LSR MEXICO REPORT

Mexico begins 2021 with legislative, economic battles with businessmen

President Andres Manuel Lopez Obrador revived old initiatives and new policies to overturn the "reforms of the neoliberal period"

  • EFE
  • 11/01/2021
  • 19:09 hrs
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Mexico begins 2021 with legislative, economic battles with businessmen
The uncertainty remains as Mexico deals with the Covid-19 pandemic. (Cuartoscuro)

The Mexican government begins this year with new and controversial legislative battles with businessmen regarding employment, renewable energy, autonomous entities and the Bank of Mexico (Banxico), all of which could disrupt its plan for a quick economic recovery.

"They are really very important threats for Mexico's good economic progress," Prof. Luis Guimes, with the Mexicali campus of the CETYS Graduate School of Business, told EFE on Sunday.

Just this past week, the first of the year, President Andres Manuel Lopez Obrador revived old initiatives and new policies to overturn the "reforms of the neoliberal period."

The president defended the announcement of the Federal Electricity Commission (CFE) to take private renewable energy generators out of operation, blaming them for the massive blackout that affected 10.3 million people in December.

He also sparked indignation when he announced that he will seek to eliminate autonomous entities like the Federal Telecommunications Institute (IFT), the Federal Economic Competition Commission (Cofece) and the Energy Regulatory Commission (CRE).

"They don't work, they don't benefit the public, but it does cost a lot to maintain them," Lopez Obrador said at his Friday morning press conference.

The Business Coordinator Council (CCE), Mexico's top private sector organization, expressed its "concern" over the president's remarks warning that the economy "is starting out weak in 2021."

"In such difficult times as these for our country, when we all must be seeking alternatives to promote economic activity, it scarcely pays to attack productive sectors," said the organization.

To these measures can be added the president's initiative to eliminate work subcontracting, known as "outsourcing" and the reform that will force Banxico to buy dollars that the private bank cannot repatriate, a situation that puts the central bank at risk of receiving illicit cash.

The president and his party, the National Regeneration Movement, or Morena, warned that they will back these measures despite the fact that they had already negotiated with the private sector on the matter.

"The federal government, since it (came into office) has been a continuous attack on private initiative, above all on business organizations," Guemez said.


The uncertainty remains as Mexico deals with the Covid-19 pandemic, which has infected more than 1.52 million Mexicans and killed 133,000 of them.

The health crisis led to a 9.6 percent contraction in the country's GDP during the first nine months of 2020.

The president and the Treasury and Public Credit Secretariat (SHCP) estimate that the Mexican economy contracted by 8 percent in 2020 but that it will have a 4.6 percent rebound in 2021.

However, Guemez doubts the government's optimism.

"To get back to the GDP level we had in January 2019, four years of any government are not enough to attain the same size of the economy," he said.

The professor also warned that the reforms could endanger the US-Mexico-Canada Agreement, the government's main hope for rejuvenating the economy.

In particular, the initiative to eliminate outsourcing puts the five million workers who depend on it for their livelihoods, the director of Tallentia MX, Elias Micha, told EFE.

"We're seeing how dangerous it is to stigmatize subcontracting and it's even more dangerous to do it in a crisis year," the business leader said.

After the loss of a net of 700,000 formal jobs in 2020, the reform will prevent the government from meeting its goal of recovering all the jobs registered with the Mexican Social Security Institute by March, Micha said.

He noted that Mexico never has created one million formal jobs in a single year, and thus he questioned the president's promise.

"I don't see how, with the pandemic everything will get done. With an out of control pandemic, frankly it's very difficult to think there's going to be a jobs recovery in one quarter. We're thinking that if it happens it will take years," he said.