Looking ahead to 2018, AMLO’s fantasy cabinet disappoints
Economic indicators were mixed in December as the leading index for October showed its first negative adjustment in ten months (-0.02 compared to September), but remained in positive range. This slight setback reflected a softening of the growth trend in manufacturing payrolls, and a drop in the Mexico Stock Exchange’s blue chip index, factors that were only partially offset by a 0.06 point firming of business sentiment.
Public finance was one area where notable improvements were reported in the past month as Mexico’s public sector budgetary surplus expanded by almost 48% from a year earlier during October even as the negative 10 month cumulative result of a year earlier (-222.4 bn) was turned into a 108.5 billion peso surplus at the same time as the primary balance was flipped from a 236 bn deficit to a 73.9 billion peso surplus
Although industrial output fell 1.1% in October and the GFI report for September showed an annual 2.3% contraction, that same month manufacturing output expanded 2.7% (+3.3% 10M17) and the index of private consumption increased 3.4%. GEA is sticking with its forecast that GDP will grow 2.1% during the fourth quarter and for full year 2017.
The only major sector of industry that experienced growth in October was manufacturing, which expanded an annual 2.7% for the month and 3.3% for the first ten months of the year. Utilities (water, gas and electricity) contracted 3.2% for the month.
Looking ahead to 2008, and according to our calculations as well as those of the market, Mexico’s macroeconomic outlook for 2018 points to modest GDP growth, declining inflation, essentially flat short term interest rates, a reduction in foreign direct investment though not enough of a contraction to seriously affect the country’s ability to service its foreign debt, and continuing foreign exchange volatility until such time as there is greater visibility as to Nafta’s future, or lack thereof though there are expectations that the peso could rebound against the dollar if a revised North American trade pact is approved during the first half of the year.
Looking ahead to 2018's presidential election, for the second time in his more than eighteen years of campaigning for the presidency, Andrés Manuel López Obrador has decided to announce his future cabinet picks, but his list for 2018 is largely devoid of the highly experienced top-tier public officials, broadly recognized figures and widely regarded professionals that peppered his 2012 team.
That AMLO’s cabinet choices’ lack of experience and exposure was all the more surprising given that there had been talk about very prominent career officials being included such as economist Santiago Levy Algazi, and only three people who were among López Obrador’s 2012 choices made the cut this time around.
Not all the proposed candidates even appear to have the minimum experience necessary to assume such executive positions and the overwhelming majority of them are academics or young people without any serious trajectory in public administration.
Several of the people on AMLO’s list embody major contradictions with the sorts of positions that López Obrador has expressed in a wide range of forums, and some especially in matters of managing public finance, and both private property and investment. And in the immediate wake of the shock caused amongst many Morena enthusiasts by the previous week’s announcement of a coalition with the PES, some supporters have shown similar outrage over some of the cabinet picks, especially the choice of Víctor Villalobos for agriculture minister, a man who is seen as a long-time promoter of the interests of the GMO seed industry. And AMLO’s future minister of the environment has been lambasted by civil society organizations as lacking expertise.
Other constituencies are likely to be concerned by choices –such as that of Rocío Nahle as energy minister and Javier Jiménez Espriú, both of whom have long been adamantly opposed to the energy reform– and still others by early signs that such a green cabinet would likely be rubber-stamp enablers of every AMLO policy whim rather than a source of expertise providing the president with serious alternatives when need be.
With his choices, AMLO has exposed his entire team to a wave of tough attacks and questions that will endure throughout the campaign.
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