Economics: Varying shades of AMLO
A review of the economic policy proposals that have been raised by the virtual president-elect Andrés Manuel López Obrador is a study in contrast between the populist politician most people became familiar with in past years, and the more accommodating and economically orthodox figure that has showed up with rising frequency in past months.
A point frequently cited by AMLO’s critics is the illusory nature of his core promise to fund ambitious social and investment programs without raising taxes through what he terms “republican austerity”, which entails lower salaries and benefits for higher-level public servants, trimming any superfluous spending, and eradicating corruption on the strength of the example set by the future president’s austere lifestyle. His future finance minister took a first step toward walking back the campaign promise that such an approach would generate 10% of GDP in savings by projecting only a fifth or tenth of that amount. The underlying problem is not so much with the basic aims, but rather the actions for achieving them and especially for maintaining the basic equilibria for generating the country’s fiscal and financial stability.
After making all the right gestures to the country’s business elite and the outgoing administration, the point of departure for the incoming administration’s economic policies provides a proper scenario for planning a new public policy in a context of macroeconomic stability and consolidated public finance. The question that hangs in the air is whether AMLO will stick with this more conciliatory tone or shift back to the populist approach once he is in office.
We can expect the López Obrador team to continue to reassure business leaders and markets that they are agents of badly needed economic and financial stability. We also expect the team, during the first months in office, to try to make good on campaign pledges dearest to AMLO’s heart and his presumable dream of consolidating the dominant left-wing force for decades to come. These pledges include significantly raising the minimum wage, providing direct support to jobless youth, students, the elderly and disabled, keeping gasoline prices steady and allotting 5% of GDP to public investment.
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