Mexico: Good prospects for the brave | Analyst Picks | RiskMap 2020
Good prospects for the brave
The first year of the administration of President Andrés Manuel López Obrador, or AMLO, has been a turbulent one on many fronts. Despite having the strongest mandate of any president over the past two decades, AMLO has failed to capitalise on his political power to improve many of Mexico’s persistent issues - mainly a sluggish economy and a challenging security environment. The Mexican economy only narrowly avoided recession during the first half of 2019, whilst growth prospects for 2020 have been slashed again and again, and now hover around a meagre 1%.
Meanwhile, 2019 is set to become the country’s most violent year on record as the murder rate is expected to surpass 25 per 100,000 inhabitants. Although some of the root causes of these issues can be traced back to previous presidential administrations, AMLO has already made serious mistakes. His image is tarnished among sectors of the population that supported him over his pledges to kickstart economic growth and holistically combat organised crime. AMLO’s reform plans for state-owned oil company Pemex will continue to cast doubts over his administration’s capacity to turnaround the ailing company. Moreover, his austerity drive has led to a substantial decline in government expenditures in infrastructure and public services, contributing to the cooling of the economy. On the security front, despite operations by the National Guard in mid-2019, his administration has been unable to curb organised criminal activities. Worst still, they have shown clear signs of incompetence, as evidenced by a number of failed security operations that have garnered widespread public attention.
Despite his shortcomings, AMLO will continue to benefit from the country’s overall competitiveness, particularly in niche industries such as advanced manufacturing and automotive, as well as its vast network of free trade agreements. Nonetheless, AMLO’s lack of pragmatism displayed during his first year in office have led to skepticism over his economic and political project and heightened risks for business activities in Latin America’s second largest economy.