International investors and policymakers are responding to Andr�s Manuel L�pez Obrador, Mexico's likely next president, the same way they responded to Lula's accession to Brazil's presidency in 2001 - with cautious confidence, reports the Financial Times. The optimism of the masses is more unbridled; the populist Mexico City mayor holds a huge lead in opinion polls geared to next year's election.
As with Lula, the big bourgoisie is counting on Obrador to engineer unpopular reforms beyond the political capacity of the conservative parties more directly tied to it. As the article concludes: ".there is a sense in which even the private sector believes his ideology could help him. Mr Fox tried to raise taxes and privatise the energy network from the political right. But many in Mexico believe that a politician of the opposite stripe might be more successful, pointing to the progress made elsewhere in Latin America by left-leaning politicians. 'The Lula effect will be here big time,' says one businessman. 'By that, I mean the belief that only someone from the left can carry out some of the reforms. Only Nixon could approach China.' MG --------------------------------- Left turn, Mexico? By John Authers, Richard Lapper and Sara Silver Financial Times May 25 2005 In the office of Andr�s Manuel L�pez Obrador, Mexico City's mayor, the carpets are threadbare and held together by tape. "Mexico is not for Sale", proclaim framed posters on the white walls. A tank contains a pejelagarto, a spiny river fish from Mr L�pez Obrador's home state of Tabasco. A television monitor broadcasts images from 125 road inter- sections so that the man who oversees one of the world's largest cities can telephone police to smooth out any traffic jams. With this mix of austerity, defiance and hands-on action - and a touch of the survival instinct that has allowed the pejelagarto to withstand the depredations of hunters - Mr L�pez Obrador has made himself not just a popular city mayor but one of Mexico's most important politicians. Riding a wave of support after overcoming a highly politicised attempt last month to impeach him (see below), Mr L�pez Obrador is the clear frontrunner for next year's presidential elections with a lead of 12 to 17 percentage points over his likely challengers. While his nomination by his Democratic Revolution party (PRD) is a virtual formality, the two larger forces opposing him - the Institutional Revolutionary party (PRI) and President Vicente Fox's centre-right National Action party (PAN) - are likely to undergo internal struggles to choose candidates. If Mr L�pez Obrador can avoid a mistake over the next 12 months the presidency of Mexico is, it seems, his to lose. Mexico's poor believe in Mr L�pez Obrador. He drives a battered Nissan, once offered to give his earnings to Tabasco's poor indigenous population and started his term as mayor by imposing a 10 per cent pay cut on himself. In office he gave every resident aged over 75 a cheque for 633 pesos ($58) every month. Yet the mayor also needs to win over international investors if he is to avoid the market panic that Mexico has frequently experienced with the election of a new president. Mr L�pez Obrador is proud to be described as a leftist - but needs to be seen as one along the lines of Luiz In�cio Lula da Silva, Brazil's pragmatic president, rather than a demagogic populist such as Venezuela's Hugo Ch�vez. During a recent interview with the Financial Times Mr L�pez Obrador was at pains to present himself as an economic moderate. He emphatically denied speculation that he would seek to renegotiate the North American Free Trade Agreement with the US and Canada, whose final stages will come into force under the next president. He pledges to create jobs and economic growth through large-scale construction and other public works projects. But he says he would maintain the anti-inflationary policies that Mexico has followed, successfully, since the peso crisis of 1994-95. "Inflation and instability affect the poor the most, since they have no way to defend themselves," Mr L�pez Obrador says. "In the case of Mexico, those who have benefited most from the crises are those with the most resources. The better off have more ways to defend themselves." A government led by him would run the economy in "a technical rather than an ideological way", he says. He does not believe that tax rises will be necessary. "Macroeconomic stability is simply common sense," he says. The problem, he adds, is that Mexico for the past 20 years has put "all the emphasis on macroeconomic stability. What we are suggesting is a formula that can be summarised in four concepts - macroeconomic stability, growth, employment and welfare." Mexico's economic growth under Mr Fox has been disappointing, with gross domestic product per capita falling in each year of his presidency before a moderate recovery last year. But continuing tight monetary policies have created a boon for investors, with the stock market at record levels, foreign debt being paid down and capital markets thriving as never before. Foreign investors have so far shown little concern that Mr L�pez Obrador would endanger this - the peso has appreciated against the dollar this year and both Moody's and Standard & Poor's, the ratings agencies, have upgraded Mexico's sovereign rating recently. Domestic investors appear to think differently. Mexicans hold only 14 per cent of Mexico's 10-year, peso- denominated government bonds. Mexican pension fund managers privately acknowledge that this is because they are nervous of what Mr L�pez Obrador would do in office. This has more to do with personality than ideology. Former colleagues complain of an imperious streak. His style of crisis management has also raised concerns. Last year, when videos appeared on television showing two of his top aides accepting bribes - the worst moment of his administration - his response was to allege a conspiracy against him involving Mr Fox and a former president. One Mexico City banker says: "His first response to his first true crisis was to say it's a conspiracy. That way of managing a crisis is not acceptable in a president." Mr L�pez Obrador understands how to use the politics of the street, having co-ordinated sit-ins at oil wells in Tabasco and led a march to Mexico City to publicise alleged electoral fraud against him in a governorship election. As national leader of the PRD in the late 1990s, he was best known for outspoken attacks on the $65bn bank bailout that followed the peso crisis. Since winning the mayorship - Mexico's second most-important elected post - in 2000, Mr L�pez Obrador has preached social concern and austerity. While Mexico City's total debt has roughly doubled under his administration, it has increased more slowly than under previous mayors and has kept to limits imposed by the federal Congress. He intends to use his frugal municipal management style as a reference point. Mr L�pez Obrador says he can cut government running costs by $10bn, or 8 per cent, in his first year in office. "It's not easy. I'm very conscious of that. But yes, I believe that we can do it. That implies a new attitude, starting with the president. The president earns more than twice what Lula earns. And three times what [Chilean President Ricardo] Lagos earns." Critics say his funding for social programmes has come principally from redirecting funds from other programmes rather than austerity measures. They also point out that half of national government running costs are taken up with teachers' salaries that would be difficult or impossible to cut. Dulce Mara Sauri, the PRI's leader on the Senate finance committee, compares the undertaking to Mr Fox's rash promise to generate growth of 7 per cent per year. "I hope he hasn't been infected by President Fox," she says. Mr L�pez Obrador also intends to reduce debt service charges by refinancing the government's off-balance sheet debt, such as project finance loans and the liabilities incurred in the bank bailout. By calling his proposal a "restructuring" rather than a "refinancing" he has caused some market nervousness. But he emphasises that he has no intention of cancelling debt or asking for moratoriums. Mr L�pez Obrador has a similar austerity plan for Pemex, the state-owned oil company, which under him would stay in government hands. Pemex is crippled by the need to act as the government's cash cow, accounting for 36 per cent of its revenues. His advisers hope that austerity savings inside the oil company and elsewhere in the government will allow Pemex to retain up to $10bn more each year for investment in areas such as deep-water exploration and refineries. Early in his mayoral administration Mr L�pez Obrador worked well with the private sector, notably to revive the city's decayed historic centre. His principal partner was Carlos Slim, the billionaire owner of Telmex, the country's biggest telecommunications operator. "For each peso that the government invested, the private sector invested 22 pesos," says Mr L�pez Obrador. But the business community as a whole remains concerned about the prospect of a L�pez Obrador presidency. "When I talk to the local businessmen around the country they are all worried," says one senior Mexican business leader. The main worry is what one businessman calls "a tendency to disobey the law if it doesn't suit him". Another concern is that Mr L�pez Obrador tends to be insular. He has little to say about the threat to Mexico's economy from China, which displaced Mexico as the biggest exporter to the US three years ago. Asked about the issue, the mayor is vague: "We have to be imaginative, make sure that proposals are viable and realistic and really mean that there are changes." A related cause for concern is that Mr L�pez Obrador would be the first Mexican president in a generation who does not speak English. He has rarely left his country and has only once been to the US. His advisers say he plans to make international trips after standing down as mayor at the end of July. Mr L�pez Obrador suggests that his policy priorities towards Mexico's powerful northern neighbour would be virtually identical to those of Mr Fox. He would attempt to win an accord on the legal status of Mexican migrant workers, based on persuading the US that this was in its own interests, and he would attempt to move to a "Nafta Plus" arrangement, in which the US and Canada would give Mexico cross-subsidies to aid development. "The US is very important," he says. "We have to come to an agreement. It's a relation that must improve, and it needs maintenance and attention." A final question concerns what Mr L�pez Obrador could achieve given that his PRD party, currently the third biggest party, will almost certainly fail to achieve a congressional majority. The main pillars of Mr Fox's programme, reforms that would have widened the tax base, liberalised labour laws and opened the energy sector to more private investment, all foundered on congressional opposition, leading to concerns about governability. There is reason to believe that Mr L�pez Obrador may be more effective than his predecessor. The key elements of his programme of government austerity - clamping down on tax evasion, reorganising Pemex and redirecting funds towards social programmes - can be achieved without the involvement of Congress or wholesale legislative changes. "We are not going to use the excuse that Fox used, that the Congress impeded him. The Mexican political class is the most inclined to negotiation in the world. Fox didn't take advantage of that," he says. Finally, there is a sense in which even the private sector believes his ideology could help him. Mr Fox tried to raise taxes and privatise the energy network from the political right. But many in Mexico believe that a politician of the opposite stripe might be more successful, pointing to the progress made elsewhere in Latin America by left-leaning politicians. "The Lula effect will be here big time," says one businessman. "By that, I mean the belief that only someone from the left can carry out some of the reforms. Only Nixon could approach China."
