Top 5: Mexico Reforms
Changes to Come Under AMLO
A sign beside a highway, reads in Spanish, "Here is the construction site of the new Mexico City International Airport", in Texcoco on the outskirts of Mexico City, Mexico, December 3, 2018. REUTERS/Alexandre Meneghini
Tourists gather around Kukulcan Castle, one of the seven wonders of the modern world, at the archaeological site of Chichen Itza during the spring equinox, at the Yucatán Peninsula March 21, 2015. REUTERS/Victor Ruiz Garcia
In Mexican President Andrés Manuel López Obrador’s swearing-in ceremony on December 1, 2018, the new leader pledged to bring about the nation’s ‘fourth transformation,’ a set of reforms targeting the corruption and inequality—among the worst in the 35-member OECD—that have long stunted his nation’s development.
Less than two months later, López Obrador, or AMLO for short, was faced with the first crisis stemming from his reforms when a pipeline exploded, killing at least 89 people who were pilfering gasoline from a hole illegally punched into it. The event sparked national debate on the many obstacles along López Obrador’s path to change Mexico, as observers said his crackdown on the fuel theft epidemic was failing, and instead creating shortages and long lines at gas stations across the country.
López Obrador said he would stay the course in implementing his reforms by increasing national oil production while combating the conditions that led to the explosion.
Investment in infrastructure and social services to improve prospects for the many citizens that gave him a resounding victory in 2018 are high on the agenda.
Bolstered with control of both houses of Congress, the leftist president is positioned to make swift changes in Mexico. Below are five key reforms López Obrador is pursuing, many of which were passed through controversial referendums.
In Mexico, gasoline theft and oil production problems have been on the rise in recent years. While the country has sizeable oil reserves and the state-owned petroleum company, Pemex, runs six domestic oil refineries, they have been operating at about a third of their capacity due to structural inefficiencies, under-investment and management issues.
This scenario has led to two major obstacles in production: Mexico began importing fuel into a pipeline system plagued by distribution bottlenecks, which has increased retail prices, and criminal gangs responded by tapping into pipelines to sell discounted gasoline on the black market.
According to Reuters’ calculations, thieves are currently siphoning off about one-fifth of total national consumption.
As a short-term solution, López Obrador has closed major fuel pipelines to reduce theft, instead transporting gas via some 5,000 guarded tanker trucks, which has in turn caused delays in fuel distribution and increased prices.
Over the long term, the president has allocated a larger exploration and production budget for Pemex to develop on shore oil fields.
The cornerstone for this initiative is a proposed USD8-billion oil refinery, to be built in the city of Dos Bocas in the state of Tabasco.
Beyond financial and planning hurdles for the project, critics have said the refinery may be more of a political maneuver to benefit López Obrador’s home state than a serious attempt at resolving falling fuel production in Mexico.
Cancelled airport construction
In what is likely his most noteworthy move, President López Obrador cancelled construction of a partially-built USD13 billion airport north of Mexico City.
The signature project of former President Enrique Peña Nieto was one-third complete when then president-elect López Obrador scrapped it in October 2018, arguing the project was tainted by corruption and carried an unjustifiable price tag.
The decision was passed after about 70 percent of 1.07 million people who participated in a national referendum voted against the airport.
The Mexican Peso plummeted as a result and the cancellation prompted a major sell-off of Mexican assets as international investors grew wary.
As an alternative solution, the president put forth a plan to convert a nearby military airstrip into a commercial airport. López Obrador said the plan will save the government as much as USD5 billion, but according to the Argentine bank BBVA, the cost of cancelling the new airport could be as much as USD10.5 billion.
On January 21, López Obrador followed through on another campaign promise, by doubling pension benefits and lowering the retirement age for senior citizens. Effective immediately, retirees and pensioners now earn MXN2,550 (USD134) every two months, a two-fold increase over the MXN1,160 they were receiving in 2018.
In addition, citizens will now be eligible to collect these benefits starting at age 65, down from the prior requirement of 68.
With a goal of enrolling 8.5 million people into the retirement program this winter, López Obrador has also directed a door-to-door national census to include elderly citizens that might have been overlooked in the past.
A key infrastructure project being undertaken by the López Obrador administration is the construction of a “Mayan Train” to connect major tourist areas in the nation’s south, with intentions to create jobs and opportunities for impoverished communities in the region.
Through a November referendum in which about 850,000 people voted approvingly, López Obrador moved to build train tracks connecting Cancún, Mérida, and popular Mayan archeological sites such as Palenque, Chichen Itza, and Tulum.
Yet the plan has faced protest not only from environmentalists, who say large tracks of tropical forest would need to be cleared, but also from local indigenous groups and the Zapatista Army of National Liberation (EZLN), who claim they do not want such developments in their region.
Finally, the biggest challenge facing López Obrador’s presidency will be his nation’s continued struggle to quell violent crime.
While drug cartel activity has plagued Mexico for decades, national security worsened in recent years as 2018 became Mexico’s most violent year on record with more than 33,000 verified homicides.
In response, López Obrador has floated the idea of legalizing some drugs to reduce revenue sources for criminal groups. He has also introduced legislation that would combine military, naval, and police personnel to form a new security force called the National Guard.
Though critics say the move is a continuation of a militarized drug war that has seen few successes, the results of the president’s plans remain to be seen when the National Guard is put into action.
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