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Is Mexico's President a Threat to Its Democracy? -2-

06/04/2021 | 09:15am EDT

Mr. López Obrador comes from a generation of PRI leaders who left the party in the late 1980s after they were passed over for key jobs in favor of a new wave of Ivy League-educated technocrats. He joined a left-wing party and became mayor of Mexico City in 2000.

After losing the 2006 presidential election by a hair, he claimed that the vote was stolen, refused to concede and held a mock swearing-in ceremony declaring himself the "legitimate president." He spent the next 12 years on a pilgrimage that took him to every municipality in the country, railing against what he called a corrupt establishment. The political tide turned his way during the 2012-18 term of President Enrique Peña Nieto, who was dogged by corruption scandals. Mr. López Obrador won easily on his third presidential try in 2018.

For the U.S., the populist president is a sharp break from the type of politicians who have led Mexico since the mid-1980s: Most studied in the U.S., appointed cabinet ministers with diplomas from the world's top universities, embraced globalization, ceded authority to Mexican states and allowed, if at times grudgingly, an independent judiciary and media. They also drew Mexico far closer to the U.S., ending a period of "distant neighbors," as the former Mexico correspondent Alan Riding called it.

Mexico went from being one of the world's most closed economies to one of its most open, at one point signing more free-trade agreements than any other country. It became the world's fourth-biggest exporter of automobiles, just behind the U.S. During that time, Mexico created a world-class central bank and finance ministry, prompting an Argentine economist to wonder: "Can you imagine what Argentina would be with Mexican macroeconomic management?" From 1995 to 2015, poverty and inequality fell modestly and the middle class grew.

But the country also failed to curb rampant corruption, create enough opportunities for the poor or prevent drug gangs from terrorizing the population. As in Russia, the privatization of state firms by politically connected elites created powerful oligarchs who thwarted competition and gouged consumers. Even as Mexico produced its first billionaires, the minimum wage fell behind inflation.

In the same way that Donald Trump connected with many working-class Americans who felt left behind by globalization, Mr. López Obrador has created a bond with the poor in Mexico who felt democracy and free trade had failed to improve their lives. "He got the diagnosis exactly right: Mexico is too corrupt, too structurally unequal, and it's too difficult for smart and honest entrepreneurial persons to get ahead if you don't have the right last name or...right school," says Shannon O'Neil, a fellow at the Council on Foreign Relations in New York. "But so many of his policies are going to make all this worse."

Though Mr. López Obrador has cut funding to much of Mexico's bureaucracy, he is pouring money into the state oil giant Petróleos Mexicanos, or Pemex, which he says will power the country's growth. He has halted all new bidding by private oil firms for exploration rights, leaving Mexico's future production in the hands of Pemex, which has piled on $115 billion in debt but has failed to stem declining output.

While much of the world is focused on how to get to a carbon-free future, the Mexican leader is building a new oil refinery in his home state, the first in Mexico since the late 1970s, even though the country can import gasoline from the U.S. Gulf Coast more cheaply than it can make its own, say analysts. His administration has also stopped Mexico's fast-growing market for renewable energy, halting all new auctions for private companies to build wind and solar power, despite the fact that their electricity production costs are less than half that of the state utility.

Latin America's biggest Coke bottler, Femsa, converted 10,000 of its 20,000 Oxxo retail shops to run entirely on wind power, cutting its light bill by about a quarter, company executives say. But Mr. López Obrador has repeatedly complained that firms like Oxxo now pay less for their light than an average Mexican household, which must still purchase power from the state utility CFE.

Rather than allow more private power to lower costs further, his solution has been to restrict privately produced power. Since 2019, not a single new large electricity plant has been started by the private sector, say industry executives, raising the possibility of electricity shortages down the road.

One of the president's favorite targets in the private sector is the Spanish electricity firm Iberdrola SA, which he accuses of using corrupt, backroom deals to "loot" Mexico and freeload off the state utility's network. The government has sharply hiked transmission prices. Iberdrola, which has invested about $10 billion in Mexico, said it has suspended plans to invest another $5 billion in coming years.

"If they say they don't want foreign investment, then we won't invest," Iberdrola CEO Ignacio Sánchez Galán told analysts last year. Mr. López Obrador retorted that he wasn't interested in private companies: "To put it less bluntly, the only businesses that merit our attention are state businesses, because we are public servants. The government is not a committee to service private businesses, corporations, banks, companies."

Allies of the president say that he does not dislike either the private sector or free trade, which he recognizes as an engine of Mexican economic growth. "I don't think he wants a return to a closed economy," said a high-ranking member of Mexico's central bank.

Even before taking power, the incoming president signaled what was in store by vowing to cancel a new $15 billion Mexico City airport being built by Mexico's largest construction firms. Although an estimated $5 billion had already been spent, once in office he stopped the project and instead launched his own airport in another part of the city.

That airport, however, is being built not by the private sector but by Mexico's army, which will also operate it in coming years. Under Mr. López Obrador, the army has become one of Mexico's biggest contractors. It is also the one institution other than the presidency that is getting noticeably stronger.

In recent weeks, the president said that the navy will have partial ownership of a massive land canal consisting of a new railroad linking ports on both of Mexico's coasts to be built in the country's south. The military's ownership of the projects is meant to foil any future attempt to privatize them, he said.

According to Leonardo Curzio, a journalist who has covered Mr. López Obrador for three decades, the president sees himself as the savior of a people oppressed by a historical cavalcade of villains, starting with Spanish conquistadors and followed by inquisitorial priests, conservative landowners and top-hatted capitalists. The president has demanded, for instance, that the King of Spain apologize to Mexico for the Spanish conquest 500 years ago. The Spanish government has refused.

To right these historical wrongs, Mr. López Obrador has vowed to carry out what he calls a "Fourth Transformation" of Mexico, on a par with the country's independence from Spain, reforms to separate church and state in the 1860s, and the 1910-17 Mexican revolution. His aim, he says, is to create a more equal country where ordinary Mexicans, at last, come out on top.

Many analysts say that Mr. López Obrador's political views are based on a romantic vision of his youth in bucolic Tabasco, a southern rural state. It was a time when Mexico had a closed economy and had emerged from several decades of strong growth driven by urbanization and industrialization. "He looks at what Mexico was like in the 1970s and says, 'that works.' He wants a simple, largely agrarian, natural resource-based economy overseen by the state, which of course doesn't exist anymore because the world has changed," says Mr. Wood at the Woodrow Wilson Center.

Although Mr. López Obrador tours some part of the country every weekend, he avoids visiting modern manufacturing facilities. In 2019, he turned down an invitation to be at the inauguration of a $1 billion state-of-the-art BMW plant in San Luis Potosí. He favors much more modest projects. He has praised roads laboriously built by hand by indigenous communities in Oaxaca and, in one well-known episode, waxed poetic over a primitive one-mule circular press crushing sugar cane to extract the juice. "This is the authentic people's economy," he said in a video.

Like many Latin American populists, the Mexican leader romanticizes poverty, said Paco Calderón, one of Mexico's most prominent cartoonists. "Trump's brand was 'I'm the best because I'm rich,' but López Obrador's brand is 'I'm the best because I'm poor,' " he said.

The Mexican leader is an old-fashioned leftist who dismisses issues of the modern left like feminism and the environment. In a deeply Catholic country, he has cast his politics in religious symbolism. His party Morena is a reference to Mexico's dark-skinned national patron, the Virgin of Guadalupe, and was founded on her Feast Day. The president has compared himself to Jesus for his persecution and named his youngest son Jesús Ernesto -- for the Christian savior and the Argentine revolutionary Ernesto "Che" Guevara.

The president has an almost Franciscan frugality that resonates with ordinary Mexicans. Although he lives in Mexico's grand National Palace, once the seat of Spanish viceroys, he has no bank account, no credit card, flies economy on commercial airlines and eats tacos on the side of the road. "He believes in the dignity of poverty," says Mr. Wood. "If you aren't happy to be poor, there's something wrong with you. If you want to make money, then you are by definition corrupt."

(MORE TO FOLLOW) Dow Jones Newswires

06-04-21 1115ET

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DJ INDUSTRIAL -0.04% 33924.07 Delayed Quote.10.91%
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LONDON BRENT OIL 0.70% 75.1 Delayed Quote.44.72%
US DOLLAR / ARGENTINE PESO (USD/ARS) 0.23% 95.52 Delayed Quote.13.20%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -0.17% 72.74 Delayed Quote.-1.01%
WTI 0.51% 72.971 Delayed Quote.51.56%
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