Sun Dec 04, 2022
December 04, 2022

Mexico | Economic Perspectives: Disputing the Government’s Most Recent Report

Originally Published by Corriente Socialista de los Trabajadores (CST) in Forja Socialista No. 10, September 2022


In his Fourth Government Report, AMLO stated that the economy recovered to pre-pandemic levels, bringing in an additional 2.4 billion pesos. He stressed that inequality and poverty have decreased. He gave as examples the increase in the minimum wage, welfare programs and remittances.


This contrasts with the economic outlook that the same government had established for this period. It ignores that we were coming from a downturn in 2018 and 2019, then accentuated by the pandemic. We have not yet reached the GDP levels of 2018, when he took office. It also ignores the high dependence of the Mexican economy on that of the United States, which has suffered a downturn in two consecutive periods and for which most economists warn of a new downturn in 2023. Finally, it also contrasts with the feelings of the low-income population, affected by inflation, unemployment or with low paid jobs and long working hours (with one or several jobs to make ends meet).


What is the truth?


There is talk of recovery in macroeconomic terms, but there is a lack of data on which sectors have recovered, which have gained, and which have either stalled their recovery or disappeared.


The Health, Pharmaceutical, and Information and Communication Technologies (ICT) sectors were the sectors most in demand in the midst of the isolation and wave of infection. The worst consequences were suffered by small and medium-sized companies. In 2021, almost 1,600,000 companies closed. 20% of Mexican workers lost their jobs. How many recovered?


Manufacturing, mainly exports to the U.S., recovered. But the construction sector has not even reached half of its pre-pandemic levels. Other sectors, such as mining, financial and insurance services, electricity generation and transmission, water and gas supply, leisure, cultural and sports services, have yet to recover.
More than 49 million workers do not earn enough to feed their families, even if several of them work endless hours.


Mexico ranks 14th out of the 20 largest economies in the world. But this data hides a profound inequality where the majority of the population is of very limited means and only a few billionaires appropriate the labor of others and privilege financial speculation over the production of goods and services.


AMLO’s cynicism about remittances


Many Mexicans have left, and continue to leave, looking for work and improvements for their families. Where they go, most work long hours without social security or job stability, many underpaid because they do not have legal papers. Even so, they take the bread from their mouths to send remittances. Despite the pandemic, remittances grew 11% over the previous year and today constitute 4% of Mexico’s GDP. However, this has nothing to do with the government’s economic performance. Remittance money is the product of the overexploitation and effort of millions of Mexican workers abroad (mainly in the U.S.) who maintain solidarity with their families at all costs.


The voracious market and its contradictions


The hardships have to do with the economic system – capitalism – that AMLO claims to want to “humanize.”


The world economy, which before the pandemic suffered signs of slowdown, has entered stagflation (recession with inflation) in many European countries due to the energy and food crisis caused by the criminal Russian invasion of Ukraine, plus the setback caused by the pandemic. World growth went from 5.7% in 2021 to 2.9% in 2022.


The US has been approaching recession since the beginning of the year. Inflation continues to be a concern. The Federal Reserve raises interest rates, which will affect investment and foreign debts in most semi-colonial countries such as Mexico. In addition, prices in the energy sector are not falling, discouraging investment.
Exports to the US are up 18.8% over 2021, but less than expected. As a result, the outlook is for Mexico to grow by only 1.9%; less than the 2.3% forecast at the beginning of the year.


World markets for raw materials and energy (commodities) are dominated by financial speculation that “bets” on their future value, buying and selling in a speculative game that has an impact on real prices, especially affecting food prices. This means that prices vary not only because of the availability of what is produced in the country or because of its importation, but also because the products go to the highest paying market. It matters little about “food sovereignty” or the real need of those who buy it. Businessmen will take their goods where it is most profitable for them.


Inflation


Inflation, which according to the government would peak at 8.5% between August and September, stood at 8.62% in the first half of August, a level not seen since 2000. The goal was to bring inflation below 7% by 2022. Nothing indicates that this can be achieved. The classic measure would be to increase bank interest rates, i.e., the price of money. This measure will accentuate disinvestment in Mexico, already stagnant at pre-2013 levels.


Wages turned to dust


The Mexican Institute for Competitiveness released a study on inflation and stated that the lowest income families (those earning up to 3,300 pesos per month in 2020) had an increase in the price of their consumption basket of around 8.7%, while for those with higher incomes (more than 54,000 pesos), this increase was 7.5%. Workers and poor people, who spend a greater proportion of their income on food, suffer more from the current inflation.


Thus, despite the 94.64% increase in the minimum wage at the national level and 194.62% in the Northern Border, it is still insufficient to compensate for inflation for the majority of workers. On the other hand, the average salaries of professionals and trades do not differ much from the minimum wage. Even though they should be compensated for the worker’s qualifications and experience, they are increasingly closer to the minimum wage. Moreover, these increases are always reversed by employers by increasing the workload, by lengthening working hours or by increasing the pace of work.


Mexico’s decline as an oil-producing country


As a result of Russia’s criminal invasion of Ukraine earlier this year, oil prices have reached levels not seen for 10 years. This rise has affected most economies, but benefits oil exporting countries. However, this does not seem to be the case for Mexico.


Petróleos Mexicanos (Pemex), has been decreasing its influence to the point of being abandoned by past governments, perhaps to have the excuse to auction it off to private capital (the objective of the Energy Reform). Its production history through its own efforts has had a constant downward trend, in spite of the favorable world market.


In spite of the Government’s proclaimed wishes to revive it, Pemex continues to be one of the most indebted oil companies in the world. Instead of contributing foreign currency to the treasury (it reported a 30% decrease in this year’s GDP, compared to 2021), the Government has to help it year after year, with no results in sight. This despite the fact that, thanks to the rebound in world market prices, the company reported profits on the order of $5.980 billion in the first quarter of 2022, its best performance since 2004, in contrast to the loss of $37.358 billion last year.
The government says that Pemex could produce 1,971,000 barrels per day in 2023, exporting 43%. But the results say otherwise.


The US-China trade war


The U.S. trade war against China has resulted in a growing disinvestment by transnational corporations, which in the past sought the paradise of semi-slave labor, with extremely long working hours and low wages. Some companies seek a positive balance between investment, low wages, and low distribution costs. In this case, they see Mexico as a possibility.


However, foreign investment in Mexico must contend with insecurity and the high presence of drug trafficking, although low wages and the USMCA could favor them. In any case, only companies whose market is centered in the Americas may be interested in such a change.


The outlook


These are the prospects for businessmen, but they say nothing about the possibility of eliminating poverty, low wages, lack of decent work, inequality, or the many ills that afflict workers and the poor, such as insecurity, drugs, dispossession, oppression of indigenous people and women. Nor do they say anything about the growing impact of global warming on water scarcity and the agricultural crisis resulting from recurrent droughts.


AMLO’s supposedly progressive government pretends to make the benefits of its government program look like welfare for the poor. The distribution of welfare benefits, materialized in the form of bonuses and pensions (increasingly difficult to obtain) is insufficient to get out of poverty, but creates the illusion of a government that distributes wealth.


In this capitalist system, where we workers labor for a miserable salary so that businessmen can take the fruits of our efforts, all governments (including AMLO’s) serve the big economic powers, no matter the discourse and promises with which they win the elections.


Consequently, low salaries, inflation, unemployment and company closures, shortages and increases in the price of food, water and other services will become a constant threat to workers despite the increase in working hours and workloads.
The definitive solution is to organize ourselves, the workers of the countryside and the city, and take the reins of our destinies. Day by day we work so that the whole society functions, but we share less and less in the satisfaction of needs that this should bring.


It is time for the real producers of goods and services, the workers, to govern in democratic organization, planning the economy and society according to the needs of the great majority of the working, poor and oppressed population.


In the CST (Corriente Socialista de los Trabajadores), we are convinced that this is the only path that will guarantee well-being for all of society.

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