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 Business News | August 2005 
Mexico Leftist Neither Populist Nor Wall Street Puppet
 Greg Brosnan - Reuters
Mexico's leftist presidential front-runner, Andres Manuel Lopez Obrador, will be neither a spendthrift populist nor a Wall Street puppet if elected next July, a senior aide told Reuters. "We will not do crazy things in terms of the economy," Manuel Camacho said in an interview after speaking to international investors Thursday in New York.
"But (Wall Street) is not going to have a president that does everything it wants, because if that were the case, the president would not be able to govern the country," he said.
Lopez Obrador, an austere former Indian rights activist and an original member of the center-left Party of the Democratic Revolution, was mayor of Mexico City until stepping down last week to run for president.
Although the polls show he is way ahead of President Vicente Fox's ruling center-right National Action Party and the Institutional Revolutionary Party that ran Mexico for most of the 20th Century, the country's most popular politician is a stranger to Wall Street.
Wall Street's concerns over a new legion of leftist Latin American leaders eased after Brazil's first working class president, Luiz Inacio Lula da Silva, delegated economic policy to a market-savvy finance team upon taking office.
But the high spending on welfare and infrastructure programs in Mexico City that made Lopez Obrador such a popular mayor raises some concerns among international bondholders that he might struggle to honor Mexico's debts if he is as generous as president.
Camacho said their distrust stemmed from Lopez Obrador's reservations about adopting a Wall Street wish-list as a campaign manifesto.
"They are just thinking about their fiscal, labor and energy reform agenda," he said. "Since he is not going to do what they want, then instinctively they say 'Well we don't like this candidate because he's not our candidate.'"
"What we have to do is ... try to convince them that our agenda might be even better in terms of long-term growth."
He said Lopez Obrador would honor Mexico's debts and guarantee fiscal stability, but that a Mexican president who complied with foreign investors' every wish while economic problems lingered would lose the respect of the country.
Camacho said it was too early to talk targets, but that Mexico's fiscal deficit as a percentage of gross domestic product would continue to decline under Lopez Obrador.
Mexico ran a budget deficit of 0.3 percent of GDP in 2004. Fox aims to bring the shortfall for 2005 down to 0.22 percent and has said he would like to balance the budget in 2006.
Mexico desperately needs to raise one of Latin America's lowest tax takes as a percentage of gross domestic product.
Economists say the easiest way to do that in a country where so many work outside the formal economy and therefore pay no income tax is by extending a 15 percent value-added-tax rate to currently exempt food and medicines. The proposal would hit the poor hardest, and Fox failed to get it through Congress.
Economists say Lopez Obrador's alternate proposal to save 100 billion pesos ($9.45 billion) by reducing Mexico's bureaucracy while improving tax collection is unrealistic.
Camacho gave no additional suggestions for raising taxes, but did say Lopez Obrador had no intention of increasing corporate taxes to bring in cash, a fear among some investors.
Wall Street hopes Lopez Obrador would seek to emulate his more moderate counterparts on the Latin American left.
Investors could live with another Lula, but a radical Mexican leader in the spirit of Venezuelan firebrand President Hugo Chavez might spread panic through markets.
"Lopez Obrador likes what's happening in Chile, likes what's happening in Spain. He's looking at what's being done in Canada," said Camacho. "But we know that the solution and the model have to be something very Mexican."
He said Lopez Obrador would not be an activist president.
"He is ... a very strong negotiator. He has a very good political instinct and he's an honest man," said Camacho. "Now, does that mean he is going to govern the country as a social leader, or as a leader of a social protest? Of course not."
Camacho said Lopez Obrador had proved to be a sensible leader when urging calm among his supporters as hundreds of thousands took to Mexico City's streets to protest minor graft allegations that almost barred him from running for president.
"Instead of radicalizing people in the streets, (he) moderated social protests," Camacho said. "I don't think that there is anybody else now in the country who would have done that." |
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