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November 23, 2008

Illegitimate…For Now

Filed under: Democratization, Latin America — Jason Lakin @ 7:27 pm

My very first post for the Harvard International Review was about internal elections for the presidency of Mexico’s PRD, the country’s left-most major political party. The post was written on March 10, 2008. The elections were held on March 16. And the results were finally known just over a week ago.

That is, the internal process of selecting new PRD leadership was so fraught with corruption, allegations and counter-allegations of fraud, and lack of confidence, that it took nearly 8 months to declare a winner. And as soon as that winner, Jesús Ortega, was declared, the losing side declared him illegitimate. Indeed, according to the radical wing of the party, under Andrés Manuel López Obrador (AMLO), Mexico now has two illegitimate presidents: Felipe Calderón, illegitimate president of the country, and Ortega, illegitimate president of AMLO’s own party.

It has been a bad year for the PRD. In addition to weathering a bloody leadership struggle for the better part of a year, the party has suffered electoral defeats in key strongholds, such as the state of Guerrero. Recent surveys suggest the PRD will poll badly in mid-term elections next year, and even the party faithful estimate that it has lost nearly 40 percent of the voters who supported it in the elections of 2006. Meanwhile, two of the PRD’s allies, the smaller Work Party and an outfit known as Convergence, have decided to campaign separately in 2009 in an alliance without the PRD, leaving a long-standing left-wing coalition. Finally, the party also owes the government nearly US$3 million in fines for attempting to blockade streets and government activities in connection with the 2006 election.

With a new leader finally firmly in charge, the time has come to rebuild. It won’t be easy. There are hard feelings all around. The losing candidate in the internal elections, Alberto Encinas, supported by AMLO, will remain in the PRD, but he has refused to take the General Secretary position in the party, which he was entitled to occupy as second-place finisher. He argued that the election was illegitimate and he could not in good conscience take up the post. It fell to an ally of the AMLO faction, Hortensia Aragón, to claim the secretariat. She did so while professing her feeling that the ruling in favor of Ortega was mistaken. The Ortega faction, for their part, has very publicly repudiated AMLO, arguing that they will no longer subsidize his antics (which included a takeover of the Congress during the debate over oil reform). Many PRD members had given AMLO cash to pay for his movement politics, but about 60 members announced on Thursday last that they would no longer do so.

On the other hand, AMLO’s influence, which seemed to have peaked during the debate over oil reform, is clearly on the wane. He continues to parade through the streets of the Mexican capital, now on an agenda of lowering gas prices and increasing government transparency, but these issues do not have the hot appeal of protecting PEMEX from private investors. While Aragón may still be talking tough, the reality is that she, and other currents within the party, need to work together with Ortega to avoid a bloodbath in mid-term elections next year. AMLO may put on a good show, but he has largely become marginal to electoral politics of late. Other PRD members cannot rally their supporters in the street on a whim; they need to win elections to stay in power. The party’s brand and organization are essential for most perredistas, and Ortega will have control over these. For the party’s sake, he needs to use these tools well. This will do more to legitimate his reign than anything else.

November 9, 2008

Change We Might Suddenly Think We Need

Filed under: General, Latin America, North America — Jason Lakin @ 4:06 pm

The New York Times leads today with a story about competing camps in the Obama transition team scuffling over whether to go for big-bang change or pocket change. The usual questions are posed: will an Obama administration regret over-reaching early, resulting in catastrophic 2010 mid-term losses, or will the administration rue the fact that it wasted its early momentum on piece-meal reform, squandering its best opportunity for major reform? The answer, of course, is that it depends. Big-bang reform is the way to go, if the administration chooses the right issues to emphasize. To understand which issues make the most sense in the midst of a financial crisis, it is worth drawing a comparison with Latin America in the late 1980s and early 1990s.

The 1980s are generally referred to as the “lost decade” in Latin America. They were a time of debt, fiscal crisis, and hyper-inflation in many countries. Desperate citizens threw in their lot with neoliberal reformers who, in their bid to stave off economic disaster, dramatically altered the nature of their economies. In some cases, as in Peru, reformers ran on platforms that opposed neoliberal reform. Once in office, they transformed themselves into darlings of the so-called “Washington Consensus.” They privatized, deregulated, and slashed public spending.

Analysts who have studied the politics of this period in Latin America have suggested that things were so bad economically, that citizens were willing to give their leaders carte blanche to remake the economy. In reality, hyper-inflation could have been kept under control without radically altering the entire economic growth model. But ambitious leaders took advantage of the fear and hopes of citizens to push reform much further than the immediate situation called for. They did so by tying all of their reforms conceptually to an urgent need to deal with economic crisis. This narrative was coherent, even if it was not always truthful.

The lesson from the neoliberal reforms of this period is that economic crisis offers an opportunity to push radical reforms. Those reforms need not be neoliberal. They could be, as Obama would likely prefer, simply liberal, or a mix of liberal and conservative. To be successful, these reforms should be consistent with a powerful and coherent narrative about the causes and effects of the economic crisis, a narrative which the Obama transition team would do well to build up over the next two months. That narrative could argue that the current crisis is not only the result of deregulation, but also of failed housing policies for low-income people. This is the time to either massively increase our housing voucher program, or push hybrid public-private models for developing mixed income housing. The crisis, the narrative might continue, makes painfully clear how over-exposed most Americans are to risk. Job and income insecurity require new jobs and income policies, including a permanent program of public works as a backstop for the labor market, and a new approach to Social Security. And the volatility of the new economy also means that it is time to junk our employer-based health care system and create a national plan for everyone, so that eligibility is not dependent on staying in one’s job.

A President Obama would have to alter his priorities in order to present a compelling narrative of this type.  Housing per se has not been a part of his agenda, but it is one of the easiest ancillary concerns to add to the existing narrative of crisis.  Energy reform could still be made to fit, but it would be subordinated in the short-term to a part of the jobs/public works agenda, rather than the central concern it seems to be at the moment. Some tax cuts make short-term fiscal sense, and Obama has made them central to his agenda, but their size should be scaled back. It will be harder for the President to raise taxes later than to cut them less now, and tax cuts are simply unaffordable in the longer term.  A national health plan was not part of Obama’s agenda, and involves taking on powerful vested interests.

The key to the big-bang approach, however, is the narrative. Obama has to convince Americans that the economic crisis is bigger than he understood when he was on the trail, and that it necessitates wide-ranging social and economic reforms that go beyond what have already been envisioned. Actually, Obama has been given a great opportunity to build this narrative by the current president, who has done almost nothing to explain the ongoing mess to the American people. If the spinner-in-chief hasn’t got much to say, then Obama should start spinning his own tales. Great crises always provide great opportunities for change…if you’ve got the gift of gab.

November 3, 2008

Dismal Science: Gloomy Economics in Mexico

Filed under: Development, Economics, Latin America — Jason Lakin @ 2:00 pm

The Mexican economy is highly reliant on two sources of income which have taken a hit in the last several months. The first income source, largely flowing directly to households, is remittance income from migrants working in the United States. The economic slowdown in the U.S. has led many Mexicans working north of the border to pack their bags and head south. Some leaders have argued that the Mexican government should step in to provide a cash infusion, in order to replace lost remittances and stabilize remittance-dependent communities.

It is unclear where the money for such largesse would come from. One place it will not come from is the government’s oil revenues. The second major source of income upon which the economy relies, and the most important source of government revenue, is that derived from Mexico’s oil industry. However, PEMEX, the national oil company, has been bowled over by the decline in oil prices in recent weeks. New estimates (reported in El Universal today) suggest that the budget approved by the Mexican Congress was based on a price per barrel that was more than 18 dollars too optimistic. This means that the government’s oil revenue this year could be less than 75 percent of what was expected. Add to this inflationary fears and the precipitous decline in the value of the peso relative to the dollar in recent months (off about 24 percent since September), and the country’s economic outlook is gloomy.

PEMEX is also going to be an even less reliable source of income in the future.  Although the recently approved energy reform was meek by comparison with what the President originally envisioned, it does prescribe a degree of budgetary autonomy for PEMEX in the future. It is unclear exactly how this will work out in practice, but while budgetary autonomy is probably good for PEMEX (it will allow the company to make rational investment decisions using its own revenues), it will leave the Mexican Congress scrambling to find money to finance government programs. Currently, the government pilfers PEMEX liberally for this purpose. Mexico has an extremely low reliance on taxation, for which oil revenues are an easy substitute. Unless the country increases its tax yield, budgetary autonomy for PEMEX will savage the budget, further weakening the overall economic picture.

But don’t lose faith. There is one glimmer of hope on an otherwise bleak economic horizon: a small party in Mexico, the Social Democratic Party (PSD), has mounted a campaign to legalize marijuana. Perhaps if it succeeds, the country could reduce its budget for military and police enforcement in the war on drugs, and increase its tax take by slapping a new tax on marijuana. To my knowledge, the PSD isn’t advertising the fiscal advantages of their proposal. Perhaps a political entrepreneur should do so. Now that AMLO (Mexico’s most visible opposition leader) has lost the fight over energy reform, this seems like just the kind of issue a “legitimate president” ought to take on.