AMLO’s mess in Mexico

The business community has always been wary of Andrés Manuel López Obrador (AMLO), Mexico’s “leftist firebrand” leader, says Ian Bremmer in Time.
Yet concern about his policies was tempered by a grudging respect for his commitment to “fiscal discipline and general macro stability”. That had been underlined by his decision to hire the “widely respected” Carlos Urzúa as finance minister. Yet Urzúa resigned last week, firing off a “blistering” letter that lashed out at dubious appointments and “extremist” economic policies. The Mexican peso fell by 2% against the US dollar.

It looks as though “powerful members of the left-wing government are pushing for looser fiscal policy”, writes Edward Glossop for Capital Economics. The central paradox of AMLO’s administration has been that it wants to pay for “ambitious social programmes” while not increasing debt, adds Elisabeth Malkin in The New York Times. It said it would find the extra money by rooting out corruption, but in practice the finance ministry has been making deep cuts to non-priority areas, such as higher education, to balance the books.
The trouble now, says John Authers on Bloomberg, is that Urzúa’s broadside will fuel suspicions that the new president is “an extremist prone to appointing cronies”. Downgrades to the country’s debt look “very likely”.

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