On Wednesday, May 9, 2018, Tatiana Clouthier, campaign coordinator of the presidential campaign of Andrés Manuel López Obrador (of the “Together We Will Make History” coalition), announced the publishing of a short leaflet, called Pejenomics: hacia una economía para todos (Pejenomics: Towards an Economy for All). In the words of Clouthier, “Pejenomics provides an outlook into the issues that many entrepreneurs are interested in: the macroeconomic outlook, innovation, industrial policy, growth and rule of law.” In the interest of sharing this document with a wider English-speaking public, I have prepared a quick translation of its contents. The original document can be downloaded here: a copy of the PDF is also available here.
I think this document’s ideal companion is “Trade and Development in Mexico: A Conversation with Graciela Marquez” at the Wilson Center, which took place on April 17, 2018, in Washington D. C. Watch the webcast recap here and look at the event’s page here.
Pejenomics: Towards an Economy for All
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This text was created for those who doubt the viability of the economic program of Andrés Manuel López Obrador.
We have two goals: to explain the general lines of the economic program of AMLO and to clear the uncertainties created by the campaigns against him.
It is important to mention that the criticisms of López Obrador are directed to a small group of businessmen who have made their fortune through corruption and influence.
The huge majority of Mexican entrepreneurs are proactive, innovative, and honest. Despite their best effort, they have not been able to succeed since competition is not fair.
AMLO knows that entrepreneurial talent is essential for the development of the country.
In a World Bank survey to owners of firms and high executives of 1,480 Mexican firms, 50% of the interviewees identified corruption as a huge obstacle. (Source: La corrupción en México: transamos y no avanzamos, study made by IMCO).
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Macroeconomic Outlook
Some political and mediatic actors have said that the economic program of AMLO is full of fantasy and irresponsible.
Markets and big transnational corporations thinks exactly the opposite.
Risk agencies such as BMI Research, investment banks such as Goldman Sachs, and journalists such as Alan Riding have come to similar analyses. Several of them think that tackling corruption and improving public finances are really good news for corporations of all sizes.
“Andrés Manuel […] could be an effective leader, good for business and with a marked sense of social justice; a reformist government for Mexico”.
Paul Krugman, Nobel Prize in Economics
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The Project of AMLO looks to Reactivate the Mexican Economy
The economic program of the last thirty years that has failed all over the world has left Mexico in a very delicate condition.
Mexican Gross Domestic Product ends the current administration with an average yearly growth of 2.5%. In 2017, inflation reached 6.77%, the highest in the last 17 years. That means household income is worth less in real terms.
AMLO’s project is not against globalization. It looks for the benefits of a globalized and open Mexico to be distributed in a more equitable way.
The information of the Ministry of Economy indicates that from 2001 to 2004, the Federal District attracted 57.8% of the total foreign investment in the country. Those were the four years with the highest level of foreign investment in the history of Mexico City.
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What Does the Project Entail?
- Increasing the diversity of actors in the banking sector and creating conditions for better competition.
- Creating a public-private fund to finance infrastructure projects.
- Increasing and diversifying exports.
- Having no new public debt and low inflation.
- Consolidating positioned destinations and incentivizing nodes of regional touristic development in areas with growth potential.
- Promoting universal programs that increase consumption and help regional economies develop.
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Mexico, A Country of Great Firms
One of the most unreal and extended worries is that Andrés Manuel wants to nationalize firms.
Some fear the expropriation of their business, or an irrational increase of taxes. The “statization” of the private sector makes them uneasy.
AMLO knows that the problem is that very few entrepreneurs are able to triumph in Mexico. In 2014, the wealth of 4 Mexicans was equal to 9% of the GDP, a third of the accumulated income of nearly 20 million Mexicans. The current system has not created the conditions for a fair competition.
4 Mexicans accumulate 9% of the GDP, 1/3 of the accumulated income of 20 million Mexicans
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Government: A Motor for Development
The government is a motor of the economy, and through its contracts and acquisitions it can help create a diverse entrepreneurial ecosystem that favors competition and innovation.
In contrast, the IMCO (Mexican Institute for Competitiveness) indicates that in 2017, 71% of the signed contracts with the 1,000 most important providers of the government were directly adjudicated, without public bidding.
AMLO understands the importance of this sector. During his government, just in 2004, the Federal District concentrated 22% of the national investment in construction.
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Proposals to Grow
The Project of Nation has different proposals to nurture the growth of big firms, such as:
- Not increasing taxes, nor creating new ones.
- Supporting agricultural production, specially seeds, to diminish the current trade deficit in this segment.
- Generating a positive fiscal adjustment through the reengineering of public expenditure.
- Creating a plan of Integral Development with a duty-free zone regime to attract investment in the north of the country.
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Entrepreneurs
AMLO’s project recognizes the difficulties that entrepreneurs face.
According to The Failure Institute 75% of businesses founded by entrepreneurs fail due to adequate income.
Whereas in the United States 70% of the new businesses survive after three years, in Mexico only 25% of new businesses are still around after three years of operation.
It is believed incorrectly that Andrés Manuel is against innovation. Critics have portraited him as someone who does not understand the relevance of technology and new ideas to push economic growth.
Entrepreneurs are key in the contemporary economy. Entrepreneurs are the actors who diversify the opportunities of development and who offer new solutions to new problems.
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Innovation
AMLO has several proposals for entrepreneurs to successfully develop their projects:
- Supporting every year 200 thousand new young entrepreneurs who require tools to develop their business plans and start their ventures.
- Investing in new sectors such as 3D manufacturing and nanotechnology.
- Creating innovation labs and to support investment for research.
- Developing new technology in sectors such as clean energies, programming, and robotics.
- Creating opportunities for forgotten groups and impoverished sectors.
- Investing in young people. Studying and working will be a right for the next generation.
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Small and Medium Firms
Some owners of small and medium firms (SMFs) are worried about state interventionism. They think that if AMLO gets to the presidency there will be unnecessary paperwork and regulations that will affect the growth of their firms. This fear comes from the precarious conditions faced by most of the small and medium firms of Mexico.
SMFs sustain a great share of the national economy. They produce 42% of the GDP and create 78% of the formal employment in the country.
However, a Konfio Report on Credit for Micro, Small, and Median Firms in Mexico reveals that SMFs face two big problems:
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However, a Konfio Report on Credit for Micro, Small, and Median Firms in Mexico reveals that SMFs face two big problems:
- On the one hand, most firms have a sluggish growth and a rapid stagnation. 66% of the firms that have operated for less than two years declare annual sales lower than 500 thousand Mexican pesos.
- On the other hand, seven out of ten entrepreneurs say that the lack of credit is the most important factor behind their lack of growth, since credit for SMFs is more expensive than credit for big firms and corporations.
These conditions allow us to understand why there are entrepreneurs who are afraid of change, in spite of it being unfounded.
During the government of AMLO, entrepreneurs started projects in the industry, tourism, retail, corporate offices, education, health, and housing, an investment worth nearly 92,478 millions of pesos that created nearly 658 thousand new jobs.
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His support for SMFs doesn’t end there. The Alternative Project for the Nation includes a series of proposals to help this sector if AMLO wins the elections:
- Create consortiums of SMFs to create scale economies.
- Support consortiums with capital and credit through the Development Program for the Creation of Capital.
- Create a Fund for Capitalization, Industry, and Technology, to support the growth of medium firms.
- Achieve food sovereignty through the reactivation of certain sectors of the agricultural industry.
- Insure an integral basket of basic public services for small producers and peasants including organization, financing, and infrastructure.
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An Economy for All
The Project of the Nation emphasizes the strengthening of the domestic economy and the consumption of national products.
The project acknowledges the importance of having a competitive country in a global economy, but it also recognizes certain areas of opportunity for national industries.
We have talented entrepreneurs, we have a country with a huge cultural and material wealth that we can use in a better way.
The instability of the global economy makes us rethink our economic policy, with the aim to strengthen the domestic market. A strong national economy can provide more stability and mitigate the effects of global volatility.
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The project of AMLO looks to end with the clienteles cultivated and protected by former governments to maintain their privileges.
The objective of the project is to guarantee fair conditions for competition, and to eliminate the causes that scare investment: corruption and insecurity. In a few words, to look after each other.
To improve the domestic economy AMLO proposes:
- Increasing the production of national content in strategic sectors.
- Setting up 10 regional agribusiness systems in the next six years.
- Increasing internal tourism with packages for families with lower incomes.
- Creating national programs with multiannual investment goals of urban development, education, water, sewer systems, electricity, and housing.
- Democratizing the access to rural credit.
- Achieving food sovereignty.
- Developing high technology in the country.
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The Experts Advicing AMLO
The economic project is sustained with the experience and advice of economists, entrepreneurs, and academics. These well-prepared professionals with distinguished trajectories have a huge love for Mexico. These are some of them but not the only ones.
– Graciela Márquez Colín: She has been a professor in El Colegio de México and the University of Chicago. She is a Ph.D. in Economic History from Harvard University, where she has also taught. She won the Gershenkron Prize of the Economic History Association in 2002. She will be the first woman to lead the Ministry of Economy in our history.
– Carlos Urzúa: He was a researcher in El Colegio de México and a visiting professor in Georgetown in Princeton. He was a consultant for the World Bank and minister of Finance of the Government of the Federal District. He has written and edited eight books of economics and dozens of articles. His proof of multivariate normality is used in several econometric packages. He will be Minister of Finance and Public Credit.
– Gerardo Esquivel: He earned in B. A. in Economics in the National Autonomous University of Mexico, an M. A. in Economics in El Colegio de México, and his Ph.D. in Harvard University. He has been a visiting researcher in the International Monetary Fund and Banco de México (the Mexican central bank) and consultant for the World Bank. He has been recognized with the Award in Research in Social Sciences, the Prize in Economy “Ramón Beteta Quintana” and the National Prize in Public Finance. He is author of the book Extreme Unequality in Mexico in collaboration with Oxfam. He will be economic advisor of AMLO.
– Jesús Seade: He is a chemical engineer from the National Autonomous University of Mexico, and an economist from El Colegio de México and Oxford University. He was a professor at Warwick University and he directed the Center for Economic Studies at El Colegio de México. He was ambassador of Mexico to the General Agreement on Tariffs and Trade, and he was negotiator-in-chief in the Uruguay Round. In 2017 he moved to the Chinese University of Hong Kong, Shenzen, where he is currently an associated vicepresident of Global Affairs. AMLO proposes him to be the lead negotiator of NAFTA.
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Pejenomics: Towards an Economy for All
Measuring Clio 