Disincentive to growth

The Bank of Mexico, in line with other forecasts from domestic and international analysts, lowered its economic growth expectations for this year and next. For 2025, the central bank estimates growth of 0.1%, while for 2026 it forecasts 0.9%, significant reductions compared to what it expected in its last quarterly report, when it forecast growth rates of 0.6% and 1.8%, respectively.

It's practically a given that the economy will experience stagnation or, worse, a recession this year. Either way, GDP per capita will fall, as is also expected to happen next year. Eight years that demonstrate that the public policy and economic policy decisions taken by the two Morena administrations are not what is required to boost economic growth; worse still, these policies together discourage it. What they've done is a textbook example of what to do and how to do it if the goal is to make the economy fail; they've certainly succeeded.

Throughout his administration, López boasted of fiscal austerity. This, however, was false, as the liquidation of multi-million-dollar funds and trusts and the seven trillion peso increase in the public sector's financial requirements significantly deteriorated the public sector's net financial position.

Furthermore, the decision to use more than two and a half trillion pesos to finance their whims (AIFA, Dos Bocas, Tren Maya, Ferrocarril del Istmo, Mexicana de Aviación, LitioMex, the acquisition of the Guerrero Negro salt mine), in addition to the fact that several of them have negative social profitability and, therefore, destroy national wealth, are also a permanent source of losses and fiscal pressure. Added to this is the erroneous policy of significantly increasing transfers to older adults in a context in which the population is aging, to which must be added other transfers of fiscal resources in different programs: Jóvenes Construyendo el Futuro (Youth Building the Future), Sembrando Vida (Sowing Life), to women between 60 and 64 years of age, widespread school scholarships, and more. All these transfers do not generate wealth and do signify a deterioration in the already structurally weak public finances.

Another was to leave the various federal government agencies, particularly the education and health sectors, virtually in a state of complete ignorance and therefore without operational capacity. In addition to depriving them of resources, López's selection of inept but loyal officials resulted in an increasingly inefficient government, which continues under the current administration.

Another decision that negatively affects growth is energy policy. In addition to channeling 1.5 trillion pesos to the bankrupt and unsalvageable Pemex, the policy of favoring this company and CFE, while discriminating against the private sector, imposes additional pressures on public finances but, more importantly, weakens the country's energy security. In particular, decisions in the national electricity sector, in addition to failing to guarantee a sufficient supply, also increase the cost of electricity for companies, thus discouraging private investment.

The most serious decision, due to its negative impact on investment, resource allocation, and, consequently, economic growth, is undoubtedly the one to destroy the institutional framework and undermine legal certainty. The arbitrary cancellation of the airport in Texcoco was the first of many decisions that distanced us from the full rule of law. This was followed by the "hugs, not bullets" approach, which allowed for the unparalleled growth of organized and non-organized crime, the ever-increasing incidence of extortion to which businesses and individuals are subjected, the growing incidence of government corruption, the decision to weaken and subsequently eliminate autonomous state bodies (INAI, Cofece, IFT), the seizure of the INE and the TRIFE (National Institute of Statistics and Census), which led to Morena and its stumbling blocks, in violation of the Constitution, granting a qualified majority in the Chamber of Deputies, culminating (so far) with the destruction of the independent judiciary to create a new one subordinated to political power.

The lack of an effectively independent and impartial judiciary undermines the legal certainty that companies require to invest and to select their counterparties (suppliers and clients) to enter into contracts that, if fully or partially violated, could require the intervention of the judiciary, from which impartiality would be expected. If this condition does not exist, companies will only engage with counterparties they consider "morally responsible," even if they are not the best suppliers or clients, resulting in a socially inefficient allocation of resources. Needless to say, a judiciary, particularly the Supreme Court of Justice (SCJN), that lacks independence will allow the government to act without any checks and balances, undermining freedom and violating individual rights, such as the right to private property.

Eight years have made it clear that Morena and economic growth do not go hand in hand.