Mexico’s AMLO Affirms Power With Legislative Blitz Ahead of Vote
(Bloomberg) -- Mexico’s president is pushing through a series of interventionist reforms, from the energy industry to labor contracts, in a flurry of rushed legislative votes that will affirm his power ahead of key midterm elections in June.
President Andres Manuel Lopez Obrador’s Morena party just this month passed laws to ban labor outsourcing, give the state more sway over private companies in the nation’s fuel market and secure a sweeping reform of the courts. The government’s party, which controls congress together with allies, is expected to also approve another slate of bills before a legislative recess after Friday.
The reforms follow through on Lopez Obrador’s promises to transform Mexico’s public life, increasing the presence of the state and reversing the “neoliberal model” that he argues has been behind Mexico’s economic malaise in the past decades. The legislative blitz also gives his party more campaign ammunition to show the government is taking on the establishment after three years in power.
AMLO, as the president is known, has made clashing with Mexico’s business, political and media elite a main feature of his four-decade career. As the June 6 midterm vote approaches, he has not only pushed to legally reshape several key government areas but also increased his rhetorical attacks against the country’s electoral bodies, saying its members “conspire” against democracy.
Yet the recent laws are vulnerable to challenges in the courts. Critics say they are a sign that the president is further centralizing power in a worrying sign for Mexico’s democracy.
“This was a power grab,” said Valeria Moy, head of the Instituto Mexicano para la Competividad, an independent think-tank that promotes free-market ideas. “It is a step toward an even more radical authoritarianism.”
Last month a judge suspended indefinitely another AMLO-sponsored law that would give state companies priority over private firms in the electricity market, leading the president to say he would seek a constitutional reform to reverse the decision.
A spokesman for Lopez Obrador declined to comment.
The most recent reforms are also likely to take a further toll on investment, said Ernesto Revilla, head of Latin American Economics at Citigroup Inc., who forecasts Mexico’s potential annual economic growth could drop to 2% from 2.5%.
“It’s a vast array of reforms Mexico is undertaking that make it a less flexible economy, with more micro distortions. In the end it’s increasing costs of doing business and producing less investments,” Revilla said in an interview. He was chief economist for part of Mexico’s previous administration.
In the June vote, Morena is fighting to get a two-thirds majority in the lower house together with allies that could allow it to try to change the constitution during the second half of AMLO’s term -- though he would need opposition support in the senate.
Here is a snapshot of Mexico’s recent legislative initiatives:
The modification to the country’s hydrocarbon law gives the government the power to suspend permits for private companies in the fuel market or to use state-owned oil company Petroleos Mexicanos to take over the licenses of its rivals invoking national security reasons.
Critics fear the law could be used to expropriate private companies in the president’s bid to turn Pemex, as the oil giant is known, back into a major economic force, reducing competition. Credit rating agencies and the U.S. government have warned that AMLO’s support of loss-making state firms is draining public resources.
Another one of the reforms allows for a sweeping overhaul of Mexico’s courts, where corruption and nepotism have been widely documented. Yet the legislation included the unexpected extension of the terms of top judicial officials, including Supreme Court Chief Justice Arturo Zaldivar, who is seen as an ally of the president and his chief legal adviser.
Opposition lawmakers have said the extensions are a violation of the constitution and warn they are a harbinger of what may come in the second half of the Lopez Obrador administration.
Congress has also passed a bill that will require the registry of biometric data for every mobile phone number in the country. The government says the measures are needed to combat organized criminal gangs that operate using burner phones. The agency in charge of protecting personal data, INAI, has asked the Supreme Court to declare the bill unconstitutional, saying the personal information of millions of people will be put at risk.
In early April, Morena approved a law to regulate labor outsourcing as part of efforts to fight tax evasion. Some companies had used separate entities to employ their workers and avoid paying payroll taxes and social security dues.
The changes are expected to raise labor costs in Mexico, where many companies have used outsourcing arrangements to limit profit sharing obligations. The law will introduce criminal penalties for corporate structures that evade taxes.
The senate approved a bill Thursday that would cut the length of railroad concessions to 30 years from 50 years and impose bigger fines for violating rules, another proposal that has companies worried existing contracts made by previous governments could be broken. The Mexican Railway Association later released a statement calling the reform unconstitutional and damaging to the rule of law.
Lawmakers also approved a law that caps the salaries of public officials at the president’s salary, which Lopez Obrador lowered, and are working on a bill that would help preserve the registry of smaller parties that are aligned with Morena. Morena’s leader in the senate, Ricardo Monreal, said this week that electoral laws must be completely overhauled.
While it’s unlikely that this bill or the railway proposal will clear both houses before this current congressional period ends on Friday, Morena could try to call for an extraordinary session during the summer before the new congress is seated in September.
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