Now in Power, Mexico’s Leftist Icon Adopts Conservative Playbook

(Bloomberg) -- President Andres Manuel Lopez Obrador trumpeted his election as the long-delayed rise of the Mexican left. Dig a little deeper and many of his actions and tactics during six months in power are hardly radical.

Fiscal policy? He cut spending on government overhead, health and public daycare to meet budget targets. Security? He tapped the military to run a new national police force.

What about trade? While he’s been critical of the 1994 North American Free Trade Agreement for years, once elected AMLO supported the negotiation with the U.S. and Canada to preserve it, including the work of his business-friendly predecessor, Enrique Pena Nieto. And as president he’s defended the economic integration against U.S. President Donald Trump’s protectionist attacks, including Trump’s latest threat to slap tariffs on Mexican goods, saying free trade “is convenient" for both countries.

“This is someone who calls himself a man of the left, but he does a lot of things that are questionable from a leftist perspective,” said Carlos Bravo, a political scientist at Mexico City’s Center for Economic Research and Teaching. “He’s sold himself as the embodiment of change, and every day we find more continuity."

Confrontation with his U.S. counterpart may prove AMLO’s toughest test yet after the tariff threat sent the peso to its biggest loss in seven months Friday. Lopez Obrador’s strategy with Trump so far has been to avoid confrontation and try to find a solution through dialogue, and on Monday he said he’s optimistic a deal can be reached as aides began talks with the U.S. in Washington.

Staying positive may become harder if Trump continues to criticize Mexico for not doing more to stop Central American migrants, especially as he ramps up his campaign for reelection, or if a recession or economic crisis hits Mexico.

The economic conservatism of AMLO, as the president is known, reflects in part his desire to avoid changes that would rock the boat so much as to make his other priorities –- programs for the elderly, unemployed youth, reducing insecurity, fighting corruption and developing Mexico’s impoverished south -– harder to attain. Mexico’s fiscal prudence emerged after a history of financial calamities, including the so-called Tequila Crisis in 1994.

It also hints at his own personal belief in frugality, as he showed during his years as Mexico City mayor. Since taking office, AMLO put the presidential airplane on the auction block, closed the luxurious official residence of his predecessors, and got rid of his armed security detail, cutting presidential expenditures by 88%. He’s also promised not to increase taxes to avoid choking the economy.

The president’s press office didn’t respond to requests for comment.

Whatever his reasons, AMLO’s repeated pledges of fiscal austerity have succeeded in reassuring investors who’d been wary of him since a first presidential campaign in 2006. The peso has outperformed every major world currency except the Japanese yen since the start of his administration, even after Friday’s 2.4% sell-off, and the yield on 10-year sovereign dollar bonds has fallen this year to about 4%.

“Markets have been very calm about AMLO being in power, and that’s because it’s assumed that he’s not going to become a crazy spender," said Viridiana Rios, a visiting assistant professor in government at Harvard University. “He’s not the typical leftist populist that we imagine from Latin America."

AMLO’s fiscal zeal has been so visible that even some collaborators think he’s gone too far. German Martinez, who served in the cabinet of one of AMLO’s conservative predecessors and accepted his offer to run the nation’s social security institute, resigned last month in protest over budget cuts.

Certainly, AMLO has some deeply-rooted leftist and nationalist views that have accompanied him over his four-decade career. Take his unwavering faith in national oil producer Petroleos Mexicanos, or Pemex: he’s pledged billions of pesos of support to the company in a bid to revive its past glory, even at the expense of Mexico’s incipient green energy industry.

Shunning privatization and a preference for local companies working on key infrastructure projects is another area where the president’s more nationalist impulses are on display. He often takes aim at big business during daily press conferences.

Yet AMLO has frequently borrowed from the conservative playbook in key policy areas. In the hotly disputed issue of migration, Mexico detained 79% more immigrants in April compared with a year ago -- and even more in May, according to preliminary numbers -- after President Donald Trump threatened to close the border. This was despite AMLO’s advocacy for a development plan in Central America as a more long-term solution.

His government expanded support for the elderly and youth, championing “the people” in an echo of former leftist leaders like Argentina’s Cristina Fernandez de Kirchner and Venezuela’s Hugo Chavez. But he’s giving support to seniors through unconditional cash transfers via a bank owned by a Mexican billionaire -- a plan that might have made Milton Friedman proud.

And he’s also suggested that Mexican banks should self-regulate, and that his administration wouldn’t support a law to eliminate exorbitant banking fees.

AMLO calls his presidency Mexico’s fourth transformation, following the War of Independence and Reform periods of the 19th Century, and the Revolution of the early 20th. His approach borrows much from the 1970s, when Mexican presidents were hegemonic champions of a state-driven economic model, before the nation opened to international markets. It’s also a leftist approach pragmatically tailored to Mexican society and the record 53% of voters who backed him last July.

That pragmatism is on display in social issues, where AMLO’s ambivalent positions may be designed to avoid splitting the coalition of voters who handed him his landslide victory -- even if it means disappointing some progressive supporters.

While AMLO in May welcomed the foreign ministry’s directive to consulates globally to perform same-sex marriages and even posed for photos with the gay pride flag, he rejected the idea of a national law for marriage equality. Likewise, AMLO, a Christian, has suggested that abortion, legal in Mexico City but not across the country, should be decided through a popular referendum.

“He doesn’t want to divide his base or support, which has both conservative and progressive components,” said Carlos Petersen, an analyst at Eurasia Group. “Mexico City isn’t the same as poorer places in this country that are very conservative. So it’s a strategic decision to not divide his support.”

To contact the reporter on this story: Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, ;Daniel Cancel at dcancel@bloomberg.net, Ros Krasny

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