(Bloomberg, Nacha Cattan and Eric Martin, 1.Dec.2018) — After decades of waiting, Andres Manuel Lopez Obrador punctuated his arrival as Mexico’s president with a bang, delivering a blistering attack on the energy industry overhaul passed under his predecessor and a broader excoriation of efforts to privatize industry.
Speaking at the lower house of Congress after taking the oath of office for a six-year term on Saturday, AMLO, as the leftist is known, said the oil market opening engineered by Enrique Pena Nieto had failed to attract significant foreign and private investment.
The reforms were part of policies that must end, he said, while at the same time, pledging to respect contracts already awarded and the investments of foreigners.
“Neoliberal economic policies have been a disaster,” Lopez Obrador said. “For example, the energy reform, which they said will come to save us, but has only meant a drop in oil production and rise in gasoline prices.”
The 65-year-old former mayor of Mexico City frequently uses the term neoliberal to describe policies that he sees as favoring markets and investors over the best interests of Mexico’s roughly 131 million people.
In the speech, which lasted more than an hour, Lopez Obrador promised higher wages for the nation’s workers and assistance for farmers. While he cruised to victory in July on a promise to fight corruption, on Saturday he suggested he’ll refrain from using his office to punish misdeeds by officials in past governments, although he left open the possibility of a public referendum to helped determine his policy course.
Some of his actions since the election have rattled investors, including the move to scrap a $13 billion new airport following a national referendum. That triggered the biggest peso rout since the 2016 U.S. election.
Mexico’s central bank has warned that public policy decisions could result in a loss of confidence in the country as a destination for investors, and a weaker peso carries a risk of inflation. Analysts watched Saturday’s speech for clues on how the new president will govern and its potential market impact.
The assemblage of global statesmen in attendance on Saturday — including U.S Vice President Mike Pence and British Labour Party leader Jeremy Corbyn — mirrored the myriad public personas of Lopez Obrador. Few observers could bet with confidence which side of the president will eventually emerge triumphant: the airport-scrapping populist or the conciliator who appeared immediately after his landslide election victory.
“His inauguration speech was less conciliatory than the one he gave on the night of the election,” said Alonso Cervera, managing director of emerging market research for Credit Suisse. However, “his criticism of the neoliberal model goes back a long way.”
As a matter of practicality he may switch between his two sides, although that would pose its own risks for an economy that’s overcome decades of crises with the aid of policies that favor slower, steadier growth. If he opts for unpredictability, AMLO doesn’t have very far to look for inspiration: he’s already been compared by some to U.S. President Donald Trump in style, if not in policies.
Pence managed to avoid an uncomfortable encounter with Venezuela’s President Nicolas Maduro, who’s in Mexico for the inauguration. The U.S. may be preparing to add Venezuela to its list of state sponsors of terror — and Maduro recently compared U.S. President Donald Trump to Adolf Hitler.
Local media reported that Maduro skipped the swearing-in ceremony but planned to go to AMLO’s lunch reception. Pence and his wife attended the first event but was scheduled to fly back to the U.S. immediately after.
In his speech, Lopez Obrador thanked Trump for respectful treatment since his election five months ago, highlighting the presence of first daughter Ivanka Trump on Saturday as a sign of that friendship. He said that he’s speaking with Trump and Canadian Prime Minister Justin Trudeau about moving beyond the North American Free Trade Agreement — or its successor, the U.S.-Mexico-Canada Agreement — to reach a deal for public and private investment to spur development in Central America and relieve migration pressures at their source.
Pence told reporters at the airport before leaving Mexico that the U.S. is determined to strengthen its relationship with Mexico, and that the Trump administration wants to reach an agreement with Mexico to allow asylum seekers from Central America to remain in Mexico while their claims are processed by the U.S. Trump will work with Lopez Obrador to address the challenges for Honduras, El Salvador and Guatemala, but those nations also need to do more, Pence said.
On energy, Lopez Obrador is a longtime opponent of the landmark overhaul, passed in 2013 and 2014, which ended the state-owned Petroleos Mexicanos’s seven-decade monopoly on exploration and production. Over the years he’s varied between calls to undo it entirely and promises to inspect contracts already awarded for signs of corruption.
Incoming energy minister Rocio Nahle has told local media she’ll suspend oil auctions until 2021, while respecting investments already made by companies. Juan Carlos Zepeda, Mexico’s hydrocarbons regulator, quit after reports of pressure from Nahle, although he denied that was the reason.
— With assistance by Jose Orozco