Mexico’s Irresponsible Populist President Proposes Election-Year Giveaway

I’ve written many columns about Venezuela, Chile, and Argentina, but only one column specifically about Mexico.

Since I’m currently in Mexico City doing some meetings and research about Mexico’s economic policy, time to make up for that lack of attention.

The first thing I did when preparing for my trip was the check the IMF’s database to see what’s been happening to the burden of government spending.

Sadly, policy has moved in the wrong direction ever since leftist/populist President Andrés Manuel López Obrador (AMLO) was elected in 2018.

That’s the bad news.

If you’re waiting for me to share some good news, that’s not going to happen.

Instead, I’ll augment the bad news with some worse news.

Mark Stevenson of the Associated Press reported two days ago that “AMLO” has a new vote-buying scheme that would be economically ruinous.

Mexico’s president said Monday he will propose guaranteeing people pensions equal to their full salaries at the time they retire, something done by no other country, not even those much richer than Mexico. It…has almost no hope of getting passed in the eight months he has left in office, but which could be part of a bid to attract voters in the June 2 presidential elections. …In announcing the measures Monday, the president claimed it was an attempt “to recover holy rights, guaranteed to Mexicans by God.” It was among a package of reforms that included guaranteed annual increases in payments to the elderly and increases in the minimum wage and above the rate of inflation. …To cover the whole population with something approaching a ‘full wage,’ López Obrador’s program would have to increase the Afore pension fund by 2.5 times to meet the median wage, and then double it again to cover informal workers.

This is spectacularly bad policy. It makes Biden’s costly per-child handout scheme seem cheap by comparison.

Almost every nation in the world is in fiscal trouble because of aging populations and falling birthrates.

Responsible governments are trying to figure out how to curtail old-age entitlements.

AMLO, however, cares about buying votes rather than about Mexico’s economic future.

P.S. As you might expect, the tax-free bureaucrats at the Organization for Economic Cooperation and Development have been recommending huge tax increases in Mexico. But if AMLO’s proposal is ever enacted, even the pro-tax bureaucrats in Paris would be hard pressed to propose enough tax hikes to keep pace with that radical expansion in the burden of government.