The people of Mexico have spoken and Andres Manuel Lopez Obrador is their man. Often referred to by his initials, AMLO proved that the third time is the charm, capping off his historic campaign with an election win that will shape Mexico’s future for decades to come. Having come up short in two previous attempts, Obrador rode a wave of liberal nationalism to victory. Locking up more than 53 percent of the vote, AMLO demolished the competition—more than doubling the tally of his closest rival.
The victory is a clear indicator of growing discontent among the majority of Mexicans, who are frustrated by status quo politicians. As a political outsider, AMLO appealed to the pride of the Mexican people, often calling for a restoration of Mexico to its former glory. And how would this be achieved? The crux of AMLO’s campaign was a promise to clean house on self-serving politicians and institutional corruption. Sound familiar? Perhaps that’s why AMLO has been referred to as “Mexico’s Answer to Donald Trump.”
To be sure, Mexico has been run threadbare after years of neglect and corruption on the part of the ruling class. Pushing back against a political system dominated by wealthy individuals and powerful organizations, Obrador’s campaign wasn’t the first to promise foundational change. Time will tell if AMLO can truly drain the swamp, as the current order in Mexico runs deep and the dollars at stake are not going to be reclaimed without a fight.
Beyond the issue of corruption, AMLO’s campaign called for a return of jobs to the people of Mexico. What does that look like through AMLO’s glasses? Salary reductions for the rich, wage raises for the poor, and of note to those of us in the energy sector, a global return of Mexico to energy independence. Taken together, they are monumental goals for a single official to achieve within a single administration.
With the Mexican coffers tight on funds, AMLO has also promised to drive economic positives by righting the unsightly negatives. His mantra goes something like “by eradicating billions of dollars of corruption and improper spending, funds will be available to create jobs and drive the economy.” With Mexico’s financial condition tenuous, a failure to “fix” the leaks doesn’t leave much in the way of a backup plan to fund AMLO’s pro-growth agenda.
AMLO has also wavered on what political direction he will take with respect to the energy reform put in place by his predecessor, President Pena Nieto. Though controversial, I think we can all agree that Mexico’s energy industry was in turmoil before the reform. In point of fact, production rates have been falling by double digits year over year and refinery throughputs have averaged less than 50 percent. At the same time, imports of refined products have at times exceeded 1 million barrels per day. Add to this an estimated $1.5 billion in leakage annually as a result of organized crime, explosions, earthquakes, fires and infrastructure outages brought on by neglect and mismanagement. AMLO may not like opening the door to foreign investors, but without the reform, where would Mexico be?
My personal take is that Mexico will continue to rely on US fuels for years to come. Even if AMLO finds the funds to upgrade Mexico’s asset base, the yield from that investment will be several years away. Meanwhile, the US refining sector has every incentive to keep the door to Mexico open. After all, it’s a mutually beneficial relationship. Given that a solution is already in place and functioning, Obrador will likely find his time best utilized in solving those problems that don’t currently have answers.
With five months until AMLO officially takes office, I expect that we will learn more about his priorities in the coming days. Until then, we can only wait and speculate. The people of Mexico have put their faith in change. Can Obrador follow through on his promises to drain the swamp, deliver jobs, raise Pemex from the doldrums, and elevate Mexico to a twenty first century power? We’ll just have to wait and see.
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Senior Vice President of Terminal Services