Mexico: the slowdown in the economy threatens the popularity of Lopez Obrador

Manuel León nostalgically watched a big-screen television in a shopping mall in Mexico City. "I only spend for what is needed: food and rent, for a luxury like a TV, it's not the moment."

This is a common complaint. Despite the high popularity rating of Mexican President Andrés Manuel López Obrador, who has spent 100 days in power and has already put money in the pockets of the population through an increase in state aid, many Mexicans tighten the belt. The data primarily indicate that the economic outlook for this year is deteriorating rapidly, despite the President's continued promise of growth.

Retail sales fell to their lowest level in five years in December. Car sales – a key barometer in a country where consumer spending has spurred growth in recent years – were about 7% lower in February than in January.

"People are expecting sales to pick up," said Jose Luis Hernandez, a kitchen equipment salesman who he says has also had to cut his personal expenses. "There was a big fall, I do not think things will improve this quarter."

Sergio, a 75-year-old insurance salesman, said: "In previous years, I would have already planned my vacation."

Business confidence has deteriorated after financial institutions, including the Bank of Mexico, reduced their forecasts for 2019 in recent weeks. The most pessimistic, Bank of America Merrill Lynch, now announces growth of 1%, half of that projected by the government.

Foreign direct investment fell 1.5% in 2018, while capital flight increased 72% last year, to US $ 9.6 billion, according to official data.

After the president's decision to cancel the completion of a partially-built airport rising to 13 billion US dollars, companies remain cautious and "the fact is that it's not going to happen." There is still not enough confidence to invest, "as CEO of a major Mexican group.

"There are a lot of projects waiting and sales are low," said Nicolás Pastrana, who sells electrical cables to companies and counts among its customers construction companies involved in the work of this unfortunate airport. "I do not think much that things are going to improve."

Fears of an imminent recession in the United States, neighboring Mexico and its main trading partner, complete this gloomy picture.

López Obrador, who is crusading to overthrow what he describes as a "fruitless" neoliberal policy of the past three decades, does not share pessimism. Predicts that growth will average 4% over its six-year term, double the rate of stagnation the country has developed over a generation.

The president, who is 65 years old and has a popularity rating of up to 80%, badures that Mexico's problems are due to the widespread corruption and economic reforms approved by his predecessor.

As part of its priority programs, it has doubled the minimum wage and reduced taxes in the border region with the United States; doubled pensions and monetary aids to the disabled.

He also presented ambitious infrastructure projects, including two rail routes in southern Mexico and a controversial refinery.

However, after also promising a 1% primary surplus for this year, López Obrador must now make some tough decisions as the downturn is affecting government collection and international confidence.

The government did not comply with its own forecast for collection in January and rating agencies issued negative ratings, both for Mexico's sovereign debt and for its largest company, the oil group State, which increases the risk of degradation. sovereigns and, therefore, increase the cost of financing.

Petroleum revenues declined 52% in real terms in January, while sales tax revenues fell 12.3%.

The Mexican president maintains that his approach is correct. "We will demonstrate that the economy will grow more" than market expectations, he said recently.

However, there are indications that the government has begun to realize the reality. López Obrador rejected a controversial bill aimed at reducing high bank charges, which resulted in the collapse of bank shares. Now a diluted bill will probably be pbaded. It also ended an initiative that increased the power of the CEO despite investors' fears.

López Obrador's optimism could be the key to explaining what is perhaps the most surprising part of the data in Mexico: the record level of consumer confidence, which rose nearly 6 percentage points in February . López Obrador retains many followers, who give him the benefit of the doubt.

Omar said the sales were kept in the bike shop where he worked, and he was optimistic. "I think the economy is going to improve, even if it 's populist or socialist, the fact that people have money will generate expenses, it' s not not the same if capital accumulates in a few hands, "he said.

Jaime, director of Mexico Evaluates, baderted that there was a "gap between expectations and reality" among Mexicans, who still believe in Lopez Obrador's promises to eradicate corruption, to improve standard of living and encourage growth, even as signs of economic growth multiply.

This desire will fuel trust "until reality shows the opposite," Jaime said.