11 July 2018

What Will Lopez Obrador Do About Mexico's Corruption?

By Reggie Thompson

Thanks to a congressional majority, Andres Manuel Lopez Obrador will become the strongest Mexican president in decades, but questions remain about how he will wield that power. Lopez Obrador's big win, as well as the success of his party in Congress, gives him a mandate to tackle corruption, but he will find it easier to stamp out graft at the federal level than among lower-level officials. As a politician who has acted pragmatically in the past, Lopez Obrador could abandon a far-reaching campaign against corruption in favor of a targeted anti-graft drive.

Some political regimes bend for decades until they break. After years of pressure building on Mexico's political establishment, an overwhelming presidential and legislative victory by populist Andres Manuel Lopez Obrador might be the straw that breaks the camel's back. Voters propelled Lopez Obrador — who was third-time lucky after two unsuccessful attempts to capture the presidency — into the country's highest office with more than half of the national vote and the highest tally for any presidential candidate since 1994. Lopez Obrador's National Regeneration Movement (Morena) also captured a majority in the Senate and lower house, marking the first time any candidate has won both chambers since 1997.

Often referred to simply as "AMLO," the new president clearly enjoys a strong political mandate and extensive powers to pursue an agenda that includes hiking public spending, raising wages and possibly rolling back parts of energy and education reforms. But perhaps the plan that will have the most profound ramifications is his popular — and politically loaded — vow to stamp out corruption in Mexico. Fueled by the fraying of the country's political establishment and intensifying public intolerance toward crime and graft, Lopez Obrador has a strong platform to target well-entrenched political adversaries under a broad, anti-corruption umbrella. The new president, however, could trigger a major upheaval as he strives to tackle misconduct that has infested the public and private sectors. The question now is whether he will turn to political pragmatism once in power — becoming a product of the system he was elected to dismantle — or will use the powerful tools at his disposal to try and upend the country's political order.

The Big Picture

In its Third-Quarter Forecast for 2018, Stratfor noted that Andres Manuel Lopez Obrador stood a good chance of winning Mexico's presidential elections but that his political influence would depend on whether he secures a congressional majority. Not only did Lopez Obrador win the elections on July 1, but his Morena party also secured majorities in both chambers of Mexico's Congress of the Union. The double victory gives him the power to implement much of his agenda, including an anti-corruption drive. Realities, however, could reduce the scope of that campaign.

The Roots of Political Change

A win by an insurgent politician like Lopez Obrador was nearly three decades in the making. Since the early 1990s, Mexico's once-dominant Institutional Revolutionary Party (PRI) has steadily ceded ground to political opponents such as the center-right National Action Party (PAN) and the center-left Party of the Democratic Revolution (PRD). Voters soured on PRI as it presided over corruption scandals and an economic crisis in 1994. Other parties gained power at its expense, but by the 2012 election cycle, no single party could secure a congressional majority. Without this fragmentation, it would have been impossible for a single politician heading a brand-new party (as with Lopez Obrador) to stand a realistic chance of attaining power. After suffering consecutive defeats in the 2006 and 2012 presidential elections, Lopez Obrador made a strategic move to break with the PRD and rebrand himself under the newly formed Morena.

Broad trends clearly enabled the rise of Lopez Obrador, but short-term political trends and events also nudged voters toward his fledgling party. In December 2017, Stratfor wrote, “If Lopez Obrador becomes president in 2018, it will be because he was in the right place at the right time.” During outgoing President Enrique Pena Nieto's six-year term, three major trends served to hamper PRI's and PAN's political fortunes. Criminal activity worsened significantly in parts of the country, including the state of Baja California Sur, which had previously experienced less of the extreme violence of Mexican drug-trafficking organizations. Even as the government broke the Sinaloa Federation by arresting its leader, the rapidly expanding Cartel de Jalisco Nueva Generacion grew across the country, resulting in new, bloody turf wars.

Political events to the north also turned Mexicans against their political establishment. By early 2017, U.S. President Donald Trump's moves to alter key trade relationships, including the North American Free Trade Agreement, were in full swing. Voters in Mexico interpreted the Pena Nieto administration's cautious moves in response to Trump's foreign policies as indecision at best and cowardice at worst.

But it was Lopez Obrador's persistent attacks on the excesses of corrupt politicians under Pena Nieto and prior administrations that seemed to resonate the most with the public. Given that nationwide corruption scandals have wracked the country for decades, it is no surprise that the Pena Nieto administration also became embroiled in graft. Allegations of extensive graft, such as when contractors reportedly overcharged the federal government by $2.5 billion during the construction of Mexico City's new airport, provided fodder for Lopez Obrador on the campaign trail and helped turn public opinion against PRI and PAN. Pervasive violent crime, corruption and Pena Nieto's perceived weakness before Washington all contributed to the political establishment's defeat and the election of a politician who billed himself as a political outsider.

Lopez Obrador's persistent attacks on the excesses of corrupt politicians seemed to resonate the most with the public ahead of the elections.

Institutionalizing Corruption in Mexico

There is a reason why a serious anti-corruption movement has never taken root in Mexico's political system before. Since modern Mexico emerged in the wake of the 1910-20 revolution, the country's governments have put a priority on political stability, meaning that addressing political corruption simply paled in importance to victory in elections and the maintenance of stability. After 1920, a series of governments corralled the country's divided politicians into a working coalition of political factions. In so doing, the new governments primarily sought to keep the peace among Mexico's powerful elites and put the nation back on the path toward economic development and internal stability. To achieve this, successive administrations in the 1930s and 1940s incorporated as many potentially destabilizing factions as possible into the ruling party's orbit, resulting in the federal government doling out federal money and benefits to the military, state governors and labor unions, all in the interest of inculcating loyalty to the PRI. Under the strong patronage networks that emerged, politicians and party allies had little incentive to transgress the boundaries of the PRI.

The patronage system held together for nearly five decades, as PRI inevitably emerged victorious in every election. Thanks to the party's strong political networks that were undergirded by state power, a sprinkling of intimidation, and strict control over the federal government's purse strings, the party faced virtually no serious political opposition for much of the 20th century. During the period of unassailable PRI control over Mexican politics, the party never emphasized the fight against corruption. After all, its goal for decades was to create a political machine capable of delivering big wins, not one concerned with the illicit activities happening under its watch.
AMLO Takes on the Establishment

Much of the unease of elites with Lopez Obrador stems from his anti-corruption pledge. Not only does his anti-graft mandate carry broad appeal with the public, but it could also serve as a potent tool to further weaken his opponents in the political establishment. And since a U.S.-backed anti-corruption body in next-door Guatemala has already taken down a president — and with the prospect that such agencies could spread across Central America — the incoming Mexican president has an interest in seizing the initiative to battle corruption at home rather than face the risk that outside forces would team up with civil society groups to galvanize public dissent over graft. The details on how Lopez Obrador will translate a popular campaign promise into policy remain sketchy, but he now has the legislative numbers to create anti-corruption bodies without interference from other parties in Congress. The independence of any such bodies, their enforcement powers and their potential insulation from politics or politicization by the president remain open questions. The prospect of an anti-graft body with teeth is nonetheless a direct threat to the country's political establishment. The PRI and PAN are already in a weak position, and the publicization of more corruption scandals involving them will only harm their standing among potential voters.

In broad terms, there are two paths open to Lopez Obrador. First, he could take a more ideological approach in cutting the political establishment down to size. Such action would please many of his constituents, but endowing an anti-corruption body with broad investigative and enforcement powers to systematically take down political opponents could prove disruptive to Mexico's stability. On the other hand, Lopez Obrador could pursue a more practical approach that could still score the president political points with his base. Such an approach would target corrupt officials primarily at the federal level in Congress and ministries through audits and investigations. Such probes would constitute showy moves that could greatly unnerve investors, but Lopez Obrador would still be operating within the constraints of the system that enabled his rise. For all his anti-establishment rhetoric, Lopez Obrador began his career as a member of PRI and made a name for himself as a PRD official and a mayor of Mexico City before becoming a presidential candidate. Ultimately, Lopez Obrador knows the good, the bad and the ugly intricacies of the system and where he is likely to encounter the heaviest resistance.

AMLO knows the good, the bad and the ugly intricacies of the system and where he is likely to encounter the heaviest resistance in his anti-corruption drive.

The Path Forward

Lopez Obrador will be greatly restricted in attempting to extend the writ of an anti-corruption body down to the local level. Because municipal officials are nestled beneath state officials in the federal system created by PRI, there are multiple avenues for corrupt behavior, some of which the central government in Mexico City cannot detect or easily eliminate. During PRI rule, the president could remove governors more easily or lean on party bosses to influence the behavior of even lower-level officials. But now that governorships across the country are in the hands of different major parties and (largely unreported) corruption has become deeply embedded in thousands of municipalities, combating lower-level graft and theft will pose a great challenge for the federal government. Morena's legislative majorities will allow Lopez Obrador to enact tougher anti-corruption mechanisms to ensnare the egregiously corrupt in Congress and federal ministries, but extending the writ to the states, municipalities and the private sector — all authorities with whom many Mexicans interact on a daily basis — will be far more complicated.

So where will Lopez Obrador go from here? Tackling endemic corruption at a federal level is not only simpler than taking down local officials, but it also offers greater political benefits since it's more visible to the public. Accordingly, Lopez Obrador is likely to allocate investigative resources to such a fight. But as Brazil has learned, measures to combat deeply entrenched corruption can have unexpected consequences, after an investigation into a massive graft network at state-owned energy firm Petroleo Brasileiro worsened the country's economic downturn in 2014 and 2015. In Mexico, an indiscriminate pursuit of corruption would likely have immediate side effects, particularly if such an initiative occurs in tandem with other measures, such as tax hikes or reviews of oil and gas contracts, that will frighten investors. Broader investigations and stricter enforcement mechanisms would also disturb opposition parties, which will harbor worries that the probes will target their members. Investors and the private sector may also interpret heavy anti-corruption efforts as a move to consolidate political power, which risks fomenting economic disruption in the form of capital flight and delayed investments.

Some budgetary and security issues will also influence Lopez Obrador's plans to reduce corruption. Any new mechanism that is actually capable of investigating and punishing illicit enrichment will compete with other funding priorities in the national budget, such as social, infrastructure and security spending. Striving to create a commission with a sizable body of investigators doesn't necessarily have the same near-term political payoff as the funding of new bridges, schools or roads. Other concerns, such as the backlash from drug traffickers whose political allies may find themselves caught up in corruption investigations, or protests and public opinion campaigns driven by officials resisting the probes, could also discourage the creation of new, more powerful anti-corruption institutions.

Though Lopez Obrador swept into office on the back of promises to stamp out corruption in the government, the hard realities of governance may ultimately whittle down his ambitions to a series of targeted investigations through existing institutions. Overall, this approach would be far less disruptive than wide-ranging investigations, while also avoiding the political hullabaloo that would surround Congress' establishment of far stronger investigative bodies. But even if the new president has little choice but to tone down his anti-graft campaign, he will be the strongest Mexican leader in decades. Lopez Obrador boasts the political incentive and wields the tools to ramp up corruption investigations — the only question is whether he ultimately decides that the rewards of taking a dramatically stronger stance against Mexico's endemic corruption is worth the risk.

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