López Obrador announces a million-dollar investment plan with businessmen for a two-year term

Press conference of President Andrés Manuel López Obrador on Monday morning, Government of Mexico

Just a week ago, President Andrés Manuel López Obrador declared in his press conference that his government would no longer “tolerate” abuses from the private sector.

This Monday, one day after the Administration's two-year anniversary, representatives of the business class accompanied the president in the National Palace to announce joint multimillion-dollar investments.

It is a new show of cooperation in a relationship that has been described by experts as tough and uncertain.

The announcement comes in the midst of an intense debate on a bill sent by López Obrador to Congress that would prohibit companies from using various forms of subcontracting.

Representatives of business chambers have been against and asked for a meeting with the president to express changes to the initiative, which must be approved by legislators.

López Obrador announced this morning infrastructure projects for a total value of 228,000 million pesos (11,311 million dollars) that include ports, roads, railways, and potable water and energy works.

The announcement was made accompanied by the Secretary of the Treasury Arturo Herrera and Carlos Salazar, the president of the main employer's association, the Business Coordinating Council (CCE).

Experts agree that the symbolism of today's announcement is important.

It is a sample of the tug of war between the Government and businessmen, which has generated uncertainty in the country and scared away investment in two years of Administration.

An agreement between the parties of this magnitude is a sign of progress, but should not be interpreted as the end of the tensions but rather as an opening - perhaps partial - of the Government to private investment in the face of the economic and political pressures faced by the self-proclaimed Fourth Transformation, say specialists.

“The Government has made, first, a very clear signal that it has complied with, which is to seek to reconfigure the relationship of the Mexican State with the main actors in economic, political and social terms from its vision, which is that until 2018 it was a captured State for interests and that is why what he proposed is to generate a rapid separation, very forceful with respect to the way in which relations were being carried, ”says José Luis de la Cruz, director of the Institute for Industrial Development and Economic Growth ( IDIC), an independent research organization.

"Now what he is looking for is, based on this relationship, to establish strategies that allow accelerating the country's growth," adds De la Cruz.

The most ambitious among the projects announced this morning is a natural gas liquefaction plant in Baja California.

The work will cost more than 47,000 million pesos and will be carried out by the Ienova company, a subsidiary of the American Sempra Energy.

“It touches on some energy projects and this is relevant because precisely the energy sector has been one of those that has been handled with the greatest reserve by the Executive, due to the vision it has that the State must maintain control over this energy sector.

So, the fact that progress is being made there shows that there is a certain degree of openness that is still moderate in a sector where the government wants to regain full control, ”says de la Cruz.

The president's announcement is a change of tone, says Jesús Garza, professor at the business school of Tec de Monterrey, EGADE and CEO of the financial firm GAMMA.

“Considering also that the president-elect of the United States, Joseph Biden, is going to give an important turn to the American energy sector from fossil fuels towards renewable energy.

It is possible that this has already influenced Mexican energy policy, ”he adds.

De la Cruz agrees with this reading: “It seems to me that Mexico has already observed that an important change in energy is coming, where the United States is going to return to the Paris Agreement, it is going to return to the promotion of renewable energies and that is one aspect that it is weighing on the decision ”.

The companies will contribute more than 50% of the capital, the government reported.

In total, the 29 projects are equivalent to an investment of 2.5% of gross domestic product (GDP) and will be implemented over the next three years, which is well below the annual average for the country of 20%, Garza assures.

Mexico faces a 9% drop in GDP this year according to the International Monetary Fund (IMF), and investment is the main engine to boost employment, explains the economist.

The Government assured that the announced investments will generate about 400,000 jobs.

"The federal government has announced these types of programs many times with the help of the private sector and at the mere hour nothing happens and we continue with the same story of the closure of the energy sector," says Garza.

"The relationship between IP and the government is a tug of war and I feel that the federal government does not understand that the business sector is essential for economic growth."