As Donald Trump was doing his best to blow apart relations with the United States’ nearest neighbors, Carlos Urzúa, economic adviser to Andrés Manuel López Obrador, the frontrunner in Mexico’s upcoming presidential elections, sat in his office at the University of Monterrey in Mexico City, talking about this remarkable moment in history.
Talento Tec
Carlos Urzúa, likely Mexico's next treasurer.
Trump had just threatened a trade war with Mexico and Canada, and attacked Canadian Prime Minister Justin Trudeau after storming out of the G-7 summit on his way to embrace North Korean dictator Kim Jong-un.
Mexico, for its part, has retaliated against the Trump Administration’s punitive tariffs on steel and aluminum—slapping its own tariffs on U.S. products, specifically targeting products from Republican states, including whiskey and pork, in order to hurt Congressional districts that support Trump.
Urzúa, who will likely become Mexico’s next treasury secretary, chuckled a bit at the poetic justice of this maneuver, but also called it “dangerous.”
“Any trade war, no matter how small, can easily escalate, with grave consequences,” he said. “The Mexican economy and the U.S. economy are obviously extraordinarily intertwined. For both countries, changing our trade relationship could represent a great deal of money lost and a great deal of unemployment.”
“Any trade war, no matter how small, can easily escalate, with grave consequences.”
An affable, white-haired man with an impish laugh, Urzúa spoke to me, in Spanish, for about an hour. He has been traveling to the United States lately to talk to business leaders, farmers, policymakers, and academics about the election, and to reassure them about the future of U.S.-Mexico relations. He recently flew to Madison, Wisconsin, the city where he got his Ph.D. in economics in 1986 from the University of Wisconsin, to meet with farmers worried about the consequences of a NAFTA collapse for the corn and dairy industries.
“Wisconsin is number four among the states that stand to lose the most if there were no NAFTA agreement with Mexico, because the agricultural sector is so tied up with Mexico,” Urzúa says, “and other sectors, too, including high-tech. There are states that really depend in a notable way on us, and vice versa—we depend on you.”
If López Obrador becomes Mexico’s next president on July 1—which seems more and more likely as he opens up a larger and larger lead in the polls—Urzúa will take charge of Mexico’s finance ministry.
The financial press in the United States has been sounding the alarm about that prospect, warning that an administration run by López Obrador and his populist MORENA party will wreak havoc on the Mexican economy and U.S. investments.
Mainstream U.S. analysts warn that giving Mexicans free access to telecommunication services, creating a guaranteed minimum salary, and doubling the pension for the elderly—all proposals advanced by López Obrador—will bankrupt the country and drive out foreign investment.
Then there is the issue of NAFTA. Negotiators for the United States had hoped to reach a deal before the election, rather than start anew with a leftwing populist administration. Now it looks like they will be dealing with López Obrador.
Urzúa seems unfazed by the political whirlwind surrounding the July 1 election.
In a recent speech at Princeton’s Woodrow Wilson School, where he was an assistant professor from 1988 to 1990, he told his audience that there is no wrenching change in store.
“I really have found less nervousness among investors in the United States. Everyone is pretty relaxed,” he told me.
At this point, he added, “Lopez Obrador’s advantage [in the polls] is so large that investors who might have wanted to take out their money would have pulled it by now,” he said. “In Mexico, the big business interests have never been with Lopez Obrador—although, now that they realize that it’s going to be a relatively easy election for him, they are getting calmer.”
Urzúa said the new administration is committed to renegotiating NAFTA, albeit with more protections for Mexican farmers who have suffered under the trade deal.
“The issue is not that there are winners and losers in international trade deals. That’s true in every country,” he said. “The problem is [that] governments don’t worry about protecting the people who are disadvantaged,”—especially the farmers in impoverished southern Mexico.
The MORENA party platform includes subsidies for poor farmers in the south—in contrast to the current policy of subsidizing the relatively well-off farmers in the north. It also includes efforts to grow a cooperative economy modeled on the robust worker co-ops of Spain and Germany, and heavy public investment in social programs.
More than any other party, MORENA talks about poverty as the main issue confronting Mexico.
What looks like economic stability to U.S. investors looks like stagnant inequality to Urzúa and MORENA. They see a society in which a corrupt elite sucks up a disproportionate share of resources and 10 million Mexicans are locked in hopeless, grinding poverty, unable to purchase even a minimally adequate daily diet.
“The problem is governments don’t worry about protecting the people who are disadvantaged.”
The massive corruption and fecklessness of the ruling Institutional Revolutionary Party (PRI) has led to an outpouring of popular support for MORENA—and López Obrador’s double-digit lead in the polls.
In his previous two runs for president, López Obrador relied on heavy support from Mexico City, where he was a popular mayor, and Urzúa ran the city finance ministry.
Now, Urzúa said, “He has reinvented himself. His politics are not regional but national.”
In the impoverished southern states of Oaxaca, Guerrero, and Chiapas, there is strong support for MORENA. In Veracruz, where PRI signs declare “We are working hard to regain your confidence,” López Obrador is way ahead in the polls.
“That would have been unimaginable in the past,” said Urzúa.
López Obrador, sixty-four, is also the favorite candidate among millennials, outstripping second-place candidate Ricardo Anaya, who is not yet forty and has made his youth a centerpiece of his campaign.
“The problem with Anaya is his image is phony, Urzúa told me. “Young people don’t like that.”
In many ways, López Obrador is like a Mexican Bernie Sanders—a white-haired populist appealing to a new generation of voters by attacking a corrupt elite and promising to address gaping economic inequality and run a clean government.
Corruption is MORENA’s number-one campaign theme.
Urzúa points to the example of a high-speed interurban train project begun by current president Enrique Peña Nieto, which would connect Peña Nieto’s hometown of Toluca to Mexico City. It was going to cost, at the outset, 38.6 billion pesos, or around $1.8 billion. It has now cost nearly 60 billion pesos, about $2.9 billion, and after four years is still unfinished, the subject of scathing criticism for lack of transparency and disorganization.
“My hope is that President Trump is holding up negotiations on NAFTA, just as he is slapping tariffs on China and Europe, because of electoral politics.”
“That gives you an idea of the ineffectiveness and corruption of the government,” Urzúa said. “As long as that doesn’t change, we are not going to have hope.”
If Urzúa does become Mexico’s next finance minister, he told me, his first task will be to tame government procurement by centralizing purchasing and ending widespread corruption and waste.
“There is a lot of money there,” he said. “But it’s going to be a supremely complicated task. There are 1.6 million government employees. So it’s very difficult. But in the first year, that will be my task.”
As for the brewing trade war with the United States, “I do have a hope,” said Urzúa. “My hope is that President Trump is holding up negotiations on NAFTA, just as he is slapping tariffs on China and Europe, because of electoral politics. I could be wrong, but that’s what it looks like to me.”
“As you know better than I do, you are going to have an election in November, and a large percentage of [Trump’s] base is certainly anti-international trade in general, but particularly anti-trade with Mexico,” Urzúa added. “We know this. So probably, he is doing this in order not to lose the support of his electoral base. I hope that that’s it.”
If, as Urzúa hopes, Trump is scuttling trade in order to throw red meat to his base and help Republicans win Congressional elections in November, “When we get past the elections, everything will go better,” he said.
Until November—when the U.S. Congressional elections are over and the new Mexican administration takes office—things are up in the air. “It’s very worrying,” Urzúa said. “Not to have a trade deal between the United States, Canada, and Mexico, would be really dumb.”
Urzúa’s recipe for combatting Mexican poverty is a combination of trade, investment, and public spending. The only way to improve the economy, and living conditions for poor Mexicans, is through growth, he said. “There’s no other way. We have to grow. And to grow, we have to have investment and trade.”
There are good and bad things about international trade, he added.
“The worst thing is that there are going to be sectors that don’t benefit, and the government has to support the people who are losers in these deals,” he said.
Among the advantages of international trade deals: “Trade is one of the best ways to maintain good relations. When everyone recognizes each other as partners, it’s more difficult to have problems.”
Compared to the rhetoric emanating from the United States, that sounds eminently reasonable.
Ruth Conniff is editor-at-large for The Progressive.