For over a century, incoming Mexican presidents have fended off powerful predecessors who tried to continue to wield power. Whether Claudia Sheinbaum can do the same with her mentor, the divisive populist Andrés Manuel López Obrador, will determine her presidency’s success.
MEXICO CITY – When Andrés Manuel López Obrador was elected president of Mexico in 2018, the question was which AMLO – as he is commonly known – would govern. Would he be the pragmatic politician who had pledged fiscal rectitude, advocated free trade, and supported an independent central bank? Or would he be a populist leader who, like the authoritarian Institutional Revolutionary Party (PRI) of the 1970s and 1980s, would seek to co-opt voters through enormous social programs and giveaways and expand the role of state enterprises?
AMLO’s presidency preserved economic stability by adhering to the monetary and fiscal framework consolidated during the previous quarter-century, notwithstanding his constant derision of this “neoliberal” model. Otherwise, the administration was reckless in terms of resource allocation, squandering more than 3% of GDP with the cancellation of a partly-built new Mexico City airport and other mega projects. Moreover, AMLO financed his social transfers and other projects by defunding critical health and education programs and raiding funds for disaster relief and other targeted purposes.
This strategy was politically effective. Despite the dismal economic performance during his administration and widespread dissatisfaction with his government’s handling of security, corruption, health care, and other important issues, AMLO’s approval ratings hovered around 60-65% throughout his administration, and Claudia Sheinbaum, his anointed successor, handily won June’s presidential election. AMLO remained popular partly because he proved to be a great communicator, creating a polarizing narrative of “the people vs. the neoliberal mafia” in his daily press conferences.
But, equally important, the average household income of the bottom 40% increased by 13.5% in real terms during AMLO’s term, helped by substantial minimum-wage hikes. Over that same period, social spending, including universal pension coverage, educational scholarships, and other support schemes, rose by 47% in real terms, reaching over three million additional households. To be sure, remittances by Mexicans working abroad also nearly doubled under AMLO, hitting a record $63 billion in 2023, and likely helped boost disposable incomes.
Sheinbaum’s landslide victory, however, has turned into a mixed blessing. In September, AMLO pushed through a hugely controversial reform that introduces direct election of state, federal, and even Supreme Court judges. The radical overhaul poses a fundamental threat to judicial independence. It is also widely seen as a move by the ruling Morena party to consolidate control over all three branches of government, reversing the democratic reforms of the past three decades and paving the way for authoritarianism.
Moreover, AMLO recently oversaw the incorporation of the National Guard (which replaced the Federal Police early in his term) into the army, formalizing the militarization of law enforcement amid high levels of violence and territorial gains by organized crime. Other proposed reforms, including to the pension system and the minimum wage, risk diminishing the medium-term outlook for public finances, while legislation to eliminate independent regulatory agencies would further concentrate power in the executive. If approved, these measures would enshrine AMLO’s populist illiberalism in the Constitution and alter the structure of the Mexican state for years to come.
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Investors, independent analysts, and civil-society organizations have raised serious concerns about these developments, especially because the judiciary acted as an effective counterweight to AMLO. The Mexican peso has depreciated against the dollar, volatility in Mexico’s bond market has increased, risk premiums for Mexican government bonds have risen, and many privately funded near-shoring projects have been put on hold. Ratings agencies may even downgrade Mexico, precipitating higher borrowing costs and increasing the risk of financial-market turbulence. Such a scenario would mark a disastrous start for Sheinbaum’s administration.
Sheinbaum already faces several daunting challenges. The government must reduce the fiscal deficit, now 6% of GDP, and raise more revenue to fund social programs and increase investment in health and education, which fell precipitously during AMLO’s term. Mexico also urgently needs to boost clean-energy production, address water shortages, and finance logistics and infrastructure projects, which, so far, have been funded largely by the private sector, to seize the near-shoring opportunities created by the decoupling of China and Mexico’s huge northern neighbor.
Seemingly aware of at least some of the risks posed by her mentor’s constitutional reforms, Sheinbaum has reassured the private sector that her administration welcomes foreign investment and will be more business-friendly than AMLO’s. But she owes her position to AMLO, who controls Morena and hand-picked her as his successor. This puts Sheinbaum in a bind. Instead of laying the foundations for sustainable development, she must begin her term in damage-control mode, assuaging concerns about the investment climate and ensuring financial stability.
The question posed about AMLO six years ago has resurfaced with Sheinbaum’s win. Will she embrace her predecessor’s populism, like the leftist student activist she once was, or will she govern as the pragmatic, data-driven climate scientist-turned-politician who served as mayor of Mexico City?
In her inaugural address on October 1, Sheinbaum adopted some of AMLO’s rhetoric, vowing to expand social programs with an emphasis on women’s rights and family protection. But, crucially, she did not adopt a divisive tone or demonize neoliberalism. Sheinbaum also announced a reasonably competent cabinet and listed her priorities as water, renewable energy, logistics, and infrastructure. She is expected to remove obstacles to private-sector investment in clean-energy generation and renew concessions to foreign companies for oil exploration and production, which have provided a much-needed boost to the dire financial and operational conditions of PEMEX, the state energy giant.
Given this, perhaps a more relevant question to ask is whether Sheinbaum will be allowed to follow her own path. For over a century, incoming Mexican presidents have fended off powerful predecessors who tried to continue to wield power. Whether Sheinbaum can do the same will determine her administration’s success.
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MEXICO CITY – When Andrés Manuel López Obrador was elected president of Mexico in 2018, the question was which AMLO – as he is commonly known – would govern. Would he be the pragmatic politician who had pledged fiscal rectitude, advocated free trade, and supported an independent central bank? Or would he be a populist leader who, like the authoritarian Institutional Revolutionary Party (PRI) of the 1970s and 1980s, would seek to co-opt voters through enormous social programs and giveaways and expand the role of state enterprises?
AMLO’s presidency preserved economic stability by adhering to the monetary and fiscal framework consolidated during the previous quarter-century, notwithstanding his constant derision of this “neoliberal” model. Otherwise, the administration was reckless in terms of resource allocation, squandering more than 3% of GDP with the cancellation of a partly-built new Mexico City airport and other mega projects. Moreover, AMLO financed his social transfers and other projects by defunding critical health and education programs and raiding funds for disaster relief and other targeted purposes.
This strategy was politically effective. Despite the dismal economic performance during his administration and widespread dissatisfaction with his government’s handling of security, corruption, health care, and other important issues, AMLO’s approval ratings hovered around 60-65% throughout his administration, and Claudia Sheinbaum, his anointed successor, handily won June’s presidential election. AMLO remained popular partly because he proved to be a great communicator, creating a polarizing narrative of “the people vs. the neoliberal mafia” in his daily press conferences.
But, equally important, the average household income of the bottom 40% increased by 13.5% in real terms during AMLO’s term, helped by substantial minimum-wage hikes. Over that same period, social spending, including universal pension coverage, educational scholarships, and other support schemes, rose by 47% in real terms, reaching over three million additional households. To be sure, remittances by Mexicans working abroad also nearly doubled under AMLO, hitting a record $63 billion in 2023, and likely helped boost disposable incomes.
Sheinbaum’s landslide victory, however, has turned into a mixed blessing. In September, AMLO pushed through a hugely controversial reform that introduces direct election of state, federal, and even Supreme Court judges. The radical overhaul poses a fundamental threat to judicial independence. It is also widely seen as a move by the ruling Morena party to consolidate control over all three branches of government, reversing the democratic reforms of the past three decades and paving the way for authoritarianism.
Moreover, AMLO recently oversaw the incorporation of the National Guard (which replaced the Federal Police early in his term) into the army, formalizing the militarization of law enforcement amid high levels of violence and territorial gains by organized crime. Other proposed reforms, including to the pension system and the minimum wage, risk diminishing the medium-term outlook for public finances, while legislation to eliminate independent regulatory agencies would further concentrate power in the executive. If approved, these measures would enshrine AMLO’s populist illiberalism in the Constitution and alter the structure of the Mexican state for years to come.
Secure your copy of PS Quarterly: The Climate Crucible
The newest issue of our magazine, PS Quarterly: The Climate Crucible, is here. To gain digital access to all of the magazine’s content, and receive your print copy, subscribe to PS Premium now.
Subscribe Now
Investors, independent analysts, and civil-society organizations have raised serious concerns about these developments, especially because the judiciary acted as an effective counterweight to AMLO. The Mexican peso has depreciated against the dollar, volatility in Mexico’s bond market has increased, risk premiums for Mexican government bonds have risen, and many privately funded near-shoring projects have been put on hold. Ratings agencies may even downgrade Mexico, precipitating higher borrowing costs and increasing the risk of financial-market turbulence. Such a scenario would mark a disastrous start for Sheinbaum’s administration.
Sheinbaum already faces several daunting challenges. The government must reduce the fiscal deficit, now 6% of GDP, and raise more revenue to fund social programs and increase investment in health and education, which fell precipitously during AMLO’s term. Mexico also urgently needs to boost clean-energy production, address water shortages, and finance logistics and infrastructure projects, which, so far, have been funded largely by the private sector, to seize the near-shoring opportunities created by the decoupling of China and Mexico’s huge northern neighbor.
Seemingly aware of at least some of the risks posed by her mentor’s constitutional reforms, Sheinbaum has reassured the private sector that her administration welcomes foreign investment and will be more business-friendly than AMLO’s. But she owes her position to AMLO, who controls Morena and hand-picked her as his successor. This puts Sheinbaum in a bind. Instead of laying the foundations for sustainable development, she must begin her term in damage-control mode, assuaging concerns about the investment climate and ensuring financial stability.
The question posed about AMLO six years ago has resurfaced with Sheinbaum’s win. Will she embrace her predecessor’s populism, like the leftist student activist she once was, or will she govern as the pragmatic, data-driven climate scientist-turned-politician who served as mayor of Mexico City?
In her inaugural address on October 1, Sheinbaum adopted some of AMLO’s rhetoric, vowing to expand social programs with an emphasis on women’s rights and family protection. But, crucially, she did not adopt a divisive tone or demonize neoliberalism. Sheinbaum also announced a reasonably competent cabinet and listed her priorities as water, renewable energy, logistics, and infrastructure. She is expected to remove obstacles to private-sector investment in clean-energy generation and renew concessions to foreign companies for oil exploration and production, which have provided a much-needed boost to the dire financial and operational conditions of PEMEX, the state energy giant.
Given this, perhaps a more relevant question to ask is whether Sheinbaum will be allowed to follow her own path. For over a century, incoming Mexican presidents have fended off powerful predecessors who tried to continue to wield power. Whether Sheinbaum can do the same will determine her administration’s success.