Thursday, July 06, 2006

Watching the Southern Flank

Ed. note: Even as I wrote the below, it looks like the latest shift is back to Calderon; but the below still applies (though if Calderon's lead holds, you may have missed your chance to sell/short the Peso, but if the Left takes to the streets and pouts like they can do......). I still worry for Mexico, as history is not kind to her. If the stars have changes, then the Obrador options below are strictly an academic exercise. This is FL 2000 all over close. You wouldn't know it by looking at the main US news sites - but this should be front page news everywhere. My take.
When one discusses Mexico now days, it is often in terms of illegal immigration. That isn’t really the problem; it is a symptom of a problem. Mexico has never gotten a good footing after getting rid of the Spanish, loosing a lot of territory to the United States, dealing with nosy French and Habsburgs – and then the underreported blood bath of a “revolution.”

While we in the U.S., in fits and starts, have bounced along over 230 years of building the rule of law and a stable culture, Mexico can’t seem to finish putting on its pants before tripping over its feet.

The key to Mexico’s problems, and ours, has been good government and the solid economy that should follow. Aztan bigots aside; that is why so much of Mexico, mostly its surplus poor, is coming to the U.S. On average, these are good folks that just want a job and a future, one they can’t get in Mexico. The last 50 years has showed us that there is one path to a solid economy, some form of liberal capitalism to slightly EuroSocialist capitalism. Nothing else works.

By any measure, Mexico should be a rich country like its Anglo-sphere neighbors to the north, U.S. and Canada. Poor government, bad leaders, a culture of corruption, and a weak rule of law have consistently getting in their way.

The 1990s saw hope as the PRI lost its grip, and the economy, via NAFTA, has shown promise and in the last 5 years higher oil prices are giving the raw material for Mexico to grow and start to catch up.

To keep this going, they needed someone who was going to focus on what works, free markets, and change what is in the way; corruption, anti-business practices, and the usual fiesta of Mexican public problems. Earlier this week, it looked like Mexico may have done the right thing and given the Harvard technocrat a chance to keep the nation to march forward. The Leftist candidate offers nothing but the usual soup of class warfare, Socialist economic policy, protectionism, and a nasty bit of Nationalism.

For a bit, it looked like Calderon had the election by a squeaker – and there is still confusion out there. Now; not so much – what a mess. Something tells me that history is not finished beating up on Mexico. Obrador, if he wins, could go one of two ways – Brazil’s leftist president Lula da Silva is of the practical leftist part, and Brazil is lucky for it. Unfortunately, the trend of the left, Bachelet in Chile a mild exception, is towards the swamp of Chavezism. Though I hope (not know or think – he did hire Rudy when he was mayor or Mexico City after all) that Obrador is a Lula, if Mexico goes Left, and wanders into the Chavez orbit as a fellow traveller, and not the Bachelet and Lula pragmatism – bad news for the U.S:
- The problem on our border will get worse as the economic situation degrades.
- The cancer of anti-American Mexican leftist nationalism will infect a portion of the Mexican American community in the U.S., causing friction and conflict in our political system.
- There will be a negative impact on our economy, as the U.S. investment south of the border will loose its potency.
- With Mexico’s loss of stability, the situation in all of the Spanish and Portuguese speaking Americas will continue to degrade and drift. Thank your deity of choice they are Christian. At least there isn’t a religious component to this.

Even if Obrador is a pragmatist – his economic policy will not bring Mexico to its potential – which again is not good for the U.S.

One thing I do know: history is a bitch, and she doesn’t like Mexico. My optimism of early this week is done. Sell your Pesos, the smart money left yesterday.

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