WEBVTT - What AMLO's Legacy Means For Mexico's Upcoming Election 0:00:03.120 --> 0:00:18.239 Bloomberg Audio Studios, Podcasts, radio News. 0:00:20.200 --> 0:00:23.800 Hello and welcome to another episode of the Odd Lots podcast. 0:00:23.840 --> 0:00:26.079 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:26.280 --> 0:00:29.200 Tracy, I think we as a podcast, I think we 0:00:29.280 --> 0:00:32.760 have to do more on Latin America, letam economics, the 0:00:33.000 --> 0:00:35.280 business situation. It's just like a sort of part of 0:00:35.280 --> 0:00:36.880 the world that I don't think we've covered enough. 0:00:37.080 --> 0:00:39.240 No, I have to admit this is a total or 0:00:39.280 --> 0:00:42.960 almost total geographic and economic blind spot for me. With 0:00:43.040 --> 0:00:47.680 the exception of Guatemala, I just haven't spent that much 0:00:47.720 --> 0:00:51.199 time in Latin America. I haven't read that much about it. 0:00:51.440 --> 0:00:56.120 I think the story there is becoming increasingly interesting, and 0:00:56.480 --> 0:01:00.000 I think if you look at something like Mexico, for instance, 0:01:00.840 --> 0:01:05.119 there's all this enthusiasm about the theme of near shoring, 0:01:05.400 --> 0:01:08.640 the idea that American companies are going to build all 0:01:08.680 --> 0:01:10.560 these big factories over there. It's going to be a 0:01:10.560 --> 0:01:15.959 big beneficiary of trade tensions with China. But at the 0:01:16.000 --> 0:01:20.960 same time, there's this ongoing political backdrop which is, as 0:01:21.000 --> 0:01:23.120 far as I understand it, about to heat up in 0:01:23.160 --> 0:01:26.520 the shape of the Mexican presidential elections on June second. 0:01:26.800 --> 0:01:30.000 Yes, that's right. There is a Mexican presidential election coming 0:01:30.080 --> 0:01:32.839 up on June second, which is like a perfect news 0:01:32.840 --> 0:01:35.320 hook for us to sort of set the stakes, understand 0:01:35.319 --> 0:01:37.600 what this is all about, and sort of use that 0:01:37.800 --> 0:01:40.880 as an entry way to expand our coverage. It is 0:01:40.920 --> 0:01:43.800 sort of crazy just in general in the media, and 0:01:43.880 --> 0:01:46.720 so like I'm not trying to excuse us by implicating 0:01:46.720 --> 0:01:50.200 the entire media, it does feel like you're in the US. 0:01:50.280 --> 0:01:53.400 There's much attention paid to Europe and the Middle East, obviously, 0:01:53.880 --> 0:01:56.800 and various things going on in East Asia, and yet 0:01:56.840 --> 0:02:00.720 the sort of dearth of coverage I would say countries 0:02:00.760 --> 0:02:05.200 which probably are much more economically and politically intertwined with 0:02:05.320 --> 0:02:07.960 US than the countries that get most of the sort 0:02:08.000 --> 0:02:09.359 of foreign coverage. 0:02:09.480 --> 0:02:11.440 Yeah, it is actually kind of weird, isn't it now 0:02:11.440 --> 0:02:15.840 that I think about it. What's that expression familiarity breeds contempt? 0:02:15.919 --> 0:02:18.160 Contempt? Yeah, maybe not. 0:02:17.680 --> 0:02:20.960 Contempt, I guess ignorance. Ignorance. You're right, we spend so 0:02:21.080 --> 0:02:24.400 much time talking about things happening in the Middle East, 0:02:24.520 --> 0:02:27.880 oil production in the rest of the world, but actually 0:02:28.360 --> 0:02:32.239 not a lot of that attention trained on Latin America. So, okay, 0:02:32.560 --> 0:02:37.400 here is our first offering to course correct and actually 0:02:37.680 --> 0:02:42.080 learn something about specifically Mexico, but you know, will broaden 0:02:42.160 --> 0:02:44.799 our horizons later and expand. 0:02:44.520 --> 0:02:46.480 We are going to be the change that we want 0:02:46.480 --> 0:02:48.760 to see in the world. But you know, to this point, 0:02:48.919 --> 0:02:51.840 a really interesting fact that probably people don't really realize. 0:02:51.960 --> 0:02:54.880 Brand Censor had some great observations about this. Mexico set 0:02:54.919 --> 0:02:58.160 to displace China is the biggest source of imports into 0:02:58.160 --> 0:03:00.840 the US market. We know there is a lot of 0:03:00.880 --> 0:03:05.800 investment happening. Tesla is building a factory in Mexico. We 0:03:05.919 --> 0:03:09.040 know that some of the Chinese automakers that are already 0:03:09.080 --> 0:03:12.840 impaired by terrorists and trade barriers, they're investing in Mexico 0:03:12.880 --> 0:03:15.520 maybe as a way of getting a conduit to the 0:03:15.680 --> 0:03:19.399 US market. So there's more and more investment happening. At 0:03:19.440 --> 0:03:22.119 the same time, as we know there are very significant 0:03:22.160 --> 0:03:27.200 issues with national security, violence, the power of the cartels 0:03:27.520 --> 0:03:30.280 across the country. All of this setting up in terms 0:03:30.280 --> 0:03:32.160 of like what are the stakes of this upcoming election. 0:03:32.320 --> 0:03:34.720 Yeah, I'm just going to re emphasize that I am 0:03:34.800 --> 0:03:38.560 not entirely up to speed on the situation. I meant 0:03:38.600 --> 0:03:41.360 to come in this morning and sort of speed read 0:03:41.600 --> 0:03:44.920 my way through what's happening in Mexican politics. But then 0:03:44.960 --> 0:03:48.120 I got really distracted because I read that one of 0:03:48.120 --> 0:03:51.520 the things that's happening is this huge expansion of the 0:03:51.560 --> 0:03:54.760 amount of money that the government is spending on the military, 0:03:54.960 --> 0:03:58.800 and the defense programs are basically growing very very quickly, 0:03:59.280 --> 0:04:01.840 and one of those is something called the National Security 0:04:01.880 --> 0:04:07.640 Infrastructure Project. And in addition to building military bases and 0:04:08.160 --> 0:04:11.120 hospitals and things like that, part of the project is 0:04:11.120 --> 0:04:15.120 to build an equine reproduction center. So I saw that 0:04:15.280 --> 0:04:17.839 and I went I spent an hour going down a 0:04:17.920 --> 0:04:21.240 rabbit hole of why the Mexican Army seems to love horses, 0:04:21.839 --> 0:04:25.159 And there's actually like a lot written about this, So anyway, 0:04:25.240 --> 0:04:28.040 instead of reading about politics, I was reading about the 0:04:28.080 --> 0:04:32.000 Mexican Army's love of show jumping and things like that. So, okay, 0:04:32.320 --> 0:04:34.680 let's do it. Let's actually talk about important things. 0:04:35.160 --> 0:04:38.640 Listeners, getting a glimpse into the odd Lots episode of 0:04:38.839 --> 0:04:42.840 preparation process. Right there, we do have the perfect guest. 0:04:42.920 --> 0:04:45.440 We're going to be speaking with. Andrea and Navarro, senior 0:04:45.480 --> 0:04:49.160 reporter covering business for US here at Bloomberg, based in 0:04:49.200 --> 0:04:52.800 Mexico City. She has a big story out now on 0:04:52.920 --> 0:04:57.279 the Onloa administration, the legacy of it, the upcoming election 0:04:57.760 --> 0:05:00.279 and what it all means and the balancing of these 0:05:00.279 --> 0:05:03.560 different countervailing forces. So, Andrea, thank you so much for 0:05:03.640 --> 0:05:07.560 coming on odd loads, and we really appreciate you taking 0:05:07.600 --> 0:05:10.680 on the task of getting me and Tracy up to 0:05:10.720 --> 0:05:14.600 speed on what really is an important trading partner, neighbor 0:05:14.760 --> 0:05:16.520 and big economic. 0:05:16.080 --> 0:05:16.880 Story for us. 0:05:17.120 --> 0:05:18.880 Hi, Joe and Tracy, thank you for having me. 0:05:19.120 --> 0:05:23.080 Let's just start. There is this Mexican presidential election upcoming 0:05:23.160 --> 0:05:26.000 on June second. Who are the candidates? What is this 0:05:26.080 --> 0:05:26.799 election about? 0:05:27.160 --> 0:05:30.760 So? Yeah, in Mexico, we have elections presidential elections coming 0:05:30.839 --> 0:05:34.080 up in June second, and the candidates are Claudia Shanbaum. 0:05:34.240 --> 0:05:37.880 She was the former major of Mexico City and she 0:05:38.200 --> 0:05:41.679 was anointed by Lopez A Rador to be the candidate 0:05:41.720 --> 0:05:44.720 of his party called Morena. It's very clear right now 0:05:44.760 --> 0:05:48.080 that she's a likely winner. She has a fifty percent 0:05:48.240 --> 0:05:51.479 preference in the polls in the most recent polls. The 0:05:51.640 --> 0:05:55.279 distance second is held by a woman named Sochil Jalbis. 0:05:55.720 --> 0:06:00.720 Sochil is from a coalition of opposition parties who were 0:06:00.760 --> 0:06:05.440 severely weakened over the past five or six years during 0:06:05.480 --> 0:06:09.359 the Lopaso rather presidency. They came together to choose an 0:06:09.360 --> 0:06:13.279 opposition candidate that would have the best chances at really 0:06:13.320 --> 0:06:17.520 competing against Shanebaum. But right now, the preference that she's 0:06:17.560 --> 0:06:20.919 showing is around thirty three percent, which is not great, 0:06:21.440 --> 0:06:26.600 So barring something unexpected and very big, it's very likely 0:06:26.640 --> 0:06:29.479 that Claudia will win. There is a third candidate. His 0:06:29.560 --> 0:06:32.920 name is Jorge Albaresminez and the party he's coming from 0:06:33.000 --> 0:06:36.280 is Mohi Mintos. The last thing I read is that 0:06:36.680 --> 0:06:39.960 he's holding about a nine percent preference. It's not likely 0:06:40.000 --> 0:06:42.800 that he's going to have a big showing, so it's 0:06:42.839 --> 0:06:46.039 most likely going to be between Souchil and Claudia. But 0:06:46.120 --> 0:06:49.440 as I said, it's basically given that Claudia will win. 0:06:49.720 --> 0:06:52.120 Joe, I'm just going to say everyone should pray for 0:06:52.200 --> 0:06:56.760 our Spanish pronunciation in this episode, because Andrea just did 0:06:56.920 --> 0:07:01.360 a phenomenal amount of like switching there and getting like 0:07:01.400 --> 0:07:05.880 the accent exactly right. Okay, So Lopez Obrador is aka 0:07:06.080 --> 0:07:09.440 AMLO has been in power for multiple years and is 0:07:09.480 --> 0:07:13.240 sort of expected to hand off to his successor. Again, 0:07:13.360 --> 0:07:15.880 I don't know much about Mexico, but one thing I 0:07:15.960 --> 0:07:20.560 know is that when emerging market analysts start talking about 0:07:20.800 --> 0:07:26.680 weakening institutions and constitutional reforms, that's probably not a good thing. 0:07:26.960 --> 0:07:30.600 And some of those notes have been hitting my inbox 0:07:30.840 --> 0:07:33.680 relatively recently. What are they talking about here? 0:07:34.240 --> 0:07:37.120 Yeah, I'm Loo, as he is known, did have a 0:07:37.200 --> 0:07:42.240 string of controversial decrees or reforms that sort of scared 0:07:42.440 --> 0:07:45.680 the market throughout his presidency. I would say that the 0:07:45.760 --> 0:07:48.880 very first was right as he came into power in 0:07:49.160 --> 0:07:53.160 late twenty eighteen, he canceled an airport project that was 0:07:53.200 --> 0:07:56.400 going to be built near Mexico City to replace our 0:07:56.480 --> 0:08:01.080 old grumbling airport that's called Vinita. Juarrees. That project was 0:08:01.760 --> 0:08:04.840 planned by his predecessor, and and it was going to 0:08:04.880 --> 0:08:07.400 be a very big airport. It was going to be beautiful, 0:08:07.440 --> 0:08:09.560 It was going to be state of the art and 0:08:09.640 --> 0:08:13.120 handle I think it was like sixty eight million passengers 0:08:13.160 --> 0:08:15.280 a year, which is much more than we can handle now. 0:08:15.720 --> 0:08:19.000 But he amlan. When he was campaigning, he sort of 0:08:19.040 --> 0:08:22.680 painted the airport as a thing of the elites and 0:08:22.720 --> 0:08:25.640 that the average Mexican would never use it, and so 0:08:25.720 --> 0:08:28.840 why was so much money going into a project that 0:08:28.960 --> 0:08:31.200 was not going to benefit the average Mexican. So he 0:08:31.280 --> 0:08:35.199 scrapped it, and that really scared investors because a lot 0:08:35.240 --> 0:08:38.679 of businessmen in Mexico were involved in some way or 0:08:38.720 --> 0:08:42.439 the other in the airport project. We had Mexico's richest person, 0:08:42.559 --> 0:08:45.640 Carlo Slim. His company was going to build the terminal 0:08:45.679 --> 0:08:48.000 and I think one or two of the runways, and 0:08:48.080 --> 0:08:52.040 so coming in with such a strong move freaked everybody out, 0:08:52.120 --> 0:08:54.079 and he just scrapped it. It ended up being more 0:08:54.120 --> 0:08:57.320 costly than actually finishing the project because he had to 0:08:57.480 --> 0:08:59.720 pay off bond holders. He had to pay off so 0:08:59.840 --> 0:09:02.720 much debt and so much investment that had already gone 0:09:02.720 --> 0:09:04.920 into the project. But he just went and did it 0:09:04.960 --> 0:09:08.560 and he didn't really care. And after that, there were 0:09:08.679 --> 0:09:11.640 a couple of things that sort of did scare investors. 0:09:11.960 --> 0:09:15.160 One of them was changing the rules into how airport 0:09:15.240 --> 0:09:19.920 operators can charge different fees. We have three big companies 0:09:20.000 --> 0:09:23.080 here that operate most of the airports in Mexico, and 0:09:23.760 --> 0:09:26.040 it was just one of those moves where nobody saw 0:09:26.040 --> 0:09:29.240 it coming. And when he did it, I think it 0:09:29.280 --> 0:09:33.000 was the largest sell of those shares that the companies 0:09:33.000 --> 0:09:36.640 had ever seen. Shares tanked around like forty seven percent 0:09:36.920 --> 0:09:40.679 before pairing back some losses. He's well known for making 0:09:40.720 --> 0:09:44.120 these brash announcements and movements that he sort of then 0:09:44.240 --> 0:09:47.920 pairs back, and then people end up feeling that everything 0:09:47.960 --> 0:09:49.760 is going to be all right. I think that the 0:09:49.760 --> 0:09:51.440 best way to say it is that he has kept 0:09:51.440 --> 0:09:53.559 everybody on his toes. But in the end, if you 0:09:53.600 --> 0:09:56.680 look at the macroeconomics in Mexico, it's not all that bad. 0:09:57.040 --> 0:09:59.760 The best is that its strongest that it's been in 0:09:59.840 --> 0:10:03.720 life twenty years. I think inflation is relatively under control. 0:10:03.840 --> 0:10:06.319 We have tons of money flowing in. So it's really 0:10:06.360 --> 0:10:10.120 been surprising, to say the least, to see how he 0:10:10.200 --> 0:10:28.800 has handled both the businessman and the macro economy. 0:10:30.640 --> 0:10:33.520 Prior to the twenty twenty election, there was a lot 0:10:33.559 --> 0:10:36.720 of fear at the time that Trump it's gonna build 0:10:36.720 --> 0:10:39.040 the wall and it's gonna be terrible for the Mexican peso. 0:10:39.440 --> 0:10:41.800 Thinking back to that time, the peso is actually through 0:10:41.800 --> 0:10:44.640 twenty twenty almost seen as like the purest market proxy 0:10:44.960 --> 0:10:46.840 for market expectations of that outcome. 0:10:47.160 --> 0:10:47.880 Didn't you have a. 0:10:47.880 --> 0:10:50.120 Trade like that involved the peso? 0:10:50.360 --> 0:10:52.280 I seem to remember, I'm not going to rag about 0:10:52.320 --> 0:10:53.760 my MiCT trade. 0:10:53.920 --> 0:10:54.920 Well, I just gave. 0:10:54.800 --> 0:10:59.800 You, okay, I did tweet that you sort of took 0:11:00.360 --> 0:11:03.720 seriously that the ultimate effect of is going to be 0:11:03.760 --> 0:11:07.600 this sort of reinvigoration of sort of the North American 0:11:07.679 --> 0:11:11.200 trade at the expense of East Asian trading partners. You 0:11:11.280 --> 0:11:13.839 might want to go long Mexican pay so against the 0:11:13.920 --> 0:11:16.480 Korean wand that has been a really big winner in 0:11:16.559 --> 0:11:20.679 my imaginary FX hedge fund. Yes, thank you, Tracy. I 0:11:21.320 --> 0:11:23.839 did correctly predict that the Mexican pace that would be 0:11:23.880 --> 0:11:26.280 a winner of the sort of new trading environment, and 0:11:26.320 --> 0:11:29.160 that has been born out. But we have seen this 0:11:29.320 --> 0:11:31.760 idea of like and it really accelerated after COVID, this 0:11:31.840 --> 0:11:35.600 idea of like near shoring or friend shoring, this real 0:11:35.679 --> 0:11:39.920 turnarway against particularly China, and we do see this sort 0:11:39.920 --> 0:11:43.120 of flood of investment in parts in Mexico. We know 0:11:43.200 --> 0:11:47.200 that Tesla is opening up a new factory, as I 0:11:47.280 --> 0:11:49.400 mentioned in the beginning of Mexico is set to displace 0:11:49.520 --> 0:11:53.120 China's the biggest source of imports into the US market. 0:11:53.480 --> 0:11:56.920 So for whatever reason, and you know you mentioned AMLO's 0:11:57.040 --> 0:11:59.640 the anxiety that he gave to the business community there 0:11:59.679 --> 0:12:03.200 are a lot of positive Mexican investment stories happening right now. 0:12:03.720 --> 0:12:06.760 I think that Tesla was a big example when it 0:12:06.840 --> 0:12:10.160 was announced. The problem with that is that they haven't 0:12:10.200 --> 0:12:14.560 really started construction on the plant, and there's some doubts 0:12:14.559 --> 0:12:16.440 on whether that's going to happen at all, or if 0:12:16.480 --> 0:12:19.440 it's going to happen in five to ten years. But 0:12:20.120 --> 0:12:23.600 we do know that several suppliers to Tesla already came 0:12:23.679 --> 0:12:26.400 up and set up shop in the northern parts of 0:12:26.440 --> 0:12:30.160 the country, and we do have a very big auto industry. 0:12:30.640 --> 0:12:34.000 Most of the big car companies have big plants here 0:12:34.400 --> 0:12:36.960 and some of them have expanded them over the past 0:12:37.240 --> 0:12:39.719 few years, so there is a lot of movement. It's 0:12:39.760 --> 0:12:43.280 important to also mention some of the roadblocks that near 0:12:43.320 --> 0:12:47.439 shoring has and why some people are doubting whether Mexico 0:12:47.520 --> 0:12:50.079 is going to be able to take full advantage of 0:12:50.120 --> 0:12:56.040 the larger geoeconomical situation that it could potentially benefit from. 0:12:56.400 --> 0:13:00.720 But there are security concerns. There's water scars City in 0:13:00.840 --> 0:13:04.319 the northern part of the country, in re Bolon in Sonora. 0:13:05.040 --> 0:13:05.719 There are a lot of. 0:13:05.640 --> 0:13:09.000 States that have been dealing with severe droughts over the 0:13:09.000 --> 0:13:12.760 past few years. There's a problem with electricity. There's a 0:13:12.800 --> 0:13:17.160 big problem with supplying and distributing electricity. So there are 0:13:17.200 --> 0:13:19.920 a lot of industrial parks that have to set up 0:13:20.040 --> 0:13:24.120 their own generators, their own grids. They have to go 0:13:24.200 --> 0:13:27.480 in and connect their plants to the larger grids so 0:13:27.520 --> 0:13:30.280 that they can get some electricity. It's not cheap, it's 0:13:30.320 --> 0:13:33.599 not easy to do. All of those hurdles do represent 0:13:34.000 --> 0:13:37.680 something expensive, and it's very complicated for some companies to 0:13:37.760 --> 0:13:41.000 take on all of these problems by themselves. So they 0:13:41.040 --> 0:13:43.840 have been asking the government for more help with the security, 0:13:43.880 --> 0:13:47.760 with electricity, with water, because if they don't resolve all 0:13:47.840 --> 0:13:49.800 of those things, it's going to be very difficult for 0:13:49.840 --> 0:13:52.839 companies to just take full advantage of being so close 0:13:52.880 --> 0:13:53.960 to the United States. 0:13:54.200 --> 0:13:57.920 I was going to ask what's AMLO's approach or feeling 0:13:58.160 --> 0:14:01.880 towards the near shoring trend, because when I think of 0:14:02.080 --> 0:14:07.120 his policies, you know, sort of leftist nationalist. He used to, 0:14:07.320 --> 0:14:09.800 from what I remember, talk about the moral economy and 0:14:09.960 --> 0:14:13.559 distributing gains and things like that. So I wonder if 0:14:13.600 --> 0:14:17.719 there's a tension there between that agenda and sort of 0:14:17.800 --> 0:14:22.240 inviting external capital into the country. But then of course 0:14:22.360 --> 0:14:24.840 you know that capital leads to jobs, it leads to 0:14:24.920 --> 0:14:28.880 GDP growth. And there's also a theme here where he 0:14:29.040 --> 0:14:32.960 has been bulking up the military. He's been beefing up 0:14:33.160 --> 0:14:38.560 security and trying to crack down on crime, at least publicly. 0:14:39.080 --> 0:14:41.000 Yeah, I think that the last part that you said 0:14:41.040 --> 0:14:44.640 about what he says publicly versus what he actually does 0:14:45.440 --> 0:14:48.640 is a big, very big difference. I think that he 0:14:48.720 --> 0:14:52.240 doesn't really he hasn't really devoted that much time to 0:14:52.400 --> 0:14:54.840 talking about near shoring. He knows that it's a thing, 0:14:55.000 --> 0:14:58.080 he knows that it could be beneficial for the country. 0:14:58.320 --> 0:15:01.600 But what he's really pushing for is for development in 0:15:01.680 --> 0:15:04.040 the southern part of the country. So if you look 0:15:04.080 --> 0:15:07.360 at a map of Mexico, you look at the northern states, 0:15:07.560 --> 0:15:10.080 and those are the ones that typically have gotten a 0:15:10.080 --> 0:15:14.160 lot of industrial and investment just because of the closeness 0:15:14.240 --> 0:15:18.080 to the United States, and traditionally it's just the way 0:15:18.080 --> 0:15:20.120 it has been. And if you look at the south 0:15:20.160 --> 0:15:24.200 and especially the southeast, so where you have the Yucatan Peninsula, 0:15:24.520 --> 0:15:29.280 campeche Waaga, some of these poorer states, they have traditionally 0:15:29.600 --> 0:15:34.640 not received so much investment as their northern counterparts. So 0:15:34.680 --> 0:15:37.600 what he has really pushed for has been for business 0:15:37.920 --> 0:15:41.880 to just set up shop down south, and it hasn't 0:15:41.960 --> 0:15:45.080 really been an easy decision for businesses because of the 0:15:45.120 --> 0:15:48.160 same things. Right like, you're farther away from the US, 0:15:48.560 --> 0:15:51.640 and when there's not a big environment already set up 0:15:51.640 --> 0:15:55.000 for you to come in, it's expensive to just set 0:15:55.080 --> 0:15:57.840 up everything. And there aren't in many hotels, there aren't 0:15:57.880 --> 0:16:01.560 many roads. It's just a lack of infrastructure that has 0:16:01.600 --> 0:16:04.480 held some of the businesses back. There's a train that 0:16:04.720 --> 0:16:07.480 he built, well, there's two trains that he built. First 0:16:07.560 --> 0:16:11.320 is a Maya train that's in the Yukata and Peninsula 0:16:11.360 --> 0:16:14.320 that's supposed to be for passengers and for cargo, and 0:16:14.360 --> 0:16:16.920 a part of it has already been inaugurated. The other 0:16:16.960 --> 0:16:20.000 part is still under construction. But his big bed to 0:16:20.360 --> 0:16:22.880 answer to the new or showing question, I think, is 0:16:22.880 --> 0:16:26.840 the other train, and it's called the Transismiko. So it's 0:16:26.880 --> 0:16:29.720 sort of his answer to the Panama Canal. He wants 0:16:29.800 --> 0:16:33.600 us to replace the Panama Canal with this train. And 0:16:33.640 --> 0:16:35.880 it's very interesting because if you look at all of 0:16:35.920 --> 0:16:39.080 the problems with the Panama Canal and with the Swas Canal, 0:16:39.400 --> 0:16:43.040 you could see some people or some companies potentially using 0:16:43.320 --> 0:16:47.480 the transismiko to ship some of their goods across the ocean. 0:16:47.560 --> 0:16:51.160 So one ending point of the Salinakuruzjahaka in the Pacific, 0:16:51.480 --> 0:16:54.680 and then the other point is in the Gulf in Bakaruz. 0:16:54.960 --> 0:16:58.480 So if that works out, logistically, it's not as easy 0:16:58.520 --> 0:17:00.600 because it is a train, so sh would have to 0:17:00.640 --> 0:17:04.480 come into one of the ports, offload all of the goods, 0:17:04.720 --> 0:17:07.480 upload them to a train, have the train pass over, 0:17:07.680 --> 0:17:10.040 and then reach the Nacarus where it would have to 0:17:10.080 --> 0:17:13.720 be uploaded into a ship again. But if that works, 0:17:14.000 --> 0:17:17.359 that could potentially be very good for the country and 0:17:17.440 --> 0:17:20.240 for the economy. It's just not clear that that's what's 0:17:20.280 --> 0:17:22.200 going to happen, Tracy. 0:17:22.480 --> 0:17:25.920 As we continue to do more Laddam episode, we're definitely 0:17:25.960 --> 0:17:30.800 doing a specific episode on Mexico's ambition to replace the 0:17:30.840 --> 0:17:33.040 Panama Canal. That sounds like a great that's a great 0:17:33.480 --> 0:17:35.800 that's great, that's a great episode in its own right. 0:17:36.160 --> 0:17:40.280 Let's talk about the national security situation. You have a 0:17:40.320 --> 0:17:44.119 table in your story that shows just how much homicides 0:17:44.200 --> 0:17:48.560 in the country have increased over the years. The homicide 0:17:48.640 --> 0:17:52.560 rate during both the Onload administration, but also the previous 0:17:52.680 --> 0:17:56.200 EPN administration more than double than what it was during 0:17:56.240 --> 0:18:00.280 the Vicente Fox administration in the early two thousands. What 0:18:00.400 --> 0:18:03.520 is this sort of big story here and what has 0:18:03.840 --> 0:18:07.359 MLO tried to do and perhaps tried to do unsuccessfully 0:18:07.800 --> 0:18:10.240 to improve the national security situation. 0:18:10.960 --> 0:18:12.879 Yeah, so if you look at that chart and the 0:18:13.000 --> 0:18:17.080 numbers from starting in a two thousand, what happened very 0:18:17.080 --> 0:18:20.800 clearly was around two thousand and eight when Felipe Kaledon 0:18:20.920 --> 0:18:24.320 declared a war on drugs, on cartels and he just 0:18:24.520 --> 0:18:27.840 deployed the military into the country and sent him out 0:18:27.880 --> 0:18:31.800 to fight the big cartels. And back then we did 0:18:31.840 --> 0:18:37.160 see this splash of violence just across the country, across newspapers. 0:18:37.440 --> 0:18:40.159 It was horrible. It wasn't what the country was used to. 0:18:40.400 --> 0:18:42.960 But then it sort of became the way of life. 0:18:43.040 --> 0:18:44.679 You know, It's very sad to say it, but I 0:18:44.680 --> 0:18:48.680 think that Mexicans lost some sensitivity to seeing so many 0:18:48.760 --> 0:18:52.480 murders and so many homicides just splashed across the country. 0:18:53.040 --> 0:18:55.800 And it did get a little bit worse during the 0:18:55.840 --> 0:19:00.040 Endrique Pane the years, just because the dynamics of cartels 0:19:00.080 --> 0:19:02.320 and how they work. You know, you kill off the 0:19:02.400 --> 0:19:05.280 leader and ten new leaders come up. And so right 0:19:05.359 --> 0:19:09.240 now what we're seeing is that the three or four 0:19:09.320 --> 0:19:13.560 cartels that used to run the criminal organizations, they have 0:19:13.640 --> 0:19:16.320 been spread out and they have sort of multiplied into 0:19:16.400 --> 0:19:20.720 these cells and these smaller groups that are harder to fight, 0:19:20.880 --> 0:19:24.960 harder to control, and that have taken on several pockets 0:19:25.000 --> 0:19:29.159 of the country. So instead of having the big Sinaloa, 0:19:29.560 --> 0:19:33.880 Tijuana or Golf cartels, now you have so many different groups. 0:19:34.240 --> 0:19:37.360 I think that they were spread out more across the 0:19:37.400 --> 0:19:41.479 northern States back then, but now you see headlines where 0:19:41.800 --> 0:19:45.640 they're taking on several towns that are not that far 0:19:45.680 --> 0:19:48.560 from Mexico City, which is not something that we were 0:19:48.640 --> 0:19:52.520 used to seeing. And homicides as a result have just 0:19:52.640 --> 0:19:55.440 shot up. Now, if you ask Amlo, he's going to 0:19:55.520 --> 0:19:57.960 tell you that a closer look at the numbers will 0:19:58.000 --> 0:20:03.080 show a tiny slowdown in the rate. That could be true, 0:20:03.640 --> 0:20:06.200 but there are also many people who say that that's 0:20:06.240 --> 0:20:11.160 because statistics in Mexico aren't really that trustworthy. There's a 0:20:11.200 --> 0:20:15.800 big rate of impunity. There's many crimes that go on. Reporter, 0:20:16.119 --> 0:20:18.439 if you look at homicides, they have shut up. But 0:20:18.480 --> 0:20:20.400 I'm going to will tell you that they slow down 0:20:20.440 --> 0:20:24.080 a little bit. There's doubts on how trustworthy the numbers are, 0:20:24.600 --> 0:20:28.399 and the numbers that have come down, it's such a 0:20:28.440 --> 0:20:31.920 tiny slow down that it could just be a statistical error, 0:20:32.240 --> 0:20:35.040 not really a change in the trend. 0:20:35.240 --> 0:20:40.560 So in the intro I mentioned the national security infrastructure projects. 0:20:40.720 --> 0:20:43.520 Could you maybe talk a little bit more about, which 0:20:43.600 --> 0:20:46.679 include the equine reproduction Center. I feel I must repeat this. 0:20:47.440 --> 0:20:50.240 Could you talk a little bit more about the Defense 0:20:50.320 --> 0:20:53.679 Department and its role in the economy and what we've 0:20:53.720 --> 0:20:56.480 seen there recently under AMLA. 0:20:56.520 --> 0:21:00.159 Of course, so the Defense Ministry has always been the 0:21:00.160 --> 0:21:04.359 central ministry under which most of the army or the 0:21:04.359 --> 0:21:07.760 military runs, but I would say that under this administration, 0:21:07.960 --> 0:21:11.840 its profile and its power and its budget have grown 0:21:12.400 --> 0:21:17.040 in a way that's been unprecedented and very surprising. And 0:21:17.280 --> 0:21:19.400 what we did in the story was take a closer 0:21:19.440 --> 0:21:21.879 look at the budget and not only at the money 0:21:21.920 --> 0:21:25.439 that was given to them, but had how the money 0:21:25.480 --> 0:21:29.600 is actually being used. And so we found a program 0:21:29.760 --> 0:21:33.560 in Mexico we called it at Bartida, and it's literally 0:21:33.600 --> 0:21:37.040 the line in the budget that's called K zero nineteen. 0:21:37.080 --> 0:21:41.720 It's Casa O and that Bartida is specifically for the 0:21:41.840 --> 0:21:45.119 use of the military for its own infrastructure. Because a 0:21:45.119 --> 0:21:48.840 military in Mexico has been given so many infrastructure projects 0:21:48.840 --> 0:21:51.760 over the AMUL years, it's easy to think that that's 0:21:51.880 --> 0:21:55.040 the money that they're using to build the airports or 0:21:55.080 --> 0:21:58.560 the trains that the president has handed them over, but 0:21:58.640 --> 0:22:02.639 it's not. The money in this Partida specifically is for 0:22:02.720 --> 0:22:05.800 their own use. So it was very hard to find 0:22:06.160 --> 0:22:09.439 what contracts they were making with this money. But we 0:22:09.560 --> 0:22:14.320 did find, as you say, a lot of spending on horses, 0:22:14.720 --> 0:22:17.800 a lot of spending on gyms, on upgrades to their 0:22:17.840 --> 0:22:21.360 headquarters here in Mexico City, and so it does paint 0:22:21.400 --> 0:22:24.639 a picture of an army that's taking some of the 0:22:24.720 --> 0:22:28.000 money that they're being given for its own use. And 0:22:28.040 --> 0:22:32.840 another thing that's important to mention about this Partida specifically 0:22:33.200 --> 0:22:35.639 is that Congress did not really approve this money for 0:22:35.800 --> 0:22:38.440 this use. So how it works in Mexico is that 0:22:38.560 --> 0:22:42.920 the president or the executive chose the Congress a proposal 0:22:43.000 --> 0:22:46.080 for the budget. Congress then analyzes it, and the lower 0:22:46.160 --> 0:22:51.040 chamber has to approve it the spending part. And what 0:22:51.160 --> 0:22:55.040 we realized is that over the past few years, the 0:22:55.080 --> 0:22:59.639 military has used this tool that's called modifications to just 0:23:00.200 --> 0:23:04.399 change money from different partidas, to move it around, and 0:23:04.440 --> 0:23:10.320 to use it at their discretion. So for this specific Bardida, 0:23:10.440 --> 0:23:13.959 the money that was spent eventually there had not been 0:23:14.000 --> 0:23:17.359 approved by Congress. They just approved a tiny portion, but 0:23:17.440 --> 0:23:20.600 then they spent whatever they wanted on whatever they wanted. 0:23:20.880 --> 0:23:23.520 And it's very hard for Congress to keep track of this, 0:23:23.840 --> 0:23:27.320 and it's very hard for anybody to just find the 0:23:27.359 --> 0:23:31.760 contracts and see where the average taxpayer's money is going to, 0:23:32.119 --> 0:23:33.960