Mexicans born before the 1980s fear an old word forgotten in the old economic grimoires: devaluation.
Its mere mention brings to mind visions of economic catastrophe. So much so that many forget that the last devaluation occurred almost three decades ago. “There must be one coming because it hasn’t happened for years,” you hear some people say. It is even common to evaluate a government by how many and how severe its devaluations were.
Those generations, like an apocalyptic cult, always predict the end of times when, for example, new banknote designs appear, which used to be the first warning of an imminent devaluation.
The devaluation, of course, never comes. It is no longer possible, it is a past chapter of Mexico’s monetary history, which was not even a problem in itself, it was the tool used to adjust exchange rates after long periods of irresponsible public finances. But the history of devaluation in Mexico ended in the 1990s when the different forms of government-defined exchange rate regime were replaced by a market-defined floating exchange rate.
Along with the disappearance of devaluations, inflation was also becoming an extinct animal, but many people did not know about it or did not pay attention to it. What had changed? The autonomy of the Central Bank.
In a country used to seeing the president as the maximum leader, for many people, it is incomprehensible that there is something so important that he does not decide. If the President of the United States has access to the nuclear codes, why would ours no longer have the switch to the banknote machine?
It’s hard to see it, but monetary policy has power as destructive as nuclear bombs. No man in the world should have power over something so dangerous.
Andrés Manuel López Obrador (AMLO) enjoyed 3 years of an imperial presidency during which he had everything his idols of stabilizing development also had: absolute power, except for monetary policy, one of the few areas with decent performance in Mexico.
Last March 24, AMLO was 5 hours ahead of the Bank of Mexico’s announcement of the interest rate hike. This increase is a measure to fight inflation, so the president sought to give the impression that he is fighting it and it is not just an act of Banxico fulfilling its constitutional function of maintaining the purchasing power of the currency.
Just like when he announced that the drop in gasoline prices at the beginning of the pandemic had been his order and not a consequence of OPEC conflicts in early 2020. Or like his propaganda for the recall referendum that implies that the vote is being organized by the opposition to get him out and not him to stay.
Distracted and misinformed people believe him, then they remember that with AMLO there has been no devaluation and are convinced that he is a great statesman, “an economy genius,” as his admirer Estefania Veloz said.
It is a great political strategy to take advantage of economic ignorance and claim responsibility for everything that goes right while blaming the pandemic or the conflict in Ukraine for everything that goes wrong.
With these talking points, it is impossible to lose. Imagine the apocalyptic hypothetical case in which AMLO puts to consultation whether the president should be given back control over Banxico, who would say no if with him there has been no devaluation?
There are no honest politicians, but none of the last 5 presidents understood as well as AMLO how ignorant the electorate is.
Peña Nieto could say that the “gasolinazos” were the fault of the Arab Spring, Calderon that the tax on cash deposits was because the corrupt were stealing bags of money from the people.
I would say they were more respectful of the intelligence of the people, but the reality is that they did not know that they were so misinformed and distracted that, even in the information era, they do not understand that, for example, the prices of things are not decided by the president.
When previous presidents lied, it was not with such mastery. They tried to deceive those who did understand that they were lying. AMLO wastes no time in lying to his opponents or to informed people, they are the minority. He lies to those who still fear devaluation, still believe that the president is a king, to those who always ignore the previous governments and now believe that finally someone is listening to them, although sadly they will be the ones who will have the worst time with what may come.