Gasolina Barata

During his thirty minute discourse on US/Mexico relations over the years, Mexican President Andres Manuel Lopez Obrador (more commonly known as AMLO) gave a dig at the inflation problems plaguing the US by telling President Biden at their recent White House meeting, "we have decided that it was necessary for us to allow Americans who live close to the border ... to go and get their gasoline on the Mexican side at lower prices." What was the purpose of this snide little comment from the leftist populist president?

I mean, Mexican inflation is a little bit less than in the US at 7.7% through May compared to 8.6% in the US (we won’t mention that US inflation popped up to 9.1% in June). But that difference could be explained by the subsidies that Mexico applies to gasoline sales. At 22 pesos per liter, Mexican gasoline is a little cheaper than US gasoline at the equivalent of $4.01 a gallon (at least cheaper than in California – not worth the hassle of crossing the border from Texas). But Bloomberg estimates that without government subsidies gasoline in Mexico would be around 34 pesos a liter, the equivalent of over $6 a gallon. Bloomberg goes on to estimate that these subsidies are equal to about one percent of GDP. I guess American drivers crossing the border for gasoline should thank the Mexican people for their sacrifice.

Add in the fact that AMLO is trying to drive American gasoline retailers in Mexico out of business by not renewing their import permits and forcing them to buy from the state-owned oil company Petroleos Mexicanos (or Pemex). AMLO is determined to reinstate Pemex and the government-owned electric company CFE, as the market leaders in energy in Mexico. He does not seem to be perturbed by the fact that these moves violate the US-Mexico-Canada Agreement (also known as NAFTA 2) or by mounting lawsuits filed by American companies as well as those of other countries.

AMLO appears determined to recreate the import substitution economic system that prevailed in Mexico during the 70-plus year domination of that country by the Institutional Revolutionary Party (PRI), a party which he joined in 1976. Import substitution uses high tariff barriers to protect domestic industries and employment from foreign competition. The PRI, under President Cardenas, nationalized foreign owned oil companies in 1938 to create Pemex. Import substitution is exemplified by high levels of corruption, shoddy domestic products, unproductive workers and black markets. Import substitution led to an economic disaster for Mexico and much of the rest of Latin America in the late 1970s and 1980s that was known as the Lost Decade. I lived in Mexico during those years and well know the hardships it placed on the Mexican people.

Unsatisfied with the PRI, which incorporated elements of both the left and right, AMLO abandoned the PRI to join the further left Party of the Democratic Revolution (PRD) after the PRI’s grip on political power in Mexico was shaken by the Lost Decade. But the PRD was unable to win the presidency even when AMLO was its presidential candidate in 2006 and 2012. Denouncing those elections as illegitimate (where have we heard that before?), he then formed his own populist party the National Regeneration Movement (Movimiento de Regeneración Nacional in Spanish but it goes by the acronym MORENA which means brown or brown skin in Spanish). He won by a landslide in 2018 and set about to recreate the single party domination of Mexico that had been the hallmark of the PRI. MORENA won a majority in Congress but failed to get enough seats to amend the constitution. AMLO remains very popular and could probably be reelected president if the Mexican constitution allowed it – but it doesn’t. At least, not yet. The Mexican election in 2024 could be as interesting as the one shaping up in the United States.

AMLO’s White House visit came right after he snubbed the United States by not attending the recent Summit of the Americas hosted by the US because the US would not invite leftist dictators like Diaz-Canel of Cuba, Maduro of Venezuela and Ortega of Nicaragua. I think we can figure out where AMLO wants to go by the company he keeps. And I don’t think President Biden will have any more luck with MBS (Saudi Crown Prince Mohammed Bin Salman) on his current overseas trip than he has had with AMLO. Maybe it’s time for some backbone instead of trying to appease authoritarian populists and petty dictators. Of course, it takes real strength to have backbone.

President Biden is a slave to the left’s progressive agenda. On his most recent overseas trip, he appeared to be more of a supplicant than a world leader, replacing President Obama’s strategy of leading from behind to not attempting to lead at all. Pipsqueaks have no hesitation in mocking him, pariahs don’t answer his telephone calls but will receive him with fist bumps when he comes begging. Dictators doubt his resolve. Although President Biden has done a good job of rallying NATO in defense of Ukraine, it was the appearance of weakness that emboldened Putin.

American weakness on the world stage is the result of President Biden’s fervent adoption of the progressive left agenda which includes diversion of funds from defense to entitlements, a regulatory straightjacket for US businesses, and a Green New Deal that decimates domestic energy production while staking the country’s future on unreliable renewable energy sources that require new technology that is yet to be developed to meet the energy requirements of the future as well as dependence on raw materials from foreign countries, many of them adversaries.

Environmentalists have portrayed opponents of the Green New Deal as unscientific climate change deniers or evil personified. But the negative impacts of the environmentalists are too enormous to ignore. When Sri Lankan President Gotabaya Rajapaksa decreed that all farmers in that country were going to go organic, he banned the importation of pesticides and nitrogen based fertilizer. Rice production plummeted and exports of tea (the country’s principal cash crop) hit a 25 year low. Starving Sri Lankans needed but little incentive to rise up against the Rajapaksa family that has dominated Sri Lanka for decades and drive them from power.

And after the Dutch government announced plans to cut back on the use of fertilizers and force farmers to reduce their herds, the farmers there revolted and blocked supermarkets, distribution centers, roads and airports with their tractors. The protests are continuing.

The Green New Deal would undo all the benefits from the Green revolution of the 1950s that allowed developing countries to escape Malthus’ prediction of worldwide hunger and famines as populations grew. The truth is that banning the use of fertilizers, pesticides and other chemicals (many of them derived from petroleum products) would decimate the developing world and even weaken the developed world. The planet cannot support a population of 8 billion people with organic farming. The deaths from the Green New Deal would mount into the hundreds of millions - even billions. Of course, socialists like Stalin and Mao, have never been hesitant to sacrifice innocents that stood in the way of their plans.

Our adversaries are not debilitating their defense capabilities to address climate change. Yes, China is advancing into electric vehicles and renewable energy resources, but it is also building 150 nuclear power plnts and 43 coal fired power plants to make sure it has the energy resources it needs to be a world leader. We need to do the same. And if Joe won’t do it we need to find someone who will.