Since time immemorial, Mexico suffers a malaise some pundits have called “The Tlatoani Syndrome,” which only means that since the nation was founded in 1325, it’s been ruled from the top down in its pyramidal economic structure.
In fact, the Aztecs imposed their king god known as “Tlatoani,” then came the Spaniards who loved the rule by the king, and when Independence came, the nation’s forefathers did not know any better in terms of ruling a nation, except from the top down.
What this means is that in being ruled from top to bottom, the republic structure of the nation is virtually rendered useless as the federal government sucks up most of the tax monies leaving the municipalities — the true base of the pyramid — and the states with shortages.
During the 21st century these shortages had not been felt as oil prices had prevailed high and the federal government could trickle down some of the money.
Yet nowadays the federal government has been severely thrashed by the plummeting oil prices and there is neither question nor doubt that the beating will again trickle down to states and municipalities who for the next few years are facing the ugly monster of a veritable economic disaster.
For one, in many states the governors have been forced to ask for loans and their states are heading towards the upcoming crisis with a high degree of indebtedness. These loans for the most part come from private banking-institutions, which only means they will have to pay shark loaning interest rates and to boot they will have no margin to increase taxes as people are already up to their necks in debt.
Just the tip of the iceberg on state debts, Coahuila in northern Mexico and Veracruz on the Gulf coast have staggering debts of over 35 billion pesos each, and no visible means of income to pay for them. In both cases, the debts are not the product of productive investment in public works but of outright thievery by state governors. Many fear that should their states continue with the present course, it will not be long before they have to declare what’s known in Spanish as a “technical bankruptcy.”
At present even states that have been more or less well managed have a head-on confrontation with the federal Finance Secretariat because it is failing to release a fund created during the past two “Great Tlatoani” administrations called the Income Stabilizing Fund for Federal Entities (FEIEF). The Finance Secretariat or Hacienda refuses to say why it is not releasing the approximately 30 billion peso fund whose purpose is to cushion the literal free fall in income tax most states are currently undergoing.
Instead, Hacienda is telling governors to make adjustments to their budgets, leave the FEIEF money unscathed for worse times, which are bound to come.
Unfortunately, the “Tlatoani Syndrome” is not slackening during the current President Enrique Peña Nieto administration, and management from top to bottom prevails.
The recent past shows that Mexico is a nation that went from rags to riches and is now dangerously sliding backwards to riches to rags with the application of former madcap “big government” tactics that only led all three branches of a federal government, municipalities, states and federal to build up excessive bureaucracies that the governments seem unable to get rid of. This is the straw that’s breaking the burro’s back — but the current Tlatoani is paying no heed as it is better to have a burro with a broken back than a Tlatoani in disgrace. Unfortunately, both seem to be on the way.
For the near offing, elections in 12 different states are slated for June 5 and definitely in all of them deficit will be the number one theme of debate.
But debate will do no good if the candidates offer no new income solutions; and there won’t be any because the federal government has a tight hold on the nation’s economic bridle.