The G20 Under the Mexican Presidency

Originally published in Americas Program.

Mexico took on the presidency of the G20 in December 2011 at a moment of multiple crises. The nation shares the presidency with a “three-member management Troika of past, present and future chairs”, this year, France and Russia. As chair, Mexico is responsible for establishing a temporary secretariat to coordinate work and prepare for and organize the June 2012 Summit. The Ministry of Foreign Affairs is charged with this task, with the participation of other ministries in specific areas.

Mexico will have considerable impact in setting the agenda and drafting preparatory materials for the June 18-19 Summit in Los Cabos, Baja California South, Mexico. The government of President Felipe Calderon has set that process in motion, with a brief six months remaining and enormous challenges to a successful meeting following lackluster results in Cannes in November 2011.

Calderon referred to Mexico’s presidency of the G20 as “a very delicate responsibility, since it’s the first time that not only a Latin American country but a developing country has assumed [the post].” In fact, several emerging economies have previously chaired the G20. South Korea (2010) chaired the G20 Summit meeting of heads of state and India (2002), Mexico (2003), South Africa (2007), and Brazil (2008) chaired the G20 Finance Ministers’ meetings.

Mexico will have considerable impact in setting the agenda

In addition to being a developing country with a minor voice compared to the G8 countries, Mexico takes on the task at a time when the G20 agenda is dominated by the global financial crisis and, in particular, the eurozone debt crisis. The French G20 Summit made little headway in addressing these challenges and prospects for the Mexican G20 Summit may not be much better, as acknowledged by Mexican President Calderon at the Merida Summit on December 5, 2011: “The context of the G20 is marked by this terrible global crisis and perhaps, it’s the main issue that surrounds, envelopes and totally dominates discussions.”

As 2012 begins, it’s clear that the crisis is far from being resolved and probably deepening. It is likely to continue monopolizing the G20 agenda, with dim prospects for advances.

In addition to the weight of the crisis in deliberations, in June 2012, Mexico faces its own challenges that will affect its leadership of the group. The nation will be a mere month away from presidential elections. Presidential elections in Mexico frequently lead to a period of political instability and taint every aspect of the political climate. This year will be no exception. Violence has exploded in the country, with more than 60,000 homicides since the drug war was launched by President Calderon in December 2006.

Constant conflicts between security forces and cartels and among competing drug cartels, with the lines between the two types of conflict blurred in the context of frequent complicity and corruption within the government, have led to generalized violence and insecurity in the country.

In this context, the actions of the federal government even in the area of foreign policy have electoral implications and motivations – whether explicit or implicit. The chair of the G20 represents an opportunity to gain international visibility and prestige for the outgoing administration, but it also presents the risk of failure at the meetings on critical issues, not to mention political and security challenges. Likewise, the United States will be heading into elections in 2012 and potentially postpone tough decisions and reforms of the kind that the world economy needs now for being too controversial.

Mexico’s priorities

For civil society actors, it’s important to have an idea of the goals and political and economic perspectives that the Mexican presidency brings to the table. At the G20 meeting Nov. 4, 2011 in Cannes, Calderon outlined five major priorities for the Los Cabos Summit:

1) Regain economic stability to restart growth. Calderon would like to see the European crisis resolved before June and remove it from the agenda for the G20 Summit in June. To that end, he has offered some specific recommendations that place the onus on European leaders to apply decisive measures in the next few months to “resolve the Euro crisis, to isolate the effects of this crisis on viable economies, like the Italian and Spanish economies, to avoid systemic contagion, and of course, to immediately discount the part of the Greek debt that is simply unpayable.”

According to the Mexican President, developing countries and developed countries have different roles in the current global economic situation. The former should “maintain a responsible macroeconomy and continue to contribute to world growth”, while the latter should “achieve fiscal consolidation and close out as soon as possible the public deficits that have generated the present crisis.”

2) International trade. On this point, Calderon emphasized two goals: To foster international trade through free trade and to correct “commercial and financial imbalances on the global level.” On imbalances, his criticisms were clearly aimed at China, without mentioning names, and in particular against that country’s monetary policy, referring to “countries with constant trade surpluses, not always achieved in a natural manner or obeying the market, but through the artificial imposition of notably depreciated exchange rates.”

In defense of free trade, the President insisted on “rejecting protectionism that has arisen in various developed and developing economies of the world” and argued for reducing tariff and non-tariff barriers. He expressed impatience with the stalled Doha Round and urged that, before the June Summit, negotiators should either conclude the trade round or admit failure, adding that he would rather have it declared dead than issue yet another declaration of good intentions if there isn’t the political will or any real possibility of reaching global agreements.

3) Financial Regulation. Mexico’s objectives are: To strengthen the Financial Stability Board and continue to follow its recommendations to seek balance between financial stability and growth and to strengthen the international financial architecture, giving a key role to the International Monetary Fund. And, to strengthen “financial inclusion for growth.”

Notably absent is the mention of real measures of regulation, such as imposing a financial transactions tax, supported by France, the out-going chair, or eliminating tax havens.

4) Food Security. Calderon noted a 50% rise in world food prices over the past five years and affirmed the relationship between higher food prices and extreme poverty, hunger and “social turbulence.” He attributed the rise to an increase in demand in emerging economies such as India and China and “a strictly financial component caused by speculators who seek higher profits in food markets.”

5) Climate Change and Sustainable Development. Speaking before the outcome of the Durban Climate Change Conference, Calderon placed priority on the creation of the Green Climate Fund through mechanisms, including the ”fast start” financing for already agreed adaptation measures and the application of the program for Reducing Emissions from Deforestation and Forest Degradation (REDD+). He reiterated his belief that REDD+ and payment for environmental services will be the best global instruments for emissions reduction. This area also includes infrastructure and “green growth.”

Mexico’s Role as G20 Chair

In addition to these priorities, Calderon has publicly defined his idea of Mexico’s “strategic role” as chair. He vowed that Mexico would play a strong role, not only on issues that affect the region, but also in resolving the crisis among developed countries. At a meeting of the Pacific Alliance, he noted that his government seeks to be a spokesperson for developing countries.

The Mexican President insisted on finding immediate solutions to the Greek crisis and emphasized the need to build a “wall of contention” to buffer countries such as Italy that do not have a solvency crisis but rather a credibility crisis that could get worse. He said the eurozone has the tools to confront the crisis through the support of the central banks as “lenders of last resort”, and that they need to make the tough decisions. He attributed the crisis to “imbalances” based on the surpluses or over-accumulation of capital in China and other countries and deficits in the United States and Europe.

The Mexican government considers itself in the vanguard with regard to “green growth” and the implementation of the Green Climate Fund, social programs or safety nets such as the Opportunities Program, and free trade. It will press for the expansion of work in these areas.

Preliminary Observations

The Calderon “checklist” for the summit includes resolving the eurozone crisis first through financial intervention and deepening market policies. The suggestions follow the line of the orthodox neoliberal policies that his administration has maintained in Mexico. Although they may not be excluded from the agenda, there is no mention of the G20 priority to generate employment, especially for youth, or of a need to address inequality, development or a more just distribution of the benefits of development.

Point 3 on financial regulation does not refer to a new regulatory framework, but to systems of monitoring and evaluation (the FSB) and contingency plans on risk management to be managed by the IMF. Point 4 on food security notes the role of speculation in price increases but so far lacks recommendations for regulation, instead attacking “expansive monetary policies” in developed countries as a major cause of the flood of investment in food commodities markets, rather than the lack of regulatory frameworks and unhampered greed

On climate change investment the Calderon solution is “programs to simultaneously combat poverty and deforestation” – that is, payments to indigenous and peasant communities to conserve forests – market mechanisms that have been strongly criticized due to the lack of effectiveness in addressing the problem of emissions, the commodification of nature and the violation of indigenous rights.

In sum, the Mexican government as chair of the G20 will encourage free market policies and avoid solutions that promote regulation or market reforms. A major goal is to broaden the role and the resources of the IMF. Central Bank director Agustín Carstens told IMF Managing Director Christine Lagarde, “This will be among the most important tasks for Mexico as host of the G20 –to find ways to strengthen the Fund.”

The Mexican government proposes more money for the IMF and the use of the IMF “special drawing rights” to expand the resources of central banks as well as the implementation of reforms to increase emerging economies’ participation in decision making. It calls for expanding the capacity of the IMF to “intervene massively in financial or monetary crises”, insisting repeatedly on the “efficacy” of the Fund’s intervention in the Latin American debt crisis of the 80’s.

Although the Mexican government sees itself as the voice for developing countries and especially Latin America, other countries in the region do not share optimism regarding the meeting. When Calderon presented his agenda to the Alliance of the Pacific (Mexico, Colombia, Peru, Chile, and Panama as observer) Colombia’s President Santos questioned Mexico’s role, asking Calderon, “What are the proposals that you can take and that are going to be accepted by Europe, the US or Japan to really benefit Mexico, Chile or Peru; it’s very difficult to identify this.” He also questioned the viability of the Summit. “Excuse me for saying this, but in all frankness, if nothing changes radically, the G20 meeting will be another failure… to believe that the G20 will resolve our problems, well, I have a lot of doubts. Precisely due to the structural problems of the majority of the economies that make up the G20, I think it will be very difficult for there to be consensus.”

Skepticism that the G20 will represent their interests and that it will be effective is widespread in the region. The recent formation of the Community of Latin American and Caribbean States demonstrates that much of the region—including G20 members Argentina and Brazil– believes solutions must be forged within the region and that developed countries represent more of an obstacle than a partner. These countries also have longstanding criticisms of IMF conditionality and actions in the region and they rejected U.S. free trade agreements.

They want to spearhead efforts to build South-South ties and orient regional infrastructure development toward the consolidation of regional trade and development rather than follow a G20-led orientation toward globalization. It would be an illusion for Mexico to think that the region could speak with a single voice – much less accept the views of the Calderon administration as its own.

Challenges for Civil Society Participation in Los Cabos

Due in part to the protests that often accompany the G20 Summits, the Group has chosen a meeting site at the tip of a peninsula that is difficult to reach and where it is easy to control access.

Civil society organizations will find it difficult to mobilize large numbers of people at the Summit so strategies must focus on creativity, clear criticism and alternatives. Because of the general climate of insecurity in Mexico and possible protests, participants should expect security to be heavy.

Some of the most important issues for civil society are not only sidelined by the crisis, but seem to be minimized by the Mexican orientation of the agenda. The emphasis on ‘more of the same’ narrows the space for proposing alternatives. Civil society organizations must press the G20, and especially the Development Working Group, on the need for revamping the development agenda, real reforms and regulation, and a fairer global economy. Achieving greater transparency within the Group will be key to this effort. The Summit in Mexico presents the opportunity to spotlight alternatives, share information and make the voices of civil society heard.