Ballots and bullets: Mexico’s elections

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Hello and welcome to the Intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Stocks in companies making green technologies are going gangbusters with double the growth of the S&P 500 index. But that naturally raises a. Is it a bubble? And recent space missions have overwhelmingly focused on Mars. It's just a less forbidding place than Venus. Now though, two new missions aiming for our nearer neighbor will investigate tantalizing hints of a gas that might just be linked to life. But first, Mexicans went to the polls yesterday in a set of elections in which 93 million people were eligible to vote on more than 20,000 positions. And yet the person who has figured most prominently in campaigning wasn't on any of the ballots. Andres Manuel Lopez Obrador, who was applauded as he cast his vote yesterday, is halfway through a six year term as president. When he came to power, he promised to transform the country. He vowed to stand up for the poor, to fight corruption, to address the drug related violence that has long plagued the country. His critics say he's failed in all those ambitions and that he's used undemocratic methods to push through his policies. Across the country, election campaigns have been marred by violence. More than 30 candidates have been murdered. The votes are still being counted, but early results suggest the President's party has lost some of the legislative stranglehold it had been enjoying.

These are Mexico's biggest ever elections in terms of the number of posts up for grabs.

Sarah Burke is our Central America Bureau Chief.

There's all 500 seats of the lower chamber of the legislature. There are 15 governors of the 32 states. There are 30 state legislatures and thousands of local, local positions. It's also going to determine the President Lopez Obrador's influence over the next three years or so of his term, which is a six year term that ends in 2024. As it stands, Morena, his party, has the simple majority in the House and with its allies, a super majority. The initial results and the projections that are coming out at the moment suggest they're going to lose the super majority with their allies, keep the simple majority with their allies, but lose it on their own. So they're going to have to do a lot more negotiating in the second part his term.

And so what are the key issues in all these elections?

I mean, to oversimplify, at least when it comes to the national legislature, it's about the President's popularity, whether that outweighs his record. So it's really a sort of referendum on him and his government. So far, it's slightly different for the governor races, where the candidates themselves come into play a little bit more. So he came to power with a promise to do grand things for Mexico, to sweep away corruption, make poverty disappear. But really what he's done is polarize the country. I mean, he divides Mexicans into two groups, the people who he says he represents and the elite who he blames for everything that's wrong with Mexico.

And so you say the election is a referendum on his popularity. I mean, how popular is he?

His approval rating is pretty healthy. I mean, it hovers around 60% ish. And Morena, his party, is the leading party. Yet lots of polls show that many Mexicans are very unhappy about, more unhappy than happy indeed about a raft of issues from the economy to crime and insecurity to the handling of COVID But the problem is the opposition coalition is really seen as the sort of least bad option as opposed to necessarily desirable in itself. So voters I talk to outside the polling stations after the vote or before they were about to vote, we're talking about corruption, about the economy, about those were the things that came up. Also about the old governments and not wanting to have them back necessarily if they were in favour of Morena. So one voter I talked to, spoke about the economy, and he was half blaming the government and half blaming the pandemic. One of the things he said that clearly needed to happen was there to be better management of the economy. Another person, a supporter of Morena, who just voted for them, told me, for her, it was all about corruption, That your governments were all corrupt, that they kept everything for themselves and gave nothing to the people below them, and that the president and his party were changing that.

And as for those voters who were opting for the opposition to put a brake on Mr. Lopez Obrador, as you say, why? What are the issues there?

I mean, they say that his record has been poor, that Mexico has the world's fourth highest death toll from COVID that the economy shrunk by 8.5% last year, that he's got lots of projects that don't really make sense, such as trying to prop up the state energy providers, which makes Mexico's energy dirtier and more expensive. They also, some of them are pretty worried about his way of governing. I mean, he's very bombastic in morning conferences, calling out critics and also sort of undermining some of the checks and balances in democratic institutions in the country. So they said that there needs to be checks and balances in parliament so that he doesn't have a free hand to just pass any legislation he wants. And the initial results suggest that that might have happened.

So the opposition is credible then?

So the opposition actually got together in a coalition for this vote. It doesn't really offer an alternative view. So each of the two parties, the two main parties in the opposition, the PRI and the PAN, were only polling around 20% of the vote, compared to Morena's 40% polling. But by getting together, they managed to really have a block. But, you know, they're very different parties with very different ideas. You've not seen so much a policy platform, but just a we're in opposition to the government.

And what has the campaign itself been like?

I mean, the campaign itself, apart from being a very pro and anti government and pro and anti president, has actually been pretty violent as well. I mean, there's always campaign electoral violence in Mexico, but this has been one of the worst years. I think the worst since 2000. That's partly because these are huge elections. So, you know, you have more candidates, more seats, more competition, more people that organize crime would want to win over or not have running. But it's been bloody. There have been more than 30 candidates murdered during the campaign. And today there were reports that Human heads were dumped at polling stations in Tijuana. There was a burning of a polling station in another part of the country. And there's also been sort of allegations of dirty tricks, threats against candidates, opening of false allegations against them. So it's not been the cleanest, but it's a huge country, huge elections. And most people seem to think given all of that, it's not been as terrible as it could be. However, the electoral violence has been downplayed by the president. And in a press conference last week in one of his daily morning conferences, he accused the press of making a fuss about nothing, saying they were overplaying the violence, jazzing it up, overdoing it, making a big scene out of it when they should just be reporting on other things.

And as you say, huge country, huge elections. But just given the electoral dynamics here, do you think the outcome of these elections will help Mexico change course in some way?

I mean, these elections matter. If President Lopez Obrador doesn't have the supermajority, then he can't do certain fundamental changes, such as constitutional changes that they might like to do. And if he has to negotiate with allies in his coalition, even for simple majority, that really means that there's a sort of a clipping of his wings in a way that he's probably not going to see as a, a successful result for the party. And the other thing is it also gives a sense of what might happen in 2024 in the next presidential elections. I mean, they're a way off, but it shows that the opposition might be able to mount a credible threat to.

Morena, thanks very much for joining us.

Sarah, thank you.

For more analysis like this from our international network of correspondents, take out a subscription to the Economist. Get a great introductory deal@exterator.com intelligenceoffer. The link is in the show Notes pledges to cut greenhouse gas emissions are getting increasingly ambitious. More and more countries are aiming for net zero emissions. America, Britain and the European Union by 2050. China by 2060.

We were the first country to pass legislation for net zero.

Europe aims to be the first climate neutral continent by 2050.

And today many countries around the globe are in an exciting race to zero.

All that decarbonizing of big economies is going to take new policies, new financing, and in particular new technologies. And that in turn is driving massive growth in the publicly traded firms that will provide them.

So at the Economist, we constructed a portfolio of about 180 green companies. So companies that stand to benefit from the energy transition, and they include electric vehicle makers Wind power firms, firms that make kind of hydrogen fuel sales as well. And we looked at how their price of their shares has changed since the start of 2020.

Guy Scriven is the economist's climate risk correspondent.

And this portfolio of firms saw their shares rise by 59% since the start of 2020, which is almost twice the rate of the S&P 500.

I mean, those are impressive numbers. What is it that's driving that growth?

Essentially, it comes down to kind of investor interest. And there are three kind of types of investors to think about here. So one type is the sustainable investing crowd. These are investors that like to think about environmental factors when they design their funds. And we've seen an increase in those type of funds holding green firms. But perhaps kind of more strikingly, we've also seen the same pattern in the set of investors who don't really care about sustainability. So more conventional fund managers. They're also holding many more green companies. And the final set is retail investors. So if you look at Robinhood, which is a kind of app for day traders, you can see among their top 20 companies, there are plenty of green firms. So that includes Plug Power, which is a fuel cell maker, and Tesla as well. And if you look at WallStreetBets, which is a subreddit on which day traders share tips and discuss investment strategies, you see the names of various clean energy firms popping up there, too. And so this is all part of that shift from investing in green companies being a niche activity to it being much more mainstream.

Okay, so in essence, everybody is piling in. But that does lead to the question, is this a bubble?

So, essentially, the answer is it depends which area or which type of green companies you're looking at and how mature the underlying technology is. And essentially, the kind of underlying difference here between those types of firms which look kind of reasonably valued and those types which look overvalued is a question of the kind of maturity of the underlying technology in the market.

You mentioned the role of these environmentally conscious funds, but there's also generally a pressure, given all this wider interest, to simply appear green. Are they actually green?

So, I mean, we looked at the top 20, what they call ESG funds. So funds that purport to care about environmental, social, and governance factors. We looked at the top 20 of these globally and looked at what companies they hold, And I think six of them held ExxonMobil, which is America's biggest oil firm. A handful held Saudi Aramco. And then if you look further down, you can see that they Also hold gambling firms and booze companies and tobacco giants as well. So investors need to be a little bit careful when investing in ESG funds because they basically may not be getting what they thought they were getting. Only a small percentage of ESG investing is actually truly in green stocks.

So if you're investing in genuinely green stocks or funds, should you expect the kinds of returns you were talking about?

Well, there are some reasons to be concerned. One big worry is inflation. The reason green firms are particularly at risk from inflation is because their earnings often are far off into the future. And the, the reason that matters is that higher rates of inflation essentially mean that earnings in the future are worth less today than they would have been if you had no inflation or low rates of inflation. Even so, investors are still very enthusiastic about these types of technologies. They're buying stocks early in the technology cycle, hoping that they're going to be holding the kind of next Tesla. But in actual fact, many of these firms will end up going bust. And even if the kind of technologies do succeed, huge returns aren't necessarily guaranteed. So take solar energy, for example. We've had a huge increase in the installed capacity of solar that's gone up sevenfold. But at the same time, we've also seen the price drop by 80, 85% of individual solar panels. And so as a result, the actual cumulative revenue grew pretty slowly over that period, despite actually having a big boom in stored capacity. And so there are risks even if the technology goes according to plan.

But when we think about the prospect of bubbles in an emerging technology, people are going to think about the dot com era, the tech stocks that went south. Is that a fair comparison, a fair worry?

Yeah, I think there are certainly some similarities. I mean, one similarity is the kind of overvaluation which we talked about earlier. But another kind of, in a sense, kind of bigger similarity is that the Internet was a kind of structural change for the global economy. And lots of investors think that decarbonization will be too. It's going to involve huge shifts in capital flows and the way in which capital is allocated in particular away from fossil fuel technologies towards cleaner ones. And that process creates winners and losers amongst the firms involved. And so the comparison does make sense in those terms. And in the early noughties, a lot of tech companies at the time were touted as being the next big thing, but actually collapsed and went bust. And you can see similarities with what might be happening now in the market with regards to green firms. So it'll be interesting to see what happens over the coming years. But it's worth remembering that two decades after the dot com bust, tech firms now make up about 38% of the market capitalization of the S&P 500. So the potential gains from green investing and doing it right are enormous.

Guy, thank you very much for joining us.

Thanks.

The planet Venus has for so long played second fiddle to Mars. Venus is similar to the Earth in size, mass and composition, and it's a lot closer to, but it's got a surface temperature of nearly 500 Celsius. It's got clouds made mostly of sulfuric acid. As a planet, it's not the most welcoming. So instead, Mars has captured the interest of scientists and space agencies and for that matter, poets and writers and filmmakers. Last September, though, that changed.

A global team of astronomers have announced they found what's could be evidence of life elsewhere and not on Mars, but on the much more inhospitable Venus.

The scientists thought that they had spotted a gas called phosphine, a gas that could conceivably be made by something alive. Now, America's space agency has announced a pair of missions to the planet.

You wait decades for a new Venus mission and then two come along at once.

Oliver Morton is the Economist's briefings editor and a resident space expertise.

These missions are part of a NASA program called Discovery, which sends, quote, small missions out every few years. And every time there's a call for ideas, the Venus people get all excited and put up their Venus ideas. And up until now, every time they finally announced one or two winners, the Venus people have been disappointed. In another sense, that's probably something to do with the phosphine detection last year, which is not necessarily a definitive detection, made people slightly more interested in Venus again.

And so these two missions that are now slated to go, what will they be doing?

Well, one of them will be looking at primarily the atmosphere, and one of them will be looking primarily at the surface. The atmospheric one is the one called DaVinci Plus. And although it will do some stuff in space, the real business end of this is that it will drop a probe that will sink down through the atmosphere. And as it does so, it will do various chemical measurements as well as having a camera on the bottom that will just watch the ground rushing up towards it. DaVinci does benefit from the hoo ha over phosphine because it should be able to directly detect phosphine. But also phosphine's not life itself. The whole idea is that phosphine suggests, if it's actually there, that something is making it and there have been other very tantalizing but very edgy bits of evidence that there might be something doing something lifelike in the clouds of Venus for some time. If you put a well instrumented probe slowly down through those cloud layers, chances are that if something's going on, you might see something out of the ordinary. So that's DaVinci plus maybe launch around 2029. But these things are still a bit hazy at this sort of level.

And tell me about the other mission.

Veritas will stay in orbit and will basically use infrared imaging and radar to keep a very, very close eye on the surface. And this will be a map of the planet that is far more precise than the map produced by the previous American mission, Magellan. We should remember that America is not the only player in this game, just the only one playing very much right now. The Europeans also have a plan for a mission that's a bit like Veritas, frankly, called Envision, which I think is slated for the early 30s. And there's some private interest. A launch company called Rocket Lab talked about putting together a private mission to Venus as soon as 2023.

And so will these missions be the sort of thin end of the wedge? Are we going to see a lot more exploration of Venus as we've seen, for instance, with Mars in the past few years?

I somehow doubt it, Jason. If they were to find life, that's an outside possibility, but it's worth looking at, then, yes, people would get really excited and you'll start seeing plans for sort of like blimps to traverse the cloudscapes of Venus. But the fact that the surface really is so terribly inhospitable and inaccessible means that it's a hugely difficult undertaking unless it proves to actually have life. I think Venus will be still very much a second class planet to Mars and also to some of the moons of the outer solar system for the time to come.

Oliver, thank you very much for joining us.

Jason, it's always a pleasure.

That's all for this episode of the Intelligence, if you like us, leave us a rating and a review and see you back here tomorrow. Sam.