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Is it the end of the line for mass transit systems?



Patrick Foye travels to work on the Long Island Rail Road, once known as the “Route of the Dashing Commuter.” He boards the 6:45am from leafy Port Washington, disembarks in the catacombs of New York Penn Station and then rides the subway to his office on the tip of Manhattan. 

As chief executive of the New York region’s public transport agency, Mr Foye’s vinyl seat provides a stark view of the effects of coronavirus. The parking lots at Port Washington are plains of empty asphalt. The LIRR’s rail cars are carrying a quarter of their normal daily load of more than 300,000 passengers. Office workers no longer dash — they Zoom.

A collapse in fare and tax revenue has opened a $12bn fiscal hole at his New York Metropolitan Transportation Authority. It has an annual budget of $17.2bn of which fares make up $6.5bn and taxes another third. Without more aid from Congress, Mr Foye may furlough 8,000 employees, eliminate billions of dollars of planned capital spending and gut service on New York subways, buses and railways, including the LIRR. 

Yet an even more ominous prospect looms in the longer term: after Covid-19, what happens if some passengers never come back? It’s a question echoing across cities around the world, from New York to London — where leaders just agreed a £1.8bn short-term transport rescue deal — to Singapore.

The pandemic is setting in motion structural changes in how employees do their jobs with profound implications for urban settlement, transport networks and energy use. Journeying to work five days a week now seems excessive in an age of video conferencing and cloud data. In future, 85 per cent of employees would prefer to work remotely at least two to three days a week, according to a survey by CBRE, the commercial real estate services company. 

Without more aid from Congress, the MTA’s chief executive Patrick Foye may furlough 8,000 employees
Without more aid from Congress, the MTA’s chief executive Patrick Foye may furlough 8,000 employees © Frank Franklin II/AP

Such a scenario could seriously weaken the finances of public transit systems that underpin great cities. No other mode of transport can efficiently deliver millions of workers into dense central business districts. With fewer riders and fares, transit operators face an unpleasant choice: trimming service, which repels customers, or going cap in hand to the government for more subsidies. 

Mr Foye still hopes to stave off an immediate funding crisis with federal coronavirus aid. But he is also pondering how he would respond to lasting changes in commuting habits. 

“[We] would have to think about right-sizing service and taking steps to reduce the cost to get it commensurate with the long-term decline in revenue,” he says.

Chart shows the New York-New Jersey-Connecticut region showing the ability to work from home favours high-wage industries

Driving revival

Passenger numbers collapsed when authorities declared lockdowns in the spring, keeping all but essential workers home. After partially reopening in the summer, New York City is placing more limits on social gatherings and restaurants to keep a lid on climbing coronavirus cases

Initial research suggested that transit seeded the disease, spreading it through city arteries. But later studies, some sponsored by transport agencies, found that buses and trains with proper safety measures were no more risky than offices and homes. Transit lines adopted aggressive cleaning routines, with the MTA shutting down New York subways overnight for the first time in history to allow daily disinfections. 

Suburban railways lost the most trade as white-collar workers and students worked remotely. Buses have regained about half the passengers they had before the first outbreaks, reflecting demand from those with fewer options. The “transit-dependent” tend to have lower incomes, are more often people of colour and include some of the essential workers keeping hospitals, kitchens and warehouses open during the pandemic. 

As more affluent office workers desert transit, they may be less willing to see taxes support it. “If and when we resume a semblance of normalcy, will the affinity to public transportation still remain? That’s a bigger question that nobody has the answers to. So far it doesn’t seem like that,” says PS Sriraj, director of the Urban Transportation Center at the University of Illinois at Chicago. 

The US Centers for Disease Control and Prevention gave cars a boost when it recommended that employers subsidise workers to drive alone. Although car traffic disappeared in the spring, reducing urban pollution, it is now back to about 80 per cent of pre-pandemic volumes in metropolitan areas including Boston, Chicago, Los Angeles and New York, according to GPS data compiled by Inrix, a transport information company. 

Bar chart of When the Covid-19 crisis ends, where would you prefer to work? (average response, %) showing The appeal of working from home takes hold

The return to cars was visible on Manhattan’s west side during a recent afternoon rush hour. Traffic crept for blocks towards the jammed mouth of the Lincoln Tunnel to New Jersey. A few blocks away, train announcements echoed across a nearly empty Penn Station, where new touchscreen vending machines sell masks and hand sanitiser.

Green transport advocates warn that the driving revival will lead to “carmageddon” on crowded streets. Globally, oil demand could increase by 600,000 barrels a day — about 0.6 per cent of pre-pandemic consumption — over the next couple of years as people abandon mass transit for private cars, the International Energy Agency has forecast. Although it also calculates that fuel saved by remote working could eventually offset about 250,000 b/d of that extra demand. 

Commuters wait for a subway on the Pennsylvania Station platform in New York in June
Commuters wait for a subway train on the Pennsylvania Station platform in New York in June © Sarah Blesener/Bloomberg

US president-elect Joe Biden has featured “high-quality, zero-emissions public transportation options” as part of his plan to address climate change.

“It’s important to preserve or reinforce the priority of public transport if we want to avoid complete gridlock in cities,” says Mohamed Mezghani, secretary-general of the Brussels-based International Association of Public Transport. He adds: “We need to make sure that people will not go back to their cars.”

Rotating workers

Public transport experts hotly debate the extent to which remote working habits will stick. At a recent online forum, transit professionals were among the hundreds who heard James Hughes from Rutgers university suggest that a revolution is under way. 

“This is now a watershed moment in the world of work. The coronavirus shock may have exposed an outmoded white-collar workplace structure,” he declared. “Work is now being recognised as much more of an activity, rather than as a place.” 

Prof Hughes, a veteran urban planning pundit who witnessed New Jersey’s rise as a sprawling corporate hub, envisaged a new, decentralised office geography where workers gathered together only when they needed to. 

Kevin Corbett, NJ Transit chief executive: ‘I believe transit will come back very strong’
Kevin Corbett, NJ Transit chief executive: ‘I believe transit will come back very strong’ © Bryan Anselm/New York Times /eyevine

“I think it was probably a major market failure that work as a place remained so dominant for so long,” Prof Hughes said. Endangered, he added, was “the ritual of commuting five days per week to large centralised headquarters . . . simply to be crammed cheek by jowl in a sea of office workstations”. 

The forum’s co-sponsor was New Jersey Transit, the third largest transit network in the US by passenger numbers with services feeding New York and Philadelphia. The agency’s trains are running at 20 per cent of pre-pandemic volumes, while bus passenger numbers are down by half. 

Kevin Corbett, NJ Transit chief executive, sounded a defiant tone at the forum. “I believe transit will come back very strong,” he told the virtual audience. 

Later, in an interview with the Financial Times, Mr Corbett spoke about the years after the September 11 2001 terror attacks, when he helped manage lower Manhattan’s economic recovery. People at the time questioned the future of the skyscraper. Now super tall condominiums tower above the city, he says. Until February, New Jersey Transit was operating standing-room-only trains, delivering many of the 2m people entering Manhattan every day. 

Recent reports of local road congestion give him a perverse comfort. “When I hear now that [delays into] the Lincoln and Holland tunnels are 20 minutes or a half-hour, or there’s an accident and it’s 45 minutes, sort of like the old days, that’s a big factor in driving people back to us,” he says. 

Charts showing that US road traffic bounces back to pre-pandemic levels

Remote working, however convenient, will not predominate, he believes. “If there’s a down cycle in the economy, people may feel a little bit more comfortable if they’re in the office [being seen] than if they’re working remotely,” he says. 

Unsurprisingly, landlords share his optimism. When Douglas Durst was named chairman of the Real Estate Board of New York in September, he said his family’s company had lasted more than 105 years, “and this is not even our first pandemic — we survived the influenza pandemic of 1918”. 

Yet video conferencing was science fiction then. Kelly Steckelberg, chief financial officer of web conferencing company Zoom Video Communications, told an online investment forum that only 4 per cent of her employees wanted to go back to the office every day, “and when I’ve talked to peers with other companies, that’s really consistent with what they’re saying”. Zoom’s share price has sextupled to more than $400 this year. 

A cleaning crew disinfects a New York City subway train in May
A cleaning crew disinfects a New York City subway train in May © Stephanie Keith/Getty

Employers are already making decisions that will have lasting impacts on commuting trips. JPMorgan Chase’s headquarters rises just north of Manhattan’s Grand Central Terminal. The financial giant’s corporate and investment bank will now be rotating its more than 60,000 employees in and out of offices across the world. 

“We are going to start implementing the model that I believe will be more or less permanent, which is this rotational model,” Daniel Pinto, the bank’s chief operating officer, told CNBC. “Depending on the type of business, you may be working one week a month from home, or two days a week from home, or two weeks a month.” 

Some companies are exiting the city completely. After the geothermal heating and cooling company Dandelion Energy was spun out of Google’s advanced research lab, chief executive Michael Sachse rented offices a block west of Grand Central station. To get to work, “everybody was taking public transit. It didn’t make any sense to drive to Midtown,” he says. 

Traffic on Madison Avenue on June 9, a day after the city began reopening
Traffic on Madison Avenue on June 9, a day after the city began reopening © Jeenah Moon/Bloomberg

He closed the office when coronavirus hit, leaving two equipment warehouses outside the city as the company’s only physical locations.

Kevin Krumm’s tech recruitment company Objective Paradigm recently signed a 10-year office lease adjacent to a section of the Loop, the elevated train tracks of Chicago’s central business district. But now some of his clients are seeking new recruits who can be based anywhere. “You don’t have to be within a commutable proximity. I feel like that’s a big shift,” says Mr Krumm. “I feel like this whole talent, geography, labour-cost arbitrage is under way.”

Charts comparing New York's and Chicago's public transport use

$25bn bailout

It is an arbitrage with dire implications for transit agencies rooted in their regions. The Chicago Transit Authority’s bus and rail services are running at more than 60 per cent below normal. The Metra rail system, which operates 242 stations on 11 rail lines that run in spokes to Chicago suburbs such as Winnetka and Naperville, has slashed its schedule in the face of a 90 per cent collapse in passengers. 

Car traffic on the Chicago-area roadways is now just 10 per cent below levels in February, according to the Chicago Metropolitan Agency for Planning. The Regional Transportation Authority, which allocates funds to local transit agencies, examined six Covid-19 recovery scenarios and found that commuting by transit decreased in each one. At stake are $30bn in capital investment needs over the next decade, such as new buses and fixing bridges. “Aspects of telework are here to stay,” says Leanne Redden, RTA’s executive director. “They were here pre-Covid, and it’s become much more obvious during Covid.”

US transit agencies are public bodies funded by a mix of fares and subsidies from taxes, highway tolls and other sources. Falling passenger numbers and the pandemic economy have dealt blows to both sources of revenue. The decline in fare, toll, tax and other subsidy revenue is estimated at $6.9bn this year for New York’s MTA, according to a study by New York university.

Such transport operations have been kept afloat thanks to $25bn from the federal Cares Act coronavirus bailout, but the money will run out for most agencies next year. Democrats in the House of Representatives included another $32bn in transit funding in their proposed stimulus bill, but the legislation has stalled in a stand-off with Republicans who oppose aid to state and local governments, including public transit bodies. 

“New York risks losing its place as a pre-eminent global city” without adequate transit funding as service and maintenance cuts trigger a “continuous cycle of decline”, the Regional Plan Association warned in a report published in October on the city’s future. But the public policy group, with a board made up of corporate, legal and property executives, rebutted a narrative that New York is spiralling downhill. 

Transit agencies were already contending with threats from ride-hailing services before the pandemic. Now, experts are talking about reinventions for a work-from-home world, such as ticket prices that reward less frequent travel and better service outside of traditional rush hours, even if peak service is cut.

“The transit system is going to have to adapt to the modern workforce,” says Mitchell Moss, director of the Rudin Center for Transportation at New York university.

London Mayor Sadiq Khan stands among passengers in the first Night Tube train along the Victoria line in 2016
Sadiq Khan, London mayor, travelling on the underground. Transport for London has received £1.8bn in short-term funding to deal with the fall in revenue due to the pandemic © Jack Taylor/Getty Images

The more urgent focus is surviving until a mass vaccination programme gets the go-ahead. Last week, Boston’s transport authority proposed sweeping service cuts, saying that nearly empty trains, buses and ferries were a waste of money. Prof Moss co-authored a study that warned that 450,000 jobs could be lost in the New York region if Congress fails to give the MTA another $12bn in aid.

Mr Foye, who commutes from Long Island in a blue surgical mask, says, “I’m bullish on the city and state in the intermediate and the longer term. Cities like New York and London and Rome and Bombay have over a period of centuries endured pandemics and survived.”

But he says of commuters: “I don’t think they are all going to come back.”

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Ronaldo’s Coke moment signals shifting balance of power in sport




Cristiano Ronaldo’s rejection of strategically placed Coca-Cola bottles at a press conference at the Euro 2020 football championships this week has left sponsors and tournament organisers scrambling to limit the damage on endorsement deals.

The gesture by the Portugal star, who on Monday picked up a bottle of water saying “Agua . . . no Coca-Cola”, was mimicked by other players including Italian midfielder Manuel Locatelli, while France’s Paul Pogba removed a Heineken bottle during media commitments later in the week.

Uefa, European football’s governing body, has contacted national federations to tell teams to avoid actions that could affect tournament sponsors, each of which have paid about $30m to endorse the competition.

But there are no specific rules to police how players must discuss the corporate partners for the Euros. And there has been no reprimand of Ronaldo who, according to one senior European football executive “is so powerful, no one can tell him what to do”. 

That admission is a reflection of the changing power balance at the top of the world’s biggest sports. Highly paid athletes appear more willing to challenge the media and marketing deals struck by the leagues and competitions they play in, if those financial imperatives clash with their own carefully tailored corporate image or sincerely-held beliefs. 

Ronaldo’s viral moment led some media outlets to claim that the incident wiped billions from the market value of the US drinks company. But Coca-Cola’s shares slipped about 1 per cent in morning trade before the press conference even began, a drop that accounts for most of the day’s losses. 

The stock has fallen steadily over the days since, though it managed to recover some ground on Thursday, closing higher for the day at $54.95 .

While Locatelli appeared to be joking by following Ronaldo’s lead, Pogba is a practising Muslim who on Tuesday removed a Heineken bottle placed in front of him at a post-match press conference, though the item was from the Dutch brewers’ line of alcohol-free beers. 

Muslim athletes have cited their religious beliefs for declining to take part in marketing activities with alcoholic drinks brands and gambling groups. “We fully respect everyone’s decision when it comes to their beverage of choice,” said Heineken. 

Last month, Japanese tennis player Naomi Osaka pulled out of the French Open tournament rather than take part in compulsory press conferences, suggesting they were damaging to her mental health. Post-match media access to players is considered key to the value of television deals for tournaments. 

Ronaldo is known for sharing pictures of his intense training regime on Instagram, where he has roughly 300m followers, and has expressed disapproval at his children imbibing fizzy drinks.

Many of his sponsorship deals fit this image of healthy living, such as with sportswear group Nike and nutrition company Herballife — endorsements that have helped him become the first footballer to earn $1bn over his career, according to Forbes. 

However, the player has also previously appeared in adverts for Coca-Cola and Kentucky Fried Chicken.

“I have to say there was a collective raise of eyebrows in the industry about Ronaldo, who has a long record of brand endorsements, some of which don’t fit with his apparent approach to life,” said Tim Crow, a sports marketing expert. “There was a lot of cynicism.”

Ricardo Fort, a former Coca-Cola executive who previously spent nearly two decades managing the company’s sports partnerships, said the incident was an example of rights infringement, with the sponsor potentially entitled to damages. 

Japanese tennis player Naomi Osaka pulled out of the French Open rather than take part in compulsory press conferences © Martin Bureau/AFP via Getty

“Sometimes [rights infringement] can come from a competitor ambushing the event, sometimes it can come from the organisers, sometimes it’s a player,” he said. “In general this is a big distraction for the event and the companies which invested a lot.” 

Though using bottles as product placement is a contractual obligation of the deals that Uefa has struck with Coca-Cola and Heineken, neither brand has demanded compensation, according to a person close to the discussions. 

Uefa said players “can choose their preferred beverage” at the tournament. Coca-Cola did not respond to a request for comment. 

England manager Gareth Southgate defended corporate sponsorships on Thursday, saying “their money at all levels helps sport to function”. That stance was supported by his team’s captain, Harry Kane, who added: “Obviously the sponsors are entitled to do what they want if they’ve paid the money to do so.”

There have long been precedents for athletes favouring their own marketing deals over the groups they play for. At the 1992 Olympics, US basketball player Michael Jordan opted to cover the Reebok logo on his official uniform with a strategically draped American flag, a gesture of loyalty to Jordan’s personal sponsor, Nike.

But more recently athletes have gained greater control over which brands they are associated with, thanks in large part to their direct link to fans through social media. 

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Osaka, the world’s highest-paid female athlete, has accrued a suite of her own sponsors and a large social media following thanks to her brilliant playing record, but also frank advocacy for racial injustice and mental health. 

This breed of independent-minded athletes at the top of sport is forcing a rethink of the longstanding marketing strategies adopted by competition organisers and their sponsors.

“There’s still going to be a billion servings of Coke poured today, tomorrow and the next way,” said Crow. “But the question is: is there a better way of doing it? I suspect there is a better way to get its message across than plonking bottles in front of athletes.”

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Biden’s climate agenda bogged down in divided Congress




President Joe Biden arrives back in the US this week after a foreign tour with a recurring theme: fighting climate change.

But he returns to a Washington where his own party feels increasing anxiety that his administration’s climate agenda will fall short at home.

Bipartisan talks over Biden’s infrastructure proposals — which would spend billions on crumbling roads, bridges and tunnels, as well as record sums on clean energy — are flagging. While Republicans and moderate Democrats try to scale down the package, progressives warn they will withhold support if climate provisions are stripped out. 

“If there is no climate, there is no deal,” Jeff Merkley, a Democratic senator from Oregon, said this week. “When the ship sails on infrastructure, energy infrastructure cannot be left on the docks.”

Democratic party leaders are now exploring another path to enact Biden’s climate plan. Chuck Schumer, the Senate majority leader, on Wednesday met his members on the budget committee to find ways to fund greener electricity, zero-carbon vehicles and manufacturing and farming that keeps many climate goals intact.

While potentially more viable, the strategy could also weaken Biden’s climate policies. Legislation would be shoehorned into the Senate’s budget reconciliation process — a special procedure that enables Democrats to use their slim majority but constrains the scope of what can pass.

Column chart of US generation by fuel source, in a scenario where emissions fall 90 per cent by 2040 (TWh) showing Cutting carbon from electric sector would displace coal and gas

Biden has pledged for the US to cut emissions by at least 50 per cent from 2005 levels by 2030. He is aiming for carbon-free electricity by 2035 — a target that would mean none generated by burning coal or natural gas unless their emissions can be captured.

These lofty climate policies were a centrepiece of Biden’s diplomacy on his first international trip. He told G7 leaders in Cornwall that global warming is “the existential problem facing humanity”, and helped launch a $2bn fund for countries to shift away from coal.

In Washington, however, Democrats look unlikely to pass ambitious climate legislation with the support of Republicans given the 50-50 party split in the Senate and rules requiring at least 60 votes to move most important bills.

“I think there is reason to be concerned,” said Dan Lashof, US director of the World Resources Institute, referring to the fate of climate proposals in Congress.

“It was always going to be a challenge, to get investment at the scale that is needed, to turn the corner on climate change,” he added. “Getting very substantial investments in infrastructure and clean energy technologies is crucial to reaching the US emissions targets.”

The reconciliation process proposed by Schumer requires a simple majority vote, but rules limit it to tax and spending measures. Far-reaching initiatives to drive down the US’s 6.5bn tonnes of annual carbon emissions would be in jeopardy.

Using reconciliation would make it hard to establish a “clean electricity standard,” a core part of Biden’s plans to tackle emissions. The standard would set ever-stricter emissions targets for electric utilities, which are the source of a quarter of the country’s greenhouse gas emissions.

“The clean electricity standard is a much harder provision to enact through reconciliation and the reason is pretty simple: it’s a standard,” said Paul Bledsoe, strategic adviser at the Progressive Policy Institute. “Forcing the square peg of a clean electricity standard into the round opening of the reconciliation process will be very difficult.”

One workaround under discussion among Democrats is to pay incentives for clean electricity, achieving some of the goals of the electricity standard while fitting within the guidelines of reconciliation.

“It would involve the federal government becoming a partner in the transition, helping utilities that are making progress at the pace and scale necessary with financial investments,” said Leah Stokes, an assistant professor of political science at the University of California, Santa Barbara.

Other parts of the Biden climate agenda — including expanding tax credits for wind and solar power and energy storage and creating a credit for power transmission lines — would be more straightforward under the reconciliation process. Policies that do not depend on legislation, such as vehicle emissions rules, can be directly imposed by the Biden administration and are expected soon.

Adding urgency to the legislative push are the midterm elections in 2022, when Democrats risk losing control of the Senate or the House of Representatives.

“The rest of the world is intimately familiar with midterm elections and how the US Senate works, because they are concerned that the domestic delivery of the climate promises is imperilled by the toxic politics here,” said Rachel Kyte, dean of the Fletcher School at Tufts University. 

Republicans have argued that the infrastructure proposals should focus more on roads, bridges, and construction projects and objected to provisions that would subsidise electric cars and support non-fossil energy. 

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Meanwhile, not all Democratic senators are aligned. Joe Manchin of West Virginia, a coal-producing state, is likely to have a decisive influence on the shape of any climate proposals as his vote would be needed to pass bipartisan or reconciliation bills.

Energy experts acknowledge that achieving zero-carbon electricity by 2035 would be daunting even if a clean electricity standard was to pass, because of an ageing US grid. 

Patrick Luckow, analyst at IHS Markit, expects power demand to rapidly increase over the next decade as more vehicles and home heating systems run on electricity. “When you are adding renewable energy and getting rid of fossil fuels, there is demand growth as well, which makes it more challenging,” he said.

Democrats say Biden needs a win on climate for political reasons as much as environmental ones. “The Democrats can’t risk the failure of Biden’s climate and economic policy. It would cripple the president,” Bledsoe said.

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Mexico enjoys break from economic gloom with the help of Biden




Business gloom has been so pervasive in Mexico since Andrés Manuel López Obrador won the presidency in 2018 on a strident anti-establishment platform that a recent burst of optimism about the country’s growth prospects feels like a ray of sunshine breaking through the clouds.

Last October, the IMF was forecasting that Mexico would grow just 3.5 per cent in 2021 after shrinking a seasonally adjusted 8.5 per cent last year during the pandemic. Yet as the economy rapidly opens up, coronavirus infections remain low and the effects of the giant US stimulus ripple across the border, many economists and bankers here now see Mexico expanding almost twice as fast. 

“The combination of continued reopening with strong remittances and a US-led global recovery has allowed Mexico to close the gap with other Latin American economies, outperforming all of them in the first half of 2021,” said Marcos Casarín, chief economist for the region at Oxford Economics. The consultancy’s recovery tracker shows Mexico is returning to pre-pandemic levels of activity more quickly than any other Latin American country.

“Mexico will grow 6.0 per cent this year and it could be higher,” said former finance minister and academic Carlos Urzúa, citing the spillover effects of US fiscal stimulus and increased remittances from Mexicans working across the border. These could reach $55bn this year and are “much more important than oil”, he added.

But few believe this year’s US-inspired growth spurt heralds a bright new dawn for Mexico. The expansion, bankers and economists say, is almost entirely thanks to President Joe Biden’s policies, rather than López Obrador’s. The biggest beneficiaries are Mexico’s export-oriented manufacturing companies in the north of the country and the tourism industry, while firms servicing the domestic market struggle with depressed demand.

“Mexico will grow 6 per cent this year whether it likes it or not, dragged along by the US,” said one dealmaker who runs an investment fund in the country. “It will grow quite well in 2022 also. That’s not the point. What matters is what happens after 2023.”

Here the picture is much less sunny. A near-universal complaint in the business community is that López Obrador’s hostile rhetoric, constant attacks on regulators and the judiciary, his unpredictable policy announcements and preference for state-owned companies have scared away the foreign money that should be coming to Mexico to take advantage of preferential access under the US-Mexico-Canada free trade agreement.

“The ritual of bringing the global CEO to Mexico to announce a new investment is over,” said one leading member of the international business community. “There is a pause. Nobody is leaving the country but nobody is proposing incremental investment either.”

The example cited most often as deterring investors is the energy sector, where López Obrador is attempting to reverse an opening to private money begun under his predecessor and revert to a state-run fossil fuelled model, throttling a once-promising renewable energy boom in the process.

“The problem is investment and the issue is medium-term and long-term,” said Gerardo Esquivel, deputy governor of the central bank. “It’s been stagnant since 2015-16.”

Urzúa said that public investment would be only 2.7 per cent of gross domestic product this year, barely more than half the level it should run at. Much of the spending is directed towards López Obrador’s pet projects, which include a new oil refinery in his home state of Tabasco and a new tourist railway around the Yucatán peninsula.

Despite his government’s focus on social programmes to help the poor, López Obrador stands out from other populists for his stubborn refusal to increase borrowing to allow more spending. Most economists here do not believe that his decision last week to switch finance minister and appoint longtime ally Rogelio Ramírez de la O, 72, will change this.

Those close to the president say his aversion to debt stems from a conviction that the Mexican governments he admires most in the 1960s and 1970s were crippled by excessive borrowing. “Amlo turns into a panther when you suggest that he should take on more debt,” said one former minister. “It’s simply not something you can discuss. He will not spend.”

Even amid the pandemic, López Obrador was one of the very few presidents in the world to reject extra borrowing to alleviate suffering, despite the fact that Mexico had the fiscal space to do so. Critics dubbed his policies “austericide”. And while public investment remains weak, the president does little to encourage the private sector to take up the slack.

“López Obrador must promote private sector investment,” said the CEO of one Mexican bank, adding that the private sector accounted for 86 per cent of Mexico’s total investment. “There is no way to grow without private investment. “This rejection of private investment has to stop.”

And as for Mexico’s recovery: “To grow 6 per cent this year and 3.5 next year is not magic, it is inertia.”

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