Democracy and central banks. Can they be reconciled? I argued yes, but it is possible that the Banco de México has a different opinion.
It seems as though somebody at the central bank somehow screwed up quite possibly the most famous saying in Mexican history. “Sufragio efectivo, no reelección” somehow became “Sufragio electivo y no reelección.”
I am very curious as to what non-elective suffrage would in fact be.
Of course, Porfirio Díaz, who used the slogan in his 1876 campaign, went on to be “re-elected” in 1884, 1888, 1892, 1896, 1900, 1904, and 1910. Apparently he misplaced the comma the first time around.
Anyway, central banks aren't the only perplexing institution puzzling modern democracies: the same can be said for investor-state arbitration. NAFTA has an entire chapter devoted to investor protection, with ultimate enforcement relying on trade sanctions. Pretty tough stuff! “Sufragio electivo y no expropriación,” you might say.
Problem is, of course, in defining expropriation. Mexican tax law currently allows different companies with the same owner to consolidate results. In other words, losses at one subsidiary can be used to offset profits at a second. Congress plans to change that, as part of a broader tax hike. (Yes, Mexico needs to raise taxes. No, it doesn't need to do so in the middle of a recession. Don't get me started about Hooverism south of the border.)
The catch? Well, the tax hike might be called expropriation under NAFTA. Now, generally for a case to be made under NAFTA or ICSID rules, creeping expropriation requires both evidence of discrimination and more than one action. So I doubt that there would be much of a case here.
Yet ... arbitration law is bizarre. I must say that the judicialization of investor-state disputes has been a great thing for world peace. Consider the risks that the Brazilian government has taken in defending its investors abroad! But it remains confusing and (unlike independent central banks) not-entirely-legitimate in the eyes of the relevant electorates. At some point, the world will need to find a better way, or the system will collapse under its own weight.
In this case, however, I don't think that a straw will be added to weight bringing down the world's current imperially non-imperial means of dealing with investor-state disputes. But we shall see. Any lawyers in the house?