Mexico’s budget for 2020, a missed opportunity

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The 2020 Budget shows an absence of investments for infrastructure and alliances to reverse the decline in Pemex production.

The 2020 Budget delivered to the Congress by the Ministry of Finance on September 8 shows an absence of investments for infrastructure and partnerships to reverse the decline in Pemex production, so it represented a missed opportunity, the British publication Financial said Sunday Times

“The large investments expected in infrastructure, joint oil exploration companies to reverse the decline of Pemex production, and ambitious tax reform to expand the narrow income base are absent,” Financial Times said

Mexican business leaders – the British newspaper remarked – want the president to adopt an ambitious infrastructure plan to boost growth. “López Obrador should do it, discard his dogma of the 1970s that favors state investment in oil, should reopen Pemex to joint ventures. And he should reverse his ill-considered cancellation of the Mexico City airport project.”

According to the Financial Times, AMLO’s opportunity to restore trust is running out. The rating agencies are considering whether they should reduce the debt of 104 billion dollars of Pemex to garbage level and lower the Mexican sovereign rating that supports it.

“The stagnation of the economy threatens to derail the budget. López Obrador should change course before the markets force him to make a fifth transformation,” the newspaper warned.

In turn, the 2020 budget did not honor López Obrador’s “great rhetoric” by promising “relatively modest sums” for priority social projects, limited funds for Pemex, and only some resource to improve security.

“These budgetary priorities seem to satisfy the strict fiscal discipline that distinguishes López Obrador from other Latin American populists of free spending,” said Financial Times.

A more detailed review of the Financial Times shows “unrealistic assumptions about increasing tax revenues and oil production.” The government will have to resort to the budget income stabilization fund – whose purpose is to compensate for imbalances that the budget could suffer – to pay some expenses. A growth target of gross domestic product (GDP) of 2 percent next year seems optimistic.

Mexico’s economy has been “disappointing” for more than 30 years. Despite opening up to international trade, attracting billions of dollars of foreign investment to build an export-oriented manufacturing industry and adopting generally prudent budgets, the second largest economy in Latin America has grown just over 2 percent annually since the 1980s.

High levels of poverty persist as well as income inequality, productivity is low and corruption is endemic. The consensus regarding this bleak diagnosis is almost universal. What is not clear, says Financial Times, is if AMLO has the right answers.

The morenista has proclaimed himself as the leader of a historical “Fourth Transformation,” along with such shocking events as the Mexican Revolution of 1910-20 and the independence of Spain in 1821.

The Mexican president had a difficult start after his inauguration in December last year. His abrupt cancellation of the New International Airport of Mexico of 13 billion dollars shocked many. His insistence on spending 8 billion dollars on the construction of a new oil refinery in Tabasco was a triumph of politics over the economy.

Not surprisingly, growth has stagnated and companies have suspended investments, the publication concluded.

Source: el financiero, financial times

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