Bad signs for the economy

Last week, the price of the Mexican oil mix dropped to less than $ 50 per barrel, eight dollars less than budgeted in the Revenue Law for this fiscal year; However, this is one of the last signs that should put the Mexican government on alert.

The Moody’s agency said just last Thursday that the lack of coherence in government policies is negatively impacting the arrival of private investment and will have a negative effect, both for this year and for 2020. In this regard, Bloomberg published that businessmen interviewed by the magazine rate the policies of the current administration as erratic, which is holding back the investment.

This stagnation in investment is one of the causes of the unfortunate growth of 0.1% during the second quarter of the year. Recall that during the first quarter the economy contracted 0.2%. Likewise, both the federal government and the main banks worldwide have lowered the estimate of growth of the Mexican economy.

To make matters worse, the Inegi announced the behavior of private consumption, which has the weakest growth in a decade. Private consumption grew just 1% as of May 2019, well below the same period of the administrations of  Fox ,  Calderón  and  Peña Nieto , whose advances were 3.7%, 3.1% and 1.7%, respectively. In addition, the sale of cars already adds down 26 consecutive months. Thus, it is estimated that this year sales for the domestic market will decrease by 7%. Toyota, for example, lowered its sales expectations by 10 thousand units. Although production has not fallen, it remains afloat thanks to the export of cars.

Against this background, the SHCP announced the implementation of measures to revive the economy. They plan to advance tenders planned for 2020 and mobilize 485 MMDP; However, even if infrastructure tenders are advanced, formal work will begin until January 2020. On the other hand, the injection into the economy aims to encourage physical investment and private consumption through credit.

What we see is that reality is reaching the republican austerity of 4T. These measures will only be sufficient if the lopezobradorist government recognizes its initial lack of vision of the economy and speeds up the disbursement of resources, especially in terms of infrastructure, and ceases to privilege the transfer of cash as social programs.

In a context adverse to the global economy, derived from trade wars, mainly between China and the United States, and uncertainty over  Brexit  and the unilateral US sanctions against Iran, Mexico must act firmly, with policies that activate investment, both public, as private, in projects that generate long-term economic growth and not measures that only increase in current spending favoring the creation of customers. The lopezobradorista government must stop thinking about the next elections and think about the generations to come, to leave them a better country. Direct transfers of resources to the population will not improve the quality of life of the population in the long term.



Ricardo Solano Olivera, MSc.


Column originally published at https://laopinion.de/2019/08/13/malas-senales-para-la-economia/.

Photo by Jp Valery on Unsplash

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