While it is not new that Mexican governments ignore the problems of the world and see us as an island in the middle of nowhere, the truth is that sooner rather than later we must assume that we are not alone in our small world. Thus, given the uncertainty caused by various phenomena in the world, we must be prepared, is the 2020 budget prepared?
Today we see that the United Kingdom is far from reaching an agreement, not only with the European Union for its definitive exit from the community bloc, but also to be able to reach an agreement between conservatives and Labor to establish how and when Brexit will be formalized. Likewise, we see that the new President of the European Commission, the German Ursula von der Leyen, will have to make use of all her political capacity to establish herself in a position she was not proposed or backed by any force of the European Parliament. Thus, von der Leyen will have to take possession at the same time that Brexit is happening, if there is no extension. We will see if the German will be able to circumvent, along with the other community institutions, a catastrophic departure from the United Kingdom without agreement.
Meanwhile, European leaders try to save the agreement they made together with Russia, China and the United States with the Islamic Republic of Iran in 2015 regarding their nuclear energy program. While the United States has reestablished sanctions against Iran, for alleged Iranian violations of the agreement and for considering it a bad agreement for the Americans, Europeans have launched diplomatic efforts to reverse those sanctions and allow Iran to continue selling its crude within of the international economy. However, Iran has already resented Trump sanctions and threatens to increase uranium enrichment, which could lead to greater instability in the region, if we add Israel’s continuing threats against Iran. All this political instability contributes to the instability of oil prices.
As if that were not enough, the Trump administration continues to press the world economy through its trade wars, mainly against China. In recent months, both countries have been dramatically raising tariffs on products that import from each other. Unfortunately, this trade war cannot have an end in the short term, especially before the US elections next year where Donald Trump is going to present himself with a narrative of a tough man against China and Mexico.
Could it be that the 2020 budget presented by the Treasury over the weekend contemplates how this instability will hit our economy? Having fiscal discipline helps but reducing investment to favor welfare social programs will not help curb the impact of a Brexit without agreement, sanctions against the sale of Iranian crude or the rise in tariffs by the US have about the Mexican economy. In addition, we are not considering how US presidential elections can impact our economy, statements by Trump or whoever his adversary is on the Democratic side will have an impact on our economy.
Ricardo Solano Olivera, MSc.
Column originally published at https://laopinion.de/2019/09/10/es-suficiente-el-presupuesto-en-un-mundo-tan-inestable/