Published On: Thu, Sep 25th, 2014

Mexico’s Rising Debt: a Cause for Concern

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Experts estimate that Mexico’s debt could rise 11% under President Enrique Peña Nieto compared to the previous administration.

Even though experts agree that Mexico’s debt is at a manageable level, they warned that its upward trend is a cause for concern for the coming years.

The Center for Economic Research and Budget (CIEP) estimated that by the end of Enrique Peña Nieto’s tenure and given the debt’s track record, it could reach 51% of the Gross Domestic Product (GDP). This means that debt would rise 11% during this administration compared to Felipe Calderón’s tenure.

Héctor Villarreal, director of the CIEP, said that seven years after the financial crisis of 2009, public finances remain in a fiscal imbalance and that the 2015 Budget Law does not address this problem.

Economía-Mexicana

The chairman of the Committee of Economic Analysis of the Mexican Institute of Public Accountants, Ernesto O’Farrill, said that even though the budget is apparently responsible, public debt rose by 8.2% of the GDP in the last two years.

“At this rate, by 2026 debt would reach 100% of the GDP. The deficit is even more alarming if we consider that the ratio tax revenue to GDP has failed to surpass 11% of the GDP despite the tax reform,” he said.

Mexico’s tax revenue is estimated to reach 10.7% of the GDP by the end of 2015, compared to 15% to 25% among the Latin American members of the Organization for Economic Co-operation and Development (OECD).

“Public debt will reach 43% of the GDP next year. Apparently it is not very high and there could be a greater debt capacity, but 43% equals to four years of total tax revenues,” O’Farrill explained.

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