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Mexican finance chief pledges budget surplus for 2017

by Yucatan Times
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Mexico Finance Minister Luis Videgaray is doubling down on his pledge to send Congress a 2017 budget with a primary surplus next month, saying the government needs to make good on its promise because its credibility is constantly being tested.

Speaking in his office in Mexico City’s 16th century National Palace on Thursday Aug. 18, Videgaray told Bloomberg the nation needs to restore fiscal balance after eight years of budget deficits since the 2008 global financial crisis.

Luis Videgaray

Mexican Finance Minister Luis Videgaray. Photo: Andrew Harrer/Bloomberg

In an interview that touched on everything from global monetary policy to anti-globalization rhetoric in the U.S. presidential campaign, Videgaray said Mexican policy makers need to work pretty much every day to earn credibility from markets. He rejected the suggestion that the country could take advantage of low interest rates to increase borrowing, continue running a deficit and increase public spending to counter slowing economic growth.

“Absolutely not! We’re not delaying,” Videgaray said. “There’s a big difference in policy making in countries with advanced economies that have a reserve currency that can finance a public deficit or a current account deficit to a country that doesn’t have that, that needs to earn its credibility basically every day.”

Selloffs this year in Mexico’s currency have forced policy makers to respond with interest-rate increases and spending cuts to reassure investors about the nation’s economic management, protect it against inflation and prevent further market instability. Traders often use the peso, the most actively-traded currency in emerging markets, to hedge against other risks, which in turn makes the currency more vulnerable to price swings.

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Source: bloomberg.com

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