Adverse business climate strikes Mexico

MEXICO CITY, (Times Media Mexico) – “Companies in Mexico are the main driver of growth, but with the deterioration of the business environment, private investment flows have significantly decreased in the last four quarters”, said the Center for Economic Studies of the Private Sector (Ceesp).

In its weekly analysis, the high levels of corruption, the weakness of the rule of law and increased levels of insecurity and impunity, have benn considered as adverse to business elements.

This, together with changes in rules and policies and erratic messages from the authorities, has led to a decrease in private investment flows, which reduces economic growth potential for the nation.

Using data from the National Institute of Statistics and Geography (Inegi), they said that until the third quarter of 2019, the recent figure available, highlights that “private investment accumulated four consecutive quarters with negative annual variations, which led to its participation in the total Gross Domestic Product, also fell to 16.8 percent, seven percentage points below the same period last year.

As a proportion of total investment, private investment stood at 86.4 percent, up 1.3 percentage points over the previous year, due to a greater decline in public investment, as a result of constant spending cuts for this item.

Ceesp explained: “The private sector is the main generator of employment by virtue of its capacity to invest”.

Based on the results of the 2019 Economic Census, out of the 5.1 million productive units that had activities in 2018, 94.4 percent were concentrated in private and parastatal sector establishments, being the source of 81.8 percent of total employment.

The statement also pointed out the results of the 2019 public finances, which show that through the payment of income tax (ISR) and value added tax (VAT) alone, companies contributed 55 percent of total federal government tax revenues, equivalent to one third of total public sector revenues.

Official figures show that the private sector’s capacity to invest far exceeds that of the public sector.

They also said that the authorities have made use of private resources to meet their investment needs, through various mechanisms such as the Public Expenditure Registry Deferred Impact Investment Projects (Proyecto de Inversión de Infraestructura Productiva con Registro Diferido en el Gasto Público: Pidiregas), through which the public sector has financed private capital infrastructure projects.

In addition, the figure of Public-Private Partnerships is a way to take advantage of the participation of the private sector in the development of infrastructure, both productive and social, while oil rigs have also been used to complement public sector investment.

The Yucatan Times
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