The extent of business mistrust in Mexico

In his column at “El Financiero Diario“, Enrique Quintana explains the extent of business mistrust in Mexico.

Mexican investors continue to look to the future with suspicion. The data released by the Inegi shows that the deterioration in business confidence has not reversed.

The business confidence index for the manufacturing sector fell by 0.8 points in February from January and was down 5.8 points from the same month last year.

The drop more pronounced among construction investors, with only those in commerce showing a slight recovery of 0.5 points from January but a decline of 3.1 points from a year ago.

Another indicator released yesterday shows a trend in the same direction. This time around, it was the Banxico’s Private Sector Survey.
When asked if the time is right to make investments, only 9 percent answered positively, while 53 percent said it was the wrong time.
A more detailed review of the factors that most affect the contrary opinion of the experts is perceived to be those related to so-called governance, highlighting the problems of public security and internal political uncertainty.

Despite frequent visits by business leaders to the National Palace or even meetings of prominent businessmen with the President of the Republic, the typical Mexican businessman expresses reservations regarding internal policies.

It is not clear that the López Obrador government is aware that this is the situation that prevails in the business sector. It seems at times that various officials do know that there is uncertainty among broad layers of the business sector and propose measures to be taken to generate that confidence.

However, some officials dismiss that fact. They do not seem to care about this deterioration in confidence and almost see it as a positive sign of the significance of the Fourth Transformation (AMLO’s government)
History tells us that no government whose economic management fails can give continuity to its projects – at least while democracy prevails. And, if mistrust persists, coronavirus crisis or not, the economy is going to perform poorly in 2020.

What can make confidence return?
One of the factors that are in the air is the often-postponed announcement regarding the country’s energy infrastructure, which would give the private sector an option to invest in various areas of the oil and electricity industry.

But this is not the only issue that can inspire confidence. In this space we have referred you many times that beyond ideological matters, there are particular matters that have to do with deficiencies in the functioning of the government and that involve dependencies such as COFEPRIS, SEMARNAT, the commissions of the landowning sector, or CONAGUA, just to mention a few cases.

If the learning curve for various officials is completed in 2020, the results would be favorable, as various investment projects would continue, which would also add to the positive effect of T-MEC (USMCA)
If it turns out that the obstacles persist and the government’s operations are not streamlined, the mistrust and uncertainty will increase.
For the time being, as 2020 begins, most entrepreneurs are still not investing.

Enrique Quintana
enrique.quintana@elfinanciero.com.mx
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