Home Feature AMLO’s government cuts 18 billion to the states of Mexico.

AMLO’s government cuts 18 billion to the states of Mexico.

by Yucatan Times
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It reduces resources that went to health, education, security, and infrastructure; covid-19, determinant for low federal tax collection.

MEXICO (Times Media Mexico) – The government of President Andres Manuel Lopez Obrador delivered 18,456 billion pesos less in federalized resources to the states during the first five months of 2020, according to an analysis of the Center for Public Finance Studies of the Chamber of Deputies.

The gap left by the Federation to local treasuries was due to the lower transfers that were made through contributions (resources labeled for education, health, security and infrastructure, mainly) and participation (income of free use for sub-national governments).

The lower economic activity resulting from the confinement by Covid-19 was a determining factor in the federal government’s obtaining lower tax revenues and therefore less cash to distribute among the entities.

However, the most important factor of having a more deflated stock market than expected was the lower generation of oil revenues, which impaired the complete and programmed delivery of the money to the local governments.

The greatest drain on resources budgeted for the states was through federal contributions. It had been calculated a delivery of 335,40 billion pesos for the first five months of the year, but only 324,784 million were distributed, which means a shortfall of 10,256 million.

Under this concept were affected six states that obtained less income: Mexico City, Hidalgo, Baja California, Aguascalientes, Tamaulipas and Chiapas.

The country’s capital, governed by Claudia Sheinbaum, was the most affected. Originally, 23,573 million pesos were scheduled for contributions, but only 20,952 million pesos were spent, leaving a deficit of 2,621 million.

The government of PRI member Omar Fayad had a gap of $482 million pesos, while in the administrations of PRI members Jaime Bonilla and Rutilio Escandon was $121 million and $82 million, in that order, and in the PAN members Martin Orozco and Francisco Javier Garcia Cabeza de Vaca, $38 million and $54 million, respectively.

In the case of the participations, which are the most important income of the states, the allocation of fewer resources was extended to a greater number of territories.

Of the 411,128 million pesos that were scheduled to be granted, only 402,928 million were allocated, leaving a hole of 8.2 billion.

The analysis shows that 21 entities received less money than stipulated. Eight of them are governed by PRI members: Zacatecas, Coahuila, Campeche, Sonora, State of Mexico, Tamaulipas, Hidalgo and Sinaloa and six administered by PAN members, such as Nayarit, Durango, Guanajuato, Chihuahua, Quintana Roo and Yucatan.

Four are from Morena: Puebla, Tabasco, Mexico City and Chiapas; one, from the PRD: Michoacán; another, from the Encuentro Social Party, which is Morelos, and one from Movimiento Ciudadano: Jalisco.

The cuts will put the state governments on the spot, because they are hitting the payroll of their bureaucracy and state programs. Furthermore, through these resources, the sub-national governments support stock market and bank loans.

One explanation for the lower delivery is due to the dynamism of the economy, but also that the federal government is making a budget reallocation and redirecting that income to another line, specifically to its programs where it gives away money.

Tax revenues (VAT, IPES, ISR) have fallen and that enters the stock market of the states’ shares, and in addition to this drop in revenue, there is the fall in the price of oil.

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