Mexico expects a brutal impact of the pandemic in its economy: holder of the SHCP. Next year, “there will be no more rainy day funds,” Herrera explains to legislators.
MEXICO CITY (Agencies) – Treasury Secretary Arturo Herrera anticipated that although an economic upturn is expected in 2021, the scenario will be worse than in 2018 and 2019. On Saturday, August 29, 2020, Finance Secretary Arturo Herrera Gutiérrez anticipated that although an upturn in the economy is expected in 2021, the scenario will be worse than in 2018 and 2019, because “there will no longer be any debt” and, even if no new debt is contracted, it will increase by between 10 and 17 points of GDP due to the effect of the exchange rate. This year and next, Mexico will have the strongest crisis since 1932; it is almost the worst economic moment for the country in the last century”.
In his presentation yesterday before Morena’s congressmen, and in the audio of which a copy was obtained, Herrera Gutiérrez said that this context would force the sending of an economic package, by September 8 at the latest, which will be very careful, very prudent, very responsible and will require the understanding and solidarity of many, because there will be fewer resources in the budget than this year and at least two previous fiscal years.
Thus, he called for learning to live with the Covid and starting to adjust the economy and finances to not go on strike and announced that the focus of spending on the President’s social policy would be maintained.
He said that the first quarter was practically out of the pandemic, but in the second quarter, the economy fell 18.7 percent. There are signs of recovery for the third and fourth cycles, which could make the year close with a 7.4 percent drop in GDP, the strongest since the crises of 1932, 1994 and 2009, and that the figure will be specified when he delivers the 2021 economic package to the House.
However, he said: This fall, no matter where we put the number when we refine it when we have it accurate, will be greater than that of the global financial crisis and greater than 1995.
The head of the Treasury Department said that for next year the country will experience circumstances still very special because, while it is expected that in 2021 a vaccine against the coronavirus will be produced and applied, the most optimistic scenario is that this will happen within the first six or seven months.
“We will have to live with Covid next year and, therefore, the economy will operate under different conditions than it is used to”, he said. “That is, he said, restaurants will only serve 30 or 35 percent of their capacity, even if more people want to go; businesses, companies, and factories will have to put distance between their workers, and the economy will not reach its full potential. We hope there will be a rebound, but not the rebound that would come with such a reopening to utilize the full potential of people, capital, and factories, but it will be restricted (SIC) he said.
the decision is not to contract more public debt, its valuation will change for the dollar component, so we will not have room to ask for more, and we will have to put the economy on a downward trajectory.
In the panorama he presented to Morena’s congressmen, he pointed out that this year the impact of the pandemic on productive activity was brutal, “but we had shock absorbers to absorb that impact: the oil price hedges, and even if we do them today, they will be almost 22 percent less; we had funds for shocks of that type, the Budgetary Income Stabilization Fund, and the Federal Entities Income Stabilization Fund. Most of them are going to be used this year, and they will not give us space, we are not going to have that mattress next year nor a set of rainy day funds, mainly in trusts, because of this traumatic experience (of the pandemic), we had to use them.
He explained that in 2021, three buffers would be used: boosting the economy where it has had the most significant positive impact, such as the social programs of President Andrés Manuel López Obrador, “which ended up being a kind of essential, socially useful cushion”; accelerating public infrastructure projects, with priority given to those that are ready to start, to hire people and to acquire inputs, as well as taking advantage of the momentum that exists with the USMCA and other trade agreements.
The Yucatan Times
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