Last year, the Mexican economy finished with a budget deficit of 3.4% of GDP, the highest since 1989,” said Gabriela Siller, the director of analysis at Nuevo Leon-based Banco Base.
“This year they are predicting a deficit of 4.9% of GDP, the highest since 1988, and debt means more borrowing. Their numbers don’t add up,” Siller stated.
“The infrastructure projects — the planes and trains — are unlikely to ever turn a profit at the current pace”, she continued.
For example, the first section of the Maya Train project on the Yucatan peninsula carried about 1,780 foreign tourists in its first two months or about five per train run.
The original plan stated tourists would be the train’s most lucrative source of income, but now officials are suggesting the train’s revenue could come from short commuter runs or freight shipments. The peninsula has little industry and nothing suggests an urgent need for trains to carry shipments of sunscreen.
López Obrador has defended his free-spending ways and increased debt, saying it was less than the debt his predecessors had piled up.
“We are going to be lower in the percent of borrowing than the former administrations of Enrique Peña and Felipe Calderon,” López Obrador declared in September.
Mexico’s debt currently is around 50% of its GDP. While that doesn’t sound high compared to the United Kingdom and United States, who are both around 100%, Mexico has additional debt held by the state-owned oil company and doesn’t have unlimited access to low-cost borrowing, like the U.S. does.
Historian Lorenzo Meyer wrote in the newspaper El Universal that López Obrador’s actions were not “an attempt to limit his successor’s freedom of action, but rather as a productive investment of the huge political capital he has built up to help the new administration start off.”
The biggest bombshell ever handed by an outgoing president to his successor in Mexico came on Sept. 1, 1982, when President José López Portillo, who had three months left in office, announced that he was expropriating the entire banking industry amid a currency devaluation and debt crisis.
His successor, Miguel de la Madrid, spent his entire six-year term struggling to deal with the fallout and paying the huge debt to bank owners.
López Obrador’s debt mountain, while less dramatic, is “a way of setting the political agenda for the next administration, a way of placing his imprint on the next administration,” said Siller, the analysis chief at Banco Base.
TYT Newsroom
