Mexico’s Economy Celebrates Three Years of Uncertainty with Lopez Obrador

Mexico’s Economy Celebrates Three Years of Uncertainty with Lopez Obrador
This content was published on November 29, 2021 – 15:40

Peter Paul Curtis

Mexico City, November 29 (EFE). The Mexican economy celebrates three years of uncertainty on December 1, headed by Andres Manuel Lopez Obrador, who has faced the historic coronavirus crisis, but also caused internal shocks.

Upon coming to power, López Obrador promised growth rates of 4% of GDP with his “poor first” rhetoric, but in the middle of his six-year term, his challenge now is to return the economy and poverty to the previous levels of his government.

“What has remained in place or has been consistent is the uncertainty, primarily what happened after the pandemic, that the economy has not been on the right track,” Hector Magana, coordinator of the Center for Research in Economics, tells Effie. Monday. The Business (CIEN) of Tecnológico de Monterrey.

historical crisis

In addition to nearly 3.9 million cases and nearly 300,000 deaths, the fourth highest number in the world, the COVID-19 crisis left Mexico with a historic contraction of 8.2% of GDP in 2020.

But the economy actually fell 0.3% in 2019, the first year of the Lopez Obrador government, notes Adriana Garcia, coordinator of economic analysis for the Mexico Initiative, How are we?

“Despite the fact that the balance in 2021 is largely negative due to the effects of the pandemic, the economic policy implemented by this administration since 2019 has already been accompanied by contractions,” he told Efe.

Similarly, since Lopez Obrador came to power, 3.8 million poor people have been added, increasing from 51.9 million in 2018 to 55.7 million in 2020, according to the National Council for the Evaluation of Social Development Policy (Connival).

While the proportion of people in the middle class declined for the first time in eight years, to 37.2% of the population in 2020 from 42.7% in 2018, according to the National Institute of Statistics and Geography (Inegi).

“Undoubtedly it concerns the effects of the pandemic, so it would be unfair to state that this is a product of economic policy, but what is certain is that the government implemented the smallest economic package to combat the effects of a pandemic. Between 2020 and 2021”, warns Garcia.

uncertain future

The government expects a recovery of more than 6% of GDP by 2021 based on the Treaty between Mexico, the United States and Canada (T-MEC).

However, this will not be enough to recover what was lost due to the crisis, considers the economist Enrique Cardenas, president of the Association of Signos Vitales.

“What I see in the future is a relatively low rate of growth,” he says. “GDP per capita that isn’t going to recover its levels in 2018 until 2024 or 2025, maybe, so what we’re seeing in the future is a bit grey.”

Looking at the austerity policy set by Lopez Obrador, Cárdenas highlights the budget balance that has allowed the stability of macroeconomic indicators and the maintenance of public debt at a level close to 50% of GDP.

However, he also sees “as a general characteristic, the loss of incentives for private investment and investment in general, which makes future prospects unpromising”.

Professor Magana warns that inflation is the biggest challenge, which in 2021 accumulated an overall annual rate of 7.05%, its highest level in 20 years.

He also sees job insecurity, despite the fact that the unemployment rate stood at 4.2% through the third quarter of 2021, and the president plans to close the year with nearly 21 million formal jobs registered with the Mexican Institute of Social Security (IMSS), an unprecedented number. .

“The economy is already adjusting its dynamics. If the control of inflation and the quality of employment is not strengthened, it is very likely that by the end of the six-year period, by 2024, the economy will grow by about 2%, that is, it will sustain itself,” says Magana.

“Attacks” on Law and Energy

In addition to external factors, in “vital signs” and Mexico, how are we? They see “weak rule of law” as one of the main characteristics of economic policy.

“There have even been strong attacks on the rule of law, recently embodied in the Energy Legislation Amendment Initiative,” warns Cardenas.

Economist Garcia declared, as one of the biggest challenges during the last three years of government rule, what is happening with the electrical reform of Lopez Obrador, which seeks to reduce private sector participation in the sector by 46% in favor of the state’s Federal Electricity Authority (CFE). , with some outdated plants.

He concludes, “Without sufficient, clean and cheap energy, Mexico could cease to be a destination for investment, both nationally and foreign, and this is very sensitive for the country’s future.” EFE

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