Arturo Herrera left his post as Treasury Secretary today with a positive balance, because he managed to maintain the stability of public finances, despite the shock caused by the pandemic.
However, a more aggressive countercyclical support program was left to the business sector, given the severity of the GDP contraction, which would have prevented the closure of more than a million companies and the fall of 10 million Mexicans into poverty.
Renzo Merino, Moody’s head of credit ratings for Mexico at Moody’s, stated that the Herrera administration is being evaluated well thanks to the fact that it has been able to prevent debt and fiscal deficits from skyrocketing, which has helped keep the country’s finances with a certain degree of strength. This maintained the confidence of the markets and allowed the country to maintain the investment rating in the credit rating.
Carlos González Tabaris, director of economic analysis at Monex, agreed that maintaining fiscal health and investment grade – despite deteriorating suspicion of Pemex there – are commendable accomplishments for Harra.
“Last year we were very concerned that the deterioration in qualifications would just happen,” the specialist emphasized.
Merino acknowledged that the good fiscal outcome is partly due to the maintenance of the policy of austerity in spending, in the context of the pandemic, which the current administration was previously implementing. This allowed Mexico’s metrics not to deteriorate compared to Latin America.
Stability is the legacy
Enoch Castellanos, President of Canacintra, emphasized that on the positive side, Herrera maintained macroeconomic stability with tight control of public finances, but left it to do with a broader support plan for economic revitalization, a counter-cyclical program and a plan from it that helps the productive sector that will avoid closing the million and 10 thousand companies and will reduce unemployment where there is a deficit of 500 thousand jobs.
“Government support was minimal, only 7 out of 100 companies had any benefit; Mexico reached no more than 0.7 percent of GDP in financial support, when Chile spent about 6 percent of its GDP, while states spent United States and Germany 16%.”
On the issue, Gonzalez Tabaris said, “Perhaps part of the questions is that the additional stimulus was lacking for businesses, thus avoiding a larger drop in GDP and mitigating job losses.” He also said that one of the outstanding issues that Herrera leaves behind is tax reform to increase revenue and the ability to meet spending pressures in the country, for social programs and productive projects needed to boost economic growth.
Renzo Merino warned that there are still worrying elements about future fragility in government finances, which focus on the possibility that Pemex’s net contribution to future financial accounts will be reduced to zero or negative, depending on the part of oil prices, as well as higher pension expenditures. .
“We have a negative Baa1 rating for Mexico and this reflects some challenges. A dip in investment in Mexico could mean relatively low medium-term growth, less than 2%. He cautioned that this is a concern that we still have and we see reflected in the negative perspective.