Monday, July 18, 2016
Mexico: Three Lost Years due to Incomplete or Late Solutions
By Luis Pazos
President Enrique Peña Nieto said that if Energy Reform had been implemented some years earlier we would have a different
Mexico. Correct, but what he did not say is that it was his party, the PRI, that opposed the reform in
The administration of President Peña Nieto has been characterized
as being more reactive than preventive. In its first three years they did not make the necessary adjustments in order for
Pemex to avoid bankruptcy. It was not until they were left without cash to pay its obligations that they changed its director,
who had not implemented scheduled changes. Something similar occurred in SEDESOL [Social Development ministry], where it took
them three years to recognize that while spending rose on anti-poverty programs, the number of poor increased at the same
They were three lost years, during which they could have improved
the economy, whereas the revenue holes that produced the drop in oil, a phenomenon that many blame on growing macroeconomic
imbalances in Mexico, was offset by additional income generated from the increase in taxes; but instead of reduced spending,
which would have led to lower debt and lower deficits, they increased it, as if to them there was more than enough money,
and with the hidden purpose of counting on the resources to ensure victory in state elections in 2016 – wherein they
had a huge failure.
The growing imbalances in public finances in the
first three years of this government resulted in record growth of the debt and the budget deficit, which weakened the macro-economic
environment and contributed to international volatility that will strike Mexico more in the devaluation of its currency.
In mid-2016 they announced overdue budget spending cuts and they posed a primary surplus,
that is to say without entering the debt payment for 2017 that should have been done since 2014.
In the first three years of this administration, postponing changes and acting as if the problem
was "managing the wealth'' were the main reasons for lower growth and a greater devaluation, not external factors.
Luis Pazos (e-mail: email@example.com), who heads the Free Enterprise Research Center (CISLE) in Mexico City, holds a master's degree in Public Finance and a doctorate in Law from the National Autonomous University
of Mexico (UNAM). A prolific writer and forethoughtful analyst, Dr. Pazos' commentaries on Mexican economics, finance
and politics have appeared in newspapers and magazines throughout the Americas. As well, he is the author of numerous
books. Edited translation by MexiData.info.