Mexico
AMLO: "Up to 60% of the 2020 budget goes to debt and non-programmable spending"
The AMLO administration unveiled the new budget with guaranteed funding for welfare programs until 2021. The President promised fiscal responsibility, but the markets question the government's growth projections.

The waiting is over. This past Sunday, Mexico's Secretary of Finance, Arturo Herrera, presented to Congress his budget proposal for 2020, which contemplates 6.1 trillion pesos (USD 312,359,650,000). It is characterized by the Treasury's confidence that next year the Mexican economy will recover, as it contemplates an average projection of 2% growth in the country's GDP.

The Secretary of Finance and Public Credit assured lawmakers that the budget will generate macroeconomic stability and financial certainty, built in strict adherence to fiscal discipline, prioritizing three targets: social welfare, public security, and support for Mexican oil giant Pemex.

According to the general criteria, which are the variables used to design the budget, this year's estimated growth is between 0.6 and 1.2%, while for 2020 there would be a recovery in the range of 1.5 and 2.5%. A very optimist forecast if compared with the market consensus, which is around 1.4%.

López Obrador: "The opposition is stunned and disoriented, but the people are happy with our Government"

On Monday, President Andrés Manuel López Obrador focused his message on emphasizing that the funds for social programs are guaranteed, although he recognized the government must make a great effort for expenses such as the payment of the debt.

"This is possible because we are finding the formula of ending corruption and building an austere government, in a very clear way: corruption is not allowed and this has meant very important savings. The budget yields are higher. And there are no luxuries," he said from the National Palace.

López Obrador said that for this fiscal year and the next there are funds for programs such as pensions for older adults, disabled people, to give continuity to his youth support program, scholarships for low-income students, farmers, and other welfare programs.

He emphasized that the health-care sector is also being strengthened. "The real budget increases 40,000 million pesos. There will be no shortage of medicines or doctors. Health centers and hospitals will be repaired and finished, and the integration of healthcare workers is guaranteed," he said.

The President said that this spending package does not contemplate tax increases nor increases in energy tariffs. "We are going to guarantee an economic policy trying not to spend more money than what enters the Treasury. There will be no deficits," he promised.

 "In other words, non-programmable spending accounts for 60% of the entire budget" 

AMLO recognized that the resources for social projects are not as high as we would like them to be. "We would like more for these programs, but we have expenses that cannot be eliminated".

He was referring to non-programmable expenses, which are not determined by the Treasury, including the payment of debt service, which for 2020 contemplates 700 trillion pesos. "It hurts a lot," he said.

The government asked legislators for about 6.1 trillion pesos, but only 4.3 billion is for programmable spending, ie, resources that will go to the administration programs.

Yesterday, from the Chamber of Deputies, Herrera said that only around 1.9 trillion is for federalized spending, which is almost a third of the budget, while 965 billion pesos is allocated only to the payment of pensions. In other words, "non-programmable spending accounts for 60% of the entire budget," he said.

"Why shouldn't we be able to raise production?"

After knowing the macroeconomic assumptions with which Arturo Herrera calculated the budget the first reactions on the markets were harsh, especially regarding the projections for the oil platforms. Market annalists consider that producing 1.9 million barrels per day is too optimistic.

On Monday, the Treasury Secretary said that there are three reasons to believe that this projection can be achieved: first, that the downward trend has already stopped; second, that support for the oil company is increasing; and finally, the change of strategy to the exploration of shallow waters.

In this regard, López Obrador also mentioned the government's support for Pemex, without leaving aside his criticism of his predecessor's energy reform: "I still hope that those who supported the energy reform will apologize for deceiving themselves that it was going to increase oil production".

The President sent a message to those who question the production forecasts: "If last year production was down by 200 thousand barrels per day, why are we not going to raise production next year if we are acting efficiently, without corruption and with a larger investment?"

AMLO added: "I ask people to have confidence. We are going to have jobs, we are going to have jobs, we are going to look for full employment. And the salaries are getting better and better". 

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