Home BUSINESS Mexico gets rid of economic downturn with Biden’s help

Mexico gets rid of economic downturn with Biden’s help

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Since then, the commercial haze in Mexico has been so common Andres Manuel Lopez Obrador Winning the presidency on a harsh anti-establishment platform in 2018, the recent optimism about the country’s growth prospects feels like a ray of sunlight penetrating dark clouds.

In October last year, the International Monetary Fund predicted that Mexico’s seasonally adjusted contraction during the pandemic last year was 8.5%, and the economic growth rate in 2021 was only 3.5%. However, with the rapid opening of the economy, the coronavirus infection rate is still very low, and the impact of the US’s massive stimulus measures spread across the border. Many economists and bankers now believe that Mexico is expanding almost twice as fast.

The region’s chief economist Marcos Casalin said: “The continued reopening and strong remittances, coupled with the U.S.-led global recovery, have enabled Mexico to close the gap with other Latin American economies. Outperforms all other economies.” At Oxford School of Economics. The consulting firm’s recovery tracker shows that Mexico has returned to pre-pandemic activity levels faster than any other Latin American country.

“Mexico will grow 6.0% this year, and it may be even higher,” said Carlos Urzúa, a former finance minister and scholar, citing the spillover effects of U.S. fiscal stimulus and Mexicans working at the border. Of remittances increased. He added that these funds could reach 55 billion U.S. dollars this year and are “much more important than oil.”

But few people believe that the economic growth inspired by the United States this year heralds a new dawn for Mexico. Bankers and economists say that the expansion is almost entirely due to the policies of President Joe Biden, not the policies of Lopez Obrador. The biggest beneficiaries are export-oriented manufacturing companies and tourism in northern Mexico, while companies serving the domestic market are struggling with low demand.

A deal maker who operates investment funds in the country said: “Whether you like it or not, Mexico will grow by 6% this year, dragged down by the United States.” “It will also grow very well in 2022. This is not the point. Important. What will happen after 2023.”

The photos here lack a lot of sunlight. An almost universal complaint in the business world is that López Obrador’s hostile remarks, constant attacks on regulators and judicial institutions, his unpredictable policy announcements, and preference for state-owned enterprises have scared away what should have flowed into Mexico. Of foreign funds. Preferential access under the US-Mexico-Canada Free Trade Agreement.

“The ceremony that brought the global CEO to Mexico to announce the new investment is over,” said a key member of the international business community. “There is a pause. No one has left the country, but no one has proposed to increase investment.”

The most frequently cited example of hindering investors is the energy sector, where López Obrador is trying to reverse the opening of private funds started by his predecessor and return to the state-owned fossil fuel model, thus stifling the once hopeful The renewable energy boom. process.

“The problem is investment, the problem is the medium to long term,” said Gerardo Esquivel, deputy governor of the central bank. “It has been stagnant since 2015-16.”

Urzúa stated that public investment this year will only account for 2.7% of GDP, which is only slightly more than half of the expected level. Most of the expenditure went to López Obrador’s pet project, which included a new oil refinery in his hometown of Tabasco, and a new tourist railway around the Yucatan Peninsula.

Although his government focused on social programs to help the poor, López Obrador stood out from other populists by stubbornly refusing to increase borrowing to allow more spending.Most economists here don’t believe his decision to change the Secretary of the Treasury and appoint a long-term ally last week Rogerio Ramirez de lao, 72, will change this.

People close to the president say that his aversion to debt stems from a belief that the Mexican government he admired most in the 1960s and 1970s was paralyzed by excessive borrowing. “When you suggested that he take on more debts, Amlo became a black panther,” a former minister said. “It’s not something you can discuss at all. He won’t spend money.”

Even during the pandemic, López Obrador was one of the few presidents in the world to refuse additional borrowings to alleviate suffering, even though Mexico has the fiscal space to do so. Critics call his policy a “strangulation policy.” Although public investment remains weak, the president has hardly encouraged the private sector to fill vacancies.

“López Obrador must promote private sector investment,” said the chief executive of a Mexican bank, adding that the private sector accounts for 86% of total investment in Mexico. “Without private investment, there can be no growth. “This rejection of private investment must stop. “

As for Mexico’s recovery: “This year’s growth of 6% and next year’s growth of 3.5% is not magic, but inertia.”

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