The News
The News
Thursday 20 of January 2022

No Crisis In Sight

Agustín Carstens,photo: Cuartoscuro
Agustín Carstens,photo: Cuartoscuro
At present, Mexico does not face a potential financial crisis

To tell millions of Mexicans that the economy is rosy and give hope to people that the economy is very far from a financial crisis can be a deceitful practice, depending on what side of the fiesta you’re on.

If you are on the piñata’s side, hanging from a rope living on an day-to-day basis, beware, the next blow of the stick is inevitably coming your way.

But if you’re on the side of the stick, then the only thing you’re doing is having a profitable fun.

All this stems out of the fact that this past weekend the Treasury and Public Finance (SHCP) Secretary José Antonio Meade Kuribreña and Mexico’s Central Bank’s (Banxico) Agustín Carstens were at the International Monetary Fund (IMF) where both Meade and Carstens met with IMF Director Christine Lagarde and sweet talked into her ear.

In fact, after meeting with them, Ms. Lagarde came out speaking wonders of the Mexican economy and President Enrique Peña Nieto’s allegedly successful reforms.

“Clearly,” Christine Lagarde said, “Mexico has conducted one of the largest reforms that had not been implemented over many years be it on education, telecommunications and the oil sector with access to new licensing. This is a massive rank of reforms.”

Ever since last week, Meade Kuribreña has been talking wonders about the economy and stated a phrase that it is now getting an echo: “Mexico is very far away from another financial crisis.”

The weekly financial report issued by the Private Sector’s Center for Economic Studies (CEESP), a highly respectable institution, backed Meade Kuribreña’s statement and furthermore, it says there are no indications Mexico might confront a financial crisis.

But unlike Meade Kuribreña, who is doing politics cleaning up the often untidy management of the economy by the Peña administration, does not fitfully forget that even if there are no signs for a crisis, “the Mexican economy continues with the same slow rhythm growth and shows a precarious labor market based on low wages and high rates of informal self-employment and under occupied workers.”

The CEESP study points out other anomalies in the economy such as the increasing numbers of poor people and the ever rising costs of hiring people, which reduces the capability of creating more and better paying jobs as well as reducing benefits for workers.

But even then, for Lagarde “Mexico is confronting a similar situation as other developing economies of raw materials exporting nations, also in search of diversification given the loss of income from sales of raw products.”

Yet the IMF lowered its 2.5 percent gross domestic product growth for Mexico from 2.5 last July to 2.1 percent at the end of the year and perhaps a 2.3 percent growth for 2017.
“Clearly Mexico is also concerned by the contagion effect that would result from foreign external decisions and that’s a good enough motive for us to continue supporting our members and be aware of potential contagion effects from currency decisions that may affect other governments,” said Lagarde.

It was stressed that, at present, Mexico does not face a potential financial crisis because besides having a stable economy regardless of low economic growth, the government is enjoying a financial back up of $176 billion in hard cash international reserves and an additional potential credit line from the IMF of approximately $90 billion that is available when and if needed.

Meade Kuribreña and Carstens also met with World Bank President Jim Yong Kim and the Trans Pacific Partnership (TPP) ministers of finance – including Chile, Colombia and Peru – to revise the advance of the TPP advances and oversee passing from a time of transition to a time of execution for the economic integration of the 12 participant nations.

But what is clear now is that even if Mexico is not going to enjoy the buoyant economy everyone is hoping for, at least it is stable with a steady growth of two percent at least for the next two years of the Peña Nieto administration.