The strength of the peso during 2020 deflated the chances that the government of Andrés Manuel López Obrador could obtain robust remnants from the Bank of Mexico (Banxico) this year. In the best scenario, the government could receive 100 billion pesos, but a much smaller amount is not ruled out, even zero, according to specialists’ calculations.
A year ago, with the start of the pandemic, the peso suffered the shock of the pandemic with an exchange rate that was around 25 pesos per dollar, at that level, the projections were that the public treasury would receive up to 500 billion pesos. López Obrador was so enthusiastic about the amount that he even proposed asking the central bank to advance these resources, which was impossible. By law, these resources will be given, at the latest, in April this year.
But the scenario at the end of the year was totally different for the exchange rate, compared to what was seen at the beginning of the pandemic: the peso closed below 20 units per US Dollar.
Although specialists point out that the formula used by Banxico to determine these resources that, by law, must be used to pay the debt is not transparent, there are some basic elements that allow approximate calculations.
Héctor Villarreal, director of the Center for Economic and Budgetary Research (CIEP), explained that the Ministry of Finance and Public Credit (SHCP) could be expecting 100 billion pesos. This, after reviewing the income estimated by the agency, particularly when considering the figures in the Other uses section. “Reviewing these data, we can calculate what the Treasury has in mind about this remnant, but it is not an exact calculation, well, well or badly, Banxico is very cryptic on the subject,” he said.
Similarly, Marco Oviedo, chief economist at Barclays México, also calculated this amount, recalling that, to a large extent, these resources depend on the return of capital required by Banxico. It should be remembered that the carryover is the central bank’s “earnings”, made up of reserves.
In contrast, Gabriel Casillas, president of the IMEF’s National Committee for Economic Studies, has a much more pessimistic projection. According to the expert, these resources can range from 0 to 30 billion pesos. “It is the largest amount you can reach,” he said, also stressing that the exact formula to determine these carry-overs is not known.
Despite the fact that this capital is much less than what the government once expected, experts agree that it is not something really “dramatic” for public finances. “It is better to have a stable exchange rate on the debt side,” Casillas said.
On his part, Marco Oviedo explained that the remnants are really just a “palliative.” He explains if the exchange rate had remained around 25 pesos per dollar, the debt would have closed at 60% of GDP and the remainder would not have been enough to offset this escalation.
In this line of considering these resources as a palliative, Villarreal added that expecting more from the remnants “is asking a lot of monetary policy, which has its role, but the fiscal policy also has to play its own in the face of such a strong crisis.” he said.