By entering the international reserves, Mexico will have a macro-financial solidity and will decrease its perception of risk for the default of the debt.
The Special Drawing Rights (SDR) for 12,000 million dollars that Mexico received from the International Monetary Fund (IMF), are not a donation or extraordinary income, so debt cannot be paid as proposed by President Andrés Manuel López Obrador, Citibanamex indicated
In the document called “What can Mexico do with additional reserves for 12 billion dollars?”, The bank pointed out that the SDR that the country received from the IMF must be directly integrated into international reserves, as established by the Bank of Mexico (Banxico).
“The new SDRs do not represent a donation; It is not, then, a question of convincing Banxico or that the Foreign Exchange Commission instructs Banxico to deliver without compensation to the Treasury the equivalent of the SDR received by Mexico, since the law prevents it. The SDRs are not an extraordinary income for the public sector, as the one that could be derived, for example, as a result of the discovery of an oil well ”, stated Citibanamex.
In this sense, the financial institution explained that, by entering the international reserves, the country will have a macro-financial solidity and will decrease its perception of risk for the non-payment of the debt.
He also stated that the López Obrador initiative intends for Banxico to transfer the SDR or its equivalent in some hard currency to the federal government without a counterpart, that is, without the Ministry of Finance has to pay the Bank of Mexico in pesos for those resources.
“The law that establishes the autonomy of Banxico with respect to the federal government, and in particular with regard to loans or transfers of reserves from the first to the second, makes said initiative unviable. Article 28 of the Constitution establishes that no authority may order Banxico to grant financing ”.
In fact, Citibanamex clarified that the law also prohibits the granting of credit to the federal government and limits any other transfer of resources to the government with the exception of what would correspond, if applicable, to the remainder of the operation.
However, the bank assured that the Ministry of Finance could use the resources in foreign currency from the international reserve to pay debt, but it would imply that it would deliver the equivalent in pesos to Banxico, which in any case is a decision that is not related to the SDR.
“Among the regular operations that the SHCP can carry out with Banxico as its financial agent is the sale of foreign currency. Among those with the highest volume, there is a purchase in July 2008 of 8 billion dollars for the federal government to cover its foreign exchange needs in advance. Likewise, in June 2006 the SHCP acquired $ 7 billion for the advance payment of loans contracted with the Inter-American Development Bank and the World Bank. The acquisition of 12 billion dollars (again, in exchange for pesos) to prepay foreign debt would then be one of the largest operations, but perfectly within the current legal framework, ”explained Citibanamex.
However, he highlighted that the increase in the international reserve strengthens Banxico’s margin of action to face possible imbalances in the external accounts going forward and, in general, gives the country greater macro-financial solidity.
In addition, he affirmed that the formal proposal that the president proposes to send to Banxico to use the SDR to prepay debt and the response of the central bank, must be framed in the current law, since any eventual proposal to change the regulatory framework must take up the considerations historical.
“Given the current situation —which includes the legal initiative still unresolved in Congress, which obliges Banxico to receive dollars in cash and the changes to come in its government structure—, any proposal must be made in the most institutional way possible. , observing the utmost caution so as not to weaken the solid reputation of the central bank, which for at least two decades has been one of the most important anchors of the country’s macroeconomic stability, ”explained Citibanamex.