“AMLO will go down in history” for multiplying Mexico’s foreign debt in 2023
Until 2022, Mexico has a public debt of more than 13 billion pesos and in 2024 it may increase by 1.1 billion, however, the Treasury has already taken measures to transfer the debt to the next administration.
This Friday the Chamber of Deputies authorized the federal government to contract in 2023 an internal debt of 1.1 billion pesos and an external debt of up to 5.500 billion dollars, for which Mexico’s indebtedness would exceed 14 billion pesos.
The Ministry of Finance and Public Credit has been in charge of refinancing the country’s public debt, especially bonds maturing in 2025, with the intention of preventing the financial burden in the administration of the next president of the Republic from generating a strong pressure in his first year in office, acknowledged this week the undersecretary of the Treasury, Gabriel Yorio.
The Treasury official told the Reuters agency that around 40% of the debt that matures in 2025 has already been refinanced and the percentage could increase to 70% or 80%, which implies that the payments that the Mexican government must make in the future they will be extended for a greater number of years.
President Andrés Manuel López Obrador asked the Treasury to refinance as much debt as possible, with lower payments and extended maturities, explained Yorio, which implies in practice that the following administrations will have to face maturities.
“ He gave us very clear instructions to reduce the maturities of 2025 in order for the financial transition to be as smooth as possible”, the official mentioned.
Debt refinancing implies that payments are deferred and although the payments may be lower, they are covered over a longer period, thus increasing yields for creditors.
How much is Mexico’s debt?
The SHCP pointed out that with figures for July 2022, the Historical Balance of the Financial Requirements of the Public Sector (SHRFSP) amounted to 13 trillion 376.1 billion pesos, while the net debt of the public sector stood at 13 trillion 387.9 thousand million pesos.
According to data from the Treasury, the Historical Balance in December 2018 (when Andrés Manuel López Obrador took office) was 10 billion 551 thousand 718 million pesos.
Thus, in 2022, the balance exceeds 13 billion pesos, that is. 2.6 billion more than at the beginning of the current administration.
According to the federal government itself, from July 2019 to April 2022, the largest foreign debt refinancing exercise was achieved, by refinancing approximately 21.298 billion dollars.
In September, the Secretary of the Treasury, Rogelio Ramírez de la O , acknowledged before the Chamber of Deputies that so far in the current administration, Mexico’s debt has grown by 7%, but he pointed out that the debt is under control, since they represent about 49% of GDP.
The 2024 election in Mexico and the task of the next head of the Executive
Morena and AMLO have a difficult path towards the 2024 election (Illustration: Infobae México/Jesús Abraham Avilés Ortiz)
Mexicans will elect their next president in June 2024 and López Obrador, who took office in 2018, by law cannot run for a second term, however, his political party (Morena) has an advantage in the polls against the main opposition parties such as the PAN, PRD, and MC.
The head of the Government of Mexico City, Claudia Sheinbaum, and the chancellor, Marcelo Ebrard, are in the lead to occupy the candidacy for the presidency by the ruling party, although the Secretary of the Interior, Adán Augusto López Hernández also has the approval of López Obrador, who considers him his brother.
Since taking office, the López Obrador government has refinanced the equivalent of $63 billion in debt, much of which is denominated in pesos on the local bond market, equivalent to around 11% of total debt. from Mexico, said Gabriel Yorio.
Gabriel Yorio. REUTERS/Edgard Garrido/File Photo
The government would look for new opportunities to refinance or buy back foreign and domestic debt, added the official, whose team is also working to develop a local debt market based on sustainable bonds.
“What we seek to do is create all the yield curves so that private companies can use them to price their own instruments when they want to launch some kind of (green) bond or raise capital for a sustainable program,” he said.
Has it grown? This is how Mexico’s debt with AMLO has behaved, according to an economist
Has it grown? This is how Mexico’s debt with AMLO has behaved, according to an economist.
Since he was a candidate, President Andrés Manuel López Obrador had a particular proposal on the economic issue: not to indebt the country and during his term he has reiterated it with the argument that Mexico has healthy finances.“It is important to say it, because there is a lot of misinformation (…) We are not going to increase taxes, there are not going to be new taxes,
the public debt is not going to grow, we are not going to indebt the country, there are not going to be gas sprees. The formula is simple: put an end to corruption and privileges in government,” said López Obrador in an interview with
MILENIO in November 2018.
In an interview for MILENIO, the economist Arturo Damm explained that President López Obrador does not indebt the country but the “government; the problem is that, in the end, the government debt ends up being paid by citizens in many ways, one of them through taxes”.
For the also university professor, the debt of the Mexican government has indeed increased: “with the official data from the Ministry of Finance and Public Credit, the debt has increased so far in the current administration, both the internal debt, the one denominated in weights, like the external one”.“In November 2018, the net internal debt of the federal public sector (which includes the federal government, plus agencies and companies, for example Pemex and CFE, plus the Development Bank),
was 6.7 billion pesos.”
As of last April, which is the last month for which we have information, that debt was already 7.8 billion pesos, which represents an increase of 16.7 percent in relation to the net debt of the federal public sector, but if we consider only the federal government, we remove from this grand total the agencies, companies and development banks, since
in November 2018 that debt of the federal government was 6.5 billion pesos and last month April was already 7.8 , that is, an increase of 20.2 percent,” explained Damm.
Regarding the external debt, Arturo Damm explained that if “we consider the federal public sector, we have that in November 2018 it was 198 billion dollars, as of last April it was already 225 billion dollars, an increase of 13.5 percent .“And if we consider only the foreign debt of the federal government, in November 2018 it was 95 billion dollars and in April 2021 it already totaled 118 billion, an increase of 23.5%.”“Strictly the one that is indebted is the government and it is this government that is indebting governments that are going to come later (…) the current government is paying the debts that previous governments contracted and is contracting new debt that future governments will have to pay ”, he explained.
Consulted by MILENIO, Erika Cruz, an economist graduated from UNAM, calls for understanding why debt is contracted, how it is structured in Mexico, as well as understanding the current economic situation.
“In constitutional terms, article 73 section VIII declares that Congress has the power in matters of public debt to approve loans and payments of the national debt and explains that the contracting of public debt or financing is for the purpose of investing in works that increase public income, as an instrument for monetary regulation or in case of an emergency declared by the President of the Republic in the terms of article 29.This means that
the Executive does not operate on its own, but rather there is a consensus in Congress to approve the annual economic package that includes public debt and national accounting, as well as the authorized debt ceiling for the purposes stated by law. , therefore there is a shared responsibility between the Executive and the Legislative”.
Decisions of the 4T have hit “very hard” to the confidence of businessmen
The cancellation of the Texcoco airport or the “energy counter-reform,” among other decisions, have hit “very hard” the confidence of businessmen, assured Arturo Damm. “There is the Inegi Business Confidence Indicator, if we analyze it we see very clearly how, above all, at the end of 2018, as of the fourth quarter, the confidence of businessmen, both in the manufacturing sector and in the commercial sector, in construction, has been falling. ”
This greater mistrust has already translated into a sharp drop in direct investment, specifically, in gross fixed investment, which is the investment made in installations, machinery and equipment.” “As of last March, the level of investment in Mexico in facilities, machinery and equipment was equal to what we had already had in April 2011,” Damm detailed.
On June 28, Arturo Herrera, Secretary of Finance and Public Credit, maintained his expectations of economic growth of 6.5 percent for this year. Arturo Damm agrees, although he explained that the figure can be misleading. “In that year, yes, I do believe that the economy can grow six percent (…)
From 1934 to 1981, the average annual growth of the Mexican economy was 6.2 percent; from 1982 to 2018, the average annual growth was of 2.2 percent. “If this year we grow to six, it could be said that we are growing at the rates we had in those years in which there was talk of the Mexican economic miracle, but be careful,
if we grow to six percent this year that figure is going to be very misleading because we would be comparing 2021 with a year like 2020 in which the economy decreased by 8.3 percent We are comparing with a year so bad that it is not difficult for us to have that six percent, but it would have to be taken very seriously “, he indicated.