By RICARDO CASTILLO
Let the fireworks light up the cloudy Mexican economics sky. The great news deserves the glow in the heavens. The economy grew in the second quarter of 2019 by 0.1 percent and, according to the National Institute of Geography and Statistics (Inegi), which carries out the official econometrics gaging, “there is no recession.”
The news was made public early in the morning of Wednesday, July 31, and it was definitely an opportunity President Andrés Manuel López Obrador (AMLO) was not going to let slip into the bygones document files.
“Fortunately, contrary to what some were forecasting, that the economy was going to fall from the sky and that we were going to go into a recession, the economy grew (in the second quarter of 2019), according to Inegi data. The experts’ forecast did not turn out to be correct,” a white-haired AMLO said jubilantly during his daily press conference at the National Palace.
As usual, he stretched his own forecasting rubber band perhaps a bit too much, claiming that there’s still a possibility that the economy will grow by 2 percent by the end of the year. At least he did not announce, as he was doing two months ago, that the nation’s annual growth will be 4 percent.
So there may be room for joy, but don’t run to the nearest cantina to celebrate! The economy is still in the red-light danger zone.
Inegi president Julio Santaella sent a sobering message to the public that the 0.1 percent growth may save the economy from officially entering into a recession, “but it does confirm the deceleration of the Mexican economy. The growth in the first quarter was 0.3 percent, low compared to the 2.1 percent growth from the previous semester (2018).”
The pronounced drop in the growth figures has its reasons. First and most obvious, is the change of presidents last December. But it is also the result of AMLO’s immediate tight budgetary fist that has been felt as he has limited expenditures in the entire government.
In fact, last week the Treasury Secretariat (Hacienda) admitted that during the past six months, it had registered a financial sub-exercise of 174 billion pesos. Although that figure is based on hard numbers and is very real, immediately AMLO claimed, using a phrase that’s becoming typical of his daily lingo: “I’ve got different information from that which has been handled baselessly in the press. The information I’ve got is that the budget was well exercised, since I consider that we have saved in the current expenditures, and that’s what some may be calling sub-exercise.”
AMLO added that his administration would continue to save money first by freezing all government hiring except for medical personnel, teachers and new members of the National Guard.
Nevertheless, on Monday, July 29, Treasury Secretary Eduardo Herrera announced a surplus cash for 485 billion pesos that was part of the savings now blamed for stalling the economy.
Herrera said, perhaps knowing in advance the Inegi GDP growth announcement, said: “We could ask ourselves why this money has not been used with more anticipation. But there is nothing to stop us now with biddings today, to deliver on October or November.”
Most of that money is slated for road infrastructure beyond that already budgeted for the Secretariat of Communications and Transportation (SCT), which is planning several road development programs starting in 2020.
The 485 billion is slated to help the economy bounce back a bit in the first quarter of 2020, but still there are two quarters left in 2019, and the lack of government investment in the economy has yet to show up regardless of AMLO’s pie-in-the-sky dream that the economy will end the year with a 2 percent growth.
Some analysts – “they have the right to their opinion,” claims AMLO, practically on a daily basis – feel that AMLO has to reverse the non-spending tactic used during his first months in office as the only way to pull the economy out of stagnation because it was not only the government that stopped spending, but private business stalled investments in a wait-and-see attitude since it is a well-known fact that the private sector does not agree with AMLO’s allegedly “leftist” ideology.
The fact is that, during his first months in power, AMLO has not taken any “leftist” move, of course, unless you consider the Petróleos Mexicanos (Pemex) corruption cleanup campaign (starting last January with stopping fuel theft) a leftist move. Some see too that the Pemex Business Plan is not very attractive for their companies, but still, there are areas open for private investment left under a tight state-management control.
In the eyes of this beholder, AMLO has passed the acid test that meant implementing his way of governance and trying to convince renegades that he’s leading the nation in the right direction.
For now, the one fact of life and AMLO’s top preaching phrase is that he’s serious in his fight against corruption and downsizing the mammoth Mexican bureaucracy as much as is economically feasible. “Just by stopping corruption, we’re saving a lot of money,” he ha said, pointing to law enforcement used against fuel thieves – inside and outside of Pemex – to bring some economic relief to the financially strapped oil company.
Indeed, AMLO has had eight months up to the day to get a good mapping of how the government secretariats are managing their finances.
But now that the honeymoon is over, it is time to not look back to successful deeds of the past (such as having a good relationship with U.S. President Donald Trump), but to finish off the job of cleansing the government of corruption.
And that still means a lot of work.