By RICARDO CASTILLO
Now that the annual hoopla of Mexican Independence celebrations is over, the nation will move on with one of the most important issues at hand, which is getting from Congress the approval of the 2020 Economic Package that will go into operation next Dec. 1.
The package was delivered to President Andrés Manuel López Obrador (AMLO) on Sept. 8, following the yearly schedule the Treasury Secretariat has for drafting it. Actually, drafting the “budget,” as it is popularly known, officially began on April 1, when Congress received the “pre-criteria” considerations for drafting the budget. A second delivery to Congress is made on June 30 and a third on the second Sunday of September. This is part of the yearly established schedule for the drafting of the budget, but not the end of the process.
The budget is actually called the General Economics Policy Criteria, Initiative Bill to Draft the Law of Income and Expenditures of the Federation and the Budgetary Project of Expenses of the Federation. But just to keep it short, we’ll refer to it as the budget, or “el presupuesto” in Spanish.
At the moment, the budget bill is with the Chamber of Deputies, which has until Oct. 20 to revise and approve, after which the bill goes to the Senate, which must approve as well by Oct. 31.
Once approved by both Houses of Congress, the budget bill goes back to the Chamber of Deputies, which must deliver the approved document to the president by Nov. 15.
That’s the schedule for the budget, and something else has been the welcoming – or not – it received from Mexican financial experts.
This budget – the first concocted by AMLO and Treasury Secretary Eduardo Herrera – has left a bittersweet taste in the mouths of the left wing that has been backing AMLO for years now, and there is considerable disappointment over it.
In La Jornada, the official newspaper of the left in Mexico, financial pundit Enrique Galván Ochoa wrote:
“The government of the Fourth Transformation (4T) missed its chance to come up with a budget suitable to a regime of change: from scratch. This was an opportunity to reinvent the financial structure of the state in the calculation of income and expenses on a sheet of blank paper. The project that presented to Congress by Treasury (Hacienda) Secretary Arturo Herrera is an inheritance of Prianismo — the way budgets were presented during the past 18 years by Institutional Revolutionary Party (PRI) and National Action Pary (PAN), disdainfully called by the left and AMLO as PRIAN or neoliberal Prianismo — with some innovations, but finally constructed over the old scheme.
“It boasts two fundamental axis: One, there will be no tax increases and missing resources will be retrieved from tax evaders. Two, it is based on a moral economy, the wellbeing of the population, particularly the poor. Expenditures will be 6.1 trillion pesos, an increase over the 5.8 trillion budget currently underway.”
La Jornada pundit also perceived the 2020 budget as “one of scrawny cows, which will still produce milk” with the ominous fact that new credits will have to be acquired from international sources to renegotiate and pay interests on the humongous debt left behind by AMLO’s predecessor and now former President Enrique Peña Nieto,
In contrast with what more radical Galván Ochoa would have liked to see – a response by AMLO to the popular vote and the 70 percent popularity he currently enjoys – the overall 2020 budget is being eyed as “compliant” with acquired commitments, as established by the ultra-conservative daily El Financiero Bloomberg daily newspaper’s Enrique Quintana.
“There are two issues to underline,” Quintana wrote on Sept. 9, The first issue, he said, is that the budget has a realistic estimate of potential economic endeavor, and the second, is that it is going to require changes in tax collection procedures, as well as fiscal ones to assure that the public finance discipline be kept. “Surely those changes will stir an uproar,” he said.
Indeed, Hacienda Secretary Herrera is in tune with those who agree that the budget has traits of old neoliberal policies, but that in the end, it is realistic. For one, contrary to what AMLO claimed that the GDP would grow up to 4 percent – a fantasy, we all knew it – the Herrera vision of growth ranges from 0.7 to 1.2 percent. It may not be higher, but also, potentially not lower, which places the Mexican economy out of a recession range.
Whether it matters or not to AMLO, international ratings companies have toned down their catastrophic opinions and have now taken a step back to wait and see whether their doomsday’s forecasts were true or not. Nevertheless, most observers agree that the budget forecasts macroeconomic stability – a must to stay on course for the economy – and foresee the same GDP growth as AMLO and Herrera do.
Of course, Moody’s, Fitch and others worry a lot about Pemex and the fact that AMLO is investing a great deal of financial resources in the new Dos Bocas refinery construction project, diverting funds form further stabilizing Pemex. But their concern will not change the fact that the Dos Bocas refinery will be built and Pemex (now nearly downgraded to junk bond category) will increase its production and salvage the situation.
Right now, it is too early to tell what both houses of Congress will do to the budget presented by Herrera, but it does not seem to be a radical move by an allegedly radical president, who will have a chance to make final comments come Nov. 15, when the final draft of “the budget” will be made public.