By RICARDO CASTILLO
While the Central Bank of Mexico has already begun whining about the potential drop in dollar-denominated remittances from the roughly 36 million Mexican workers in the United States, down to $29 billion in 2020, its U.S. counterpart, the Federal Reserve (Fed) is reporting that as of last January and through Thursday, April 2, Mexican investors and business are funneling $77.2 billion into their dollar-denominated accounts.
The reason for these accounts is twofold:
First, Mexico does not allow in its banking system dollar accounts, and second, remitters use these accounts as safe havens to protect the value of their assets in devaluation volatile times such as the one Mexico is passing through currently.
Also, dollar transfers to the United States has increased as the banking systems of both nations have deepened their relationship and the presence of Mexican companies increases in the United States.
However, Fed figures show a 6 percent increase during 2020 as year 2019 closed at $72.435 billion.
Trust Fund Termination
On Friday, April 3, Mexican President Andrés Manuel López Obrador (AMLO) published in the Official Gazette a decree ordering the “extinction” of all of the government trust funds or fideicomisos.
The news rapidly spread and was misinterpreted by many expat Americans who own property in Mexico under a “fideicomiso arrangement.
The good news is that the fideicomisos AMLO was referring to in his mandate are strictly government-subsidized trust funds, considered now within a technical term as “public trust funds without an organic structure,” meaning the 308 existing trust funds are sucking over 740 billion pesos from the national budget.
These trust funds have been issued for a myriad of different objectives and many of them operate on their own without any audits from the Superior Audit of the Federation, the Congress watchdog of finances.
The extinction order issued by AMLO is to “combat pilfering” these resources from whatever that are being used – or not, nobody in government knows – for.
The president’s move will include the participation of most cabinet secretariats, but ultimately it will be the Treasury Secretariat compiling the final list, which is slated to be made public on April 15.
The fideicomisos currently include funding being funneled to these nearly ghost organizations.
Those that will become “extinct” are those that are approved, but their “organic structure” includes management, organization, facilities and productive working personnel that are in fact meeting their intended original purpose.
The government organizations holding the majority of these trust funds are the National Council for Science and Technology (Conacyt) with 29.3 percent, the Treasury Secretariat with 24.6 percent, the Education Secretariat with 7.7 percent, the Communications and Transportation Secretariat (SCT) with 6.2 percent, the Cultural Secretariat with 4.1 and the Tourism Secretariat with 3.3 percent.
It will be interesting to see, once the list is made public, how many of these trust funds were used to create what is known in Mexican bureaucracy as havens for “aviators,” meaning favored persons who get a salary for not working.
Airlines, Tourism Losses
The hardest hit industry by the Covid-19 pandemic in Mexico is no doubt the tourism sector.
Airlines and hotels are feeling the pinch to the point of shutting down business until furter notice, which may come, or not, after the government lifts up the “stay at home” hygiene program to prevent contagion.
Most noteworthy has been the closing of over 1,000 hotels in Mexico City, including the flashy until reopening performance of posh Polanco neighborhood hotels such as the W, the J.W. Marriott and the Presidente InterContinental, which closed for the time being with illumined signs asking for “faith.” The word “FE” glittered from their high rise walls.
But the most blaring sign and companies quoting in the Mexican Stock Exchange.
For instance, airlines Aeroméxico and Volaris and hotel chains City Express and Grupo Posadas, if considered together, went from a joint market value of 55,120 million pesos down to 27,887 million, a net loss of 27,233 million: half their January value.
And for now, there is no light at the end of the tunnel for them.
Radio and TV Gov’t Air Time
AMLO decided to return to radio and television concessionaires the air time the government owns as allotted by previous legislation.
He said that in hard times and with government advertising purchases at a rock bottom, the television and radio stations could use the returned air time to increase their income and sales since the government is doing well with its own advertising programs.
Opposition political parties oppose reissuing the time to the stations because it is “a government concession” and a presidential executive order is illegal because it violates Article 41 of the Mexican Constitution and secondary ordinances regulating the broadcasting trade.
“The air time belongs to the state and not the concessionaires,” said Congressman Clemente Castaneda of the Citizens’ Movement Party.
AMLO’s new executive order has not yet been published in the Official Gazette and it still open for discussion.
With no professional sports being played in Mexico these days, the bookstore chain Gandhi has started an advertising campaign aimed at the sport with the greatest majority of fans, soccer.
The Gandhi ad says: “Now that you’ve seen you can live without soccer, read a book.”