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According to a new report conducted by daily Mexican newspaper El Universal, Mexico has spent more than 85 percent of its savings since Mexican President Andrés Manuel López Obrador (AMLO) entered office in 2018.

These funds, housed in the Budget Income Stabilization Funds (FEIP) and the Income Stabilization Fund of the Federal Entities (FEIEF), had built up Mexico’s savings over decades through the collection of surpluses as outlined in the Federal Budget and Treasury Responsibility Law.

Now, in its review of figures from the Secretariat of Finance, El Universal found that FEIP funds went from 328.3 billion pesos in December 2018 to 45.9 billion pesos in June 22, a decline of 85.8 percent.

At the same time, the FEIEF went from 76.3 billion pesos in savings in December 2018 to 20.9 billion pesos in June 2022, a reduction of 72.6 percent.

National Autonomous University of Mexico (UNAM) economic analyst César Salazar told the paper that these savings funds are meant to be a resource for the government to pull from when there are decreases in federal revenues. However, given how low the FEIP and FEIEF funds are running at the moment, Mexico could be at risk of surmounting additional debt.

“The state, through the acquisition of debt, has the possibility of gathering resources in a time of emergency,” said Salazar. “The problem is that this is leading the country towards external indebtedness. In reality the funds were a buffer to prevent the State from becoming indebted. The important thing would be for there to be margin, but there is not much left anymore. So if required, the state can go into debt, and the most direct consequence of the savings funds running out is that the levels of indebtedness rise.”

Despite the declines in the savings fund, both the FEIEF and FEIP briefly recovered from their steady declines in the second quarter of 2022.

The savings reductions have brought contention between Mexican political parties, particularly AMLO’s in-power National Regeneration Movement (Morena) and its opposition, the conservative National Action Party (PAN).

“The Mexican government made savings for practically 20 years, that’s why the stabilization funds were born,” said PAN Deputy and secretary of the Budget Committee of the Chamber of Deputies Saúl Téllez. “There were more than 300 billion in those funds, and today they have been used and they register the lowest levels in 20 years since their birth.”

“The president has practically milked the savings of Mexicans. Those resources were a reserve precisely to stabilize public finances, but they no longer exist. They are at very low levels, and that sets off an alert because public finances may begin to deteriorate even more, and we must depend now much more on indebtedness,” added Téllez.

For his part, Morena deputy and fellow Budget Committee member Daniel Gutiérrez defended the use of savings as necessary amid the economic devastation of the covid-19 pandemic and ongoing geopolitical crises.

 “The international economic crisis, and mainly the pandemic, turned the world upside down, and the government of López Obrador had to make an important decision: either I take from my savings, or I borrow, and it was decided to take from the savings, and I believe that this was a decision that in the end will be reflected in the management of public debt in Mexico,” said Gutiérrez at the time, noting that he expects that the savings funds will begin replenishment by the end of the year.

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