AMLO loses grasp of economic reality

MEXICO - In Brief 06 Apr 2020 by Mauricio González

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AMLO insists on distancing his government economically (and politically), from the last five administrations (Salinas, Zedillo, Fox, Calderón and Peña Nieto), even though this translates into ineffective solutions to Mexico’s main challenges:a significant recession due to COVID 19 and pubic finance disruption caused by lower economic activity plus PEMEX’s growing financial weakness. AMLO seemed to understand so far the advantages of a market economy (he pushed for a renewed NAFTA), as long as they didn’t oppose his (ill conceived) policies to reduce income inequality and poverty or to diminish the governmnent’s monopolic power/leadership in the energy sector. However, he is starting to show some ideological bias in his economic policy actions.This explains his rejection to enforce an expansive fiscal policy and provide specific relief (tax, credit or other), to businesses to confront the consequences of social isolation.AMLO announced a strategy to face the economic crisis, based mainly on: constitutionally incorporating the social programs introduced by his administation (direct money transfers to old age population, money for young persons, that don’t work or study, scholarships, public employee and business microcredits, agricultural price support and others), and advancing some of the payments for the next 4 months. In his view these will benefit 22 million mexicans and 95% of poor mexicans by year end (which reveal an electoral advantage towards 2021 for AMLO and Morena).On public finance he commited his usual goal of not increasing public debt in real terms, with more Federal Government tax relief for PEMEX, not affecting the general government payroll and contin...