Economics: AMLO's Proposals Don't Add Up
Andrés Manuel López Obrador (AMLO) has published what in principle is supposed to be part of his governing program should he be elected president of Mexico next year. The book, entitled “2018. La Salida, Decadencia y Renacimiento de México” (2018: The Way Out, Mexico’s Decadence and Rebirth), contains a lot of words and good intentions, but very few viable and effective action proposals for realizing the objectives he raises, and the few he does spell out might well cause more problems than they pretend to solve. To a large extent, the book simply repeats many of the proposals he made during his 2006 and 2012 presidential campaigns, as if the national and international situation has remained unchanged in the past 12 years.
The book puts forward various ideas regarding public finance, and in the case of those addressing specific sectors, the author notes that he is offering “fewer but better proposals” but only describes a few.
His plan for budget savings and reassignment consists of lowering debt service payments by 5 billion pesos a year, which he claims he can achieve without incurring deficit spending or any additional debt, thanks to supposed “more favorable refinancing conditions”. These are good intentions, but not so viable given the direction of both domestic and international financial markets.
According to GEA’s estimates, the total cost of the proposals that appear in the book – just the quantifiable ones (a category that excludes various actions proposed regarding construction, the free trade border zone, telecommunications, public security and a significant part of those related to the countryside and social development) would surpass 1.02 trillion pesos, or the equivalent of 28.8% of all programmable spending authorized for 2017.
In this week’s Outlook section we analyze the contents of López Obrador’s book and their possible economic implications.
There was little domestic economic news last week, but one notable exception was the labor market report for the fourth quarter of 2016. The rate of unemployment fell to 3.64% during the fourth quarter of 2016, the National Statistics Institute (Inegi) reported, based on seasonally adjusted data. It was the lowest jobless rate recorded since the fourth quarter of 2007 (3.63%). During the most recent quarter there were 1.9 million people unemployed and actively seeking work.
Despite such improvements, the rate of labor informality, which tracks the percentage of the employed workforce that is engaged in the shadow economy, remained at the same 57.3% level recorded for the two preceding quarters, which means that roughly two out of every three people employed were engaged in the informal sector of the economy. In absolute terms, 29.8 million people were working in the informal economy last quarter. Overall there were 52.1 million people employed in Mexico, 1.1% greater than the number reported a year prior.
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