Economics: Public Finance Challenges Grow
In late March of this year, Banco de México’s Board of Governors signed off on the audited financial statements for the close of 2016. The main takeaway from the announcement – although also notable was the record increase in the central bank’s operating surplus to 535.3 billion pesos – was the amount it distributed to the federal government: 321.7 billion pesos, or 60% of the total.
We at GEA believe that the most important matter, from an economic and financial standpoint, is whether the reserves Banco de México sent to the government fulfilled its legal obligations in this regard, and whether the federal government will use these funds to help pay down the public debt.
Although it appears to ourselves and other analysts that these reserves may be insufficient, what is still more important is first, the fact that the operating surplus received by the government should be considered “transitory,” and second, that in the overall results for 2017 it turns out that not all the funds were used to reduce the public debt, as happened in 2015 and 2016.
In this week’s Economic Outlook, we analyze the implications of the “operating surplus” transfers by the central bank at a time when Mexico continues to run the risk of another sovereign ratings downgrade.
There was good news on the labor market front as the pace of hiring in factories in Mexico accelerated a seasonally adjusted 3.6% in February year over year, the strongest expansion since April 2011, when factory payrolls grew 4.2%. The branches showing the strongest growth were equipment (8.3%) and transportation equipment (5.5%). In contrast, factories producing petroleum derivative products, leather and fur goods, and apparel continued to implement layoffs. Remunerations in the manufacturing sector grew at a seasonally adjusted 1.4% in February, a stronger rate than that of the same month a year earlier (0.8% year over year).
The authorities also reported that the rate of unemployment fell to 3.53% of the Economically Active Population (EAP) during the third month of 2017. This result is the lowest level for March of any year since 2006, when joblessness was reported at 3.33%. The positive direction of the report was also apparent on the level of rates of underemployment and informality.
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