Signs of Softening and Uncertainty, While Anti-corruption Efforts Remain Muddled
Economic indicators last month showed the Mexican economy largely sustained its slackened pace of recent quarters (an average 2.0% rate of growth through the first nine months of the year) as weak supply indicators contrasted with continuing strength in demand, although the latter also manifests some weakness.
Perhaps more troublingly, Mexico is not seen as addressing structural problems in the economy and in public finance in ways that adequately reassure investors and other economic agents at a time of heightened uncertainty following the election of Donald Trump as the next US president. In this situation, the manner and content of how Mexican authorities communicate the specific response mechanisms they have in place becomes crucial, and so far their reactions have been inadequate.
Despite a continuing lack of visibility regarding Trump’s economic agenda, with this week’s issue we at GEA are updating our macroeconomic outlook for 2016-2017, which is characterized by softer GDP growth, a yawning of the current account deficit, which is becoming more difficult to finance (a weakness that will add pressure to a structurally weakened peso-dollar exchange rate), heightened inflation and interest rates, which is the only instrument at the government’s disposal to try to maintain micro financial stability. We also offer a comparison of those numbers in relation to the market consensus from the central bank's most recent monthly survey of private sector economists, which was taken following the US elections.
In recent weeks the government’s response on anti-corruption matters has worsened as its actions have grown increasingly paradoxical. While the list continues to grow of former governors under investigation or for whom arrest warrants have been issued, and the Chamber of Deputies has thrown a financial life line to the National Anti-corruption System, no progress has been made in choosing the country’s first federal prosecutor assigned exclusively to overseeing anti-corruption cases, and in what appears to be a stealth maneuver in the making, commissions of the Mexican Senate are discussing a revised version of the Government Records Act that could roll back the progress achieved in the past 15 years in public access to official information.
One step in the right direction has been to intensify investigations into several gubernatorial administrations seen as having been ostentatiously corrupt, but except for one fugitive governor who turned himself in, no major arrests have been made or appear to be close. The extent of federal government indifference in curtailing ubiquitous corruption on a mass scale, rising levels of indebtedness and unfettered waste or mismanagement of public funds by governors is apparent in the fact that of the 21 states that held gubernatorial elections between 2015 and 2016, criminal investigations of former governors have only been opened in those states where the incumbent party was turned out of office.
The anti-corruption system’s inefficiency is not circumscribed exclusively to the executive branch of the federal government. Congress shares much of the responsibility and its current actions on the subject are also muddled. The question of naming an anti-corruption prosecutor has been a source of considerable anxiety among civil society organizations. The main concerns among CSOs involve the degree of importance that should be given to assuring the person’s impartiality both on the level of partisan interests and in his or her ties to the Attorney General. The extent of social support for the National Anti-corruption System will hinge to a large extent on just how well the nominee embodies such qualities.
The other point that is crucial to civil society support for the National Anti-corruption System as it emerges is the adoption of a law on the archiving of public records, which one major expert has described as Orwellian in its efforts to roll back 15 years of progress in transparency and accountability.
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