Last week I argued that there was a very low probabilityless than 10%, that an economic crisis occurred at the end of the six-year term.
This was due, in part, to the current government’s reasonably responsible management of public finances. Despite the debt that is being proposed for the 2024the Historical Balance of Financial Requirements of the Public Sector will grow a total of 5.2 points as a proportion of the Gross Domestic Product throughout the six-year period of AMLOwhen Calderón increased it by 7.4 points and Peña by eight.
Yeah, 2024 will be the year in which the current government will borrow and spend the most. For electoral reasons, they left the tax holiday for the last year. The first five did not go into as much debt because tax revenues increased by harshly tightening the collection of large taxpayers; also They disappeared and spent the money of almost all public trusts and they cut many spending items with machete. All this allowed them to borrow less than the two previous governments.
That is why I have argued that, in matters of public finances, the government behaved more like an orthodox neoliberal than an irresponsible populist. From there they go to avoid an economic crisis at the end of the six-year term which would be lethal for them from an electoral point of view.
In this sense, the government of AMLO He already freed her.
The problem will, however, be for the next administration.
There yes that there will be significant pressures on public finances since the first day.
For a start, there will be giant holes in the Budget that will have to be solved.
Number one on the list is the pension item..
Next year, the government will have to pay almost two trillion pesos, 22% of the total of all public spending, to pay contributory pensions (IMSS, ISSSTE, public universities, etc.) and non-contributory ones, that is, the star social program of this government, the universal pension for older adults, where 465 billion pesos will be spent in 2024.
The pension gap will continue to grow because the Mexican population is aging. This year it is expected that people over 65 years of age will represent 8.2% of the total population; By 2050 this group will make up about 17%.
There will be more and more old people who will have to pay their pensionsboth contributory and universal, which is already a right in the Constitution. This program has been growing in amounts because the government has increased benefits. It started with 2,550 pesos every two months. In 2024 It will increase to six thousand per two months.
The second hole is Pemex, a bottomless barrel for the Mexican treasury. The company is a disaster. For practical purposes, it is broken.
AMLO’s government has had to rescue it financially without putting conditions for administrative improvement. The business of extraction Petroleum It remains profitable, but the company destroys value in the other activities it carries out, refining in particular.
AMLO’s administration has lowered the taxes and royalties it charges for the extraction of hydrocarbons and has increased the amounts to cover its exorbitant debt. In 2024 alone, they will allocate 171 billion pesos of transfers to Pemex.
The next government will also inherit new gaps that will have to subsidize. He Felipe Ángeles airport, the Benito Juárez and the Mayan Trainfor example, will not be able to operate unless the government subsidizes them.
The next administration will no longer have trusts that it can cancel and spend its money. Nor will it be able to make greater cuts in areas that have already suffered greatly this six-year term (health, education, public security, for example).
You will then have to go into debt or collect more taxes.
The first seems difficult because, unlike the current one and the past two, the next government will no longer have much room to contract more debt without generating negative macroeconomic consequences. Especially if, how will AMLO next year, use the debt to finance current spending (in 2024the Executive is proposing a debt of 1.8 trillion pesos, but an investment expenditure of only 888 billion; the rest will go to current expenses, which, by the way, is prohibited by the Constitution).
What remains is the inevitable and what neither of the two presidential candidates will talk about in the campaigns: Increase taxes to maintain health in public finances. That will be the fiscal bomb that will leave you AMLO to her successor.
X: @leozuckermann
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