Monterrey, Mexico.- AGiven the fiscal deficit that public finances are experiencing, the country’s entities would have fewer resources through participation, which would lead some state governments to take measures, analysts warned.
Alejandra Macías, director of the Center for Economic and Budgetary Research (CIEP), pointed out that federalized spending – the resources that the federal government transfers to entities and municipalities through participations, contributions, subsidies and agreements – is expected to be lower.
“What we see are risks everywhere, that federalized spending will be lower and in that sense the federal entities must step up.”
According to data from the Ministry of Finance, in 2023, federalized spending rose 2.5 percent at an annual rate in real terms and in 2022 it did so by 2.6 percent.
Both figures were below the general annual inflation in Mexico, of 4.66 percent in 2023 and 7.82 percent in 2022.
The CIEP projects that this year and next, federal contributions will represent 3.7 percent of GDP.
“States need their own income regardless of whether there are risks or not, regardless of whether we are at risk of fiscal deficit, they should be evaluating options to strengthen their income,” said Macías.
Édgar Luna, director of the Economic Research Center (CIE) of the UANL, considered that in the scenario of fewer resources for state and municipal governments, they would choose to review or update their taxes that represent their own income, such as property taxes for municipalities. .
Carlos González Barragán, professor and researcher in public finance at Tec de Monterrey and UDEM, considered that for Nuevo León one of the challenges is the relationship that the state government maintains with the local Congress.
“(You must) have a close relationship with the legislators of the Entity and in the budget negotiation part certain projects of benefit to the State can be incorporated,” he indicated.
Federal scenario
The specialists agreed that at the federal level it is necessary to analyze the areas where it is possible to adjust expenses before increasing taxes.
“For example, there are taxes (that could increase), which refer to the IEPS applied to tobacco and alcohol,” said Macías.
Luna considered that the taxpayer base needs to be expanded.
“The big problem with taxes is that any tax that is created or increased will continue to be paid by the same people. A true reform would be to increase the tax base, that would be fair, that everyone would pay.”
González Barragán pointed out that in the first budget of a new federal Government, it is usually inertial to that of the previous Administration, which is why it is difficult for any tax to be increased.
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