Arturo Herrera, holder of the Secretariat of Finance and Public Credit (SHCP), clarified the main doubts of the federal government’s strategy to revive Mexico’s economy in the face of the crisis unleashed by the coronavirus.
According to their estimates, the revival of the Mexican economy will begin in some municipalities from May 17 thanks to the success of the National Day of Healthy Distance, since there are localities with an epidemic transmission of almost zero; and, in the main cities of the country, it will start from June 1st.
The “epidemiological model says that part of the country can begin to open on May 17 and the rest, the three most relevant metropolitan areas. Mexico City, Guadalajara, Monterrey plus three outbreaks due to contact with the United States economy, one in Tijuana, one in Cancun and the metropolitan area of Puebla are the ones that would be opening on June 1. But that depends on the pandemic behaving as you have been predicting. That he has been predicting it well, until today ”, he said in an interview with the Spanish newspaper The country.
The sanitary measures implemented by the federal government to combat COVID-19 have as collateral damage the weakening of the national economy, since they promote social isolation to prevent the massive spread of the coronavirus, which directly affects non-essential economic activitiesThey had to be paralyzed with the entry into Phase 3 of the epidemic on April 21.
In sanitary matters, the Health Secretary (SSa) reported on Tuesday 28, that in Mexico they have 16,752 confirmed coronavirus cases and 1,569 disease-related deaths. In economic matters it is expected that there will be losses; however Arturo Herrera prefers to wait for the quarterly report that is about to come out and that will weigh the months of March, April and May.
This phenomenon not only occurred in Mexico, in such a way that international financial institutions such as the Inter-American Development Bank (IDB) established loans for financing micros, small and medium-sized companies (My SMEs), since it is expected that they will be the most affected.
In the country, the IDB and the Mexican Business Council (CMN), announced on Sunday April 26 a financing for 12,000 million dollars in support of 30,000 MSMEs due to the SARS-Cov-2 crisis. At the morning conference the following Monday, the President Andrés Manuel López Obrador spoke out against said loan who required the endorsement of the SHCP and said:
“We cannot grant that guarantee, because we do not want to indebt the country and we want to rescue, first of all, those most in need. Also, I don’t really like the ‘way’ that they agree and (later) want to impose their plans on us. Is an agreement made and now that the Treasury endorses it? And that? Are we here for vases? Imagine that the president finds out that there has already been an agreement that they are only going to ask the Treasury to endorse. So you imagined it? or when they said that ‘the government adheres to our economic plan’ How !? There is a lot of arrogance. “
This statement was criticized by private initiative, as Gustavo de Hoyos, president of the Confederation of Employers of the Mexican Republic (Coparmex) rebuked him via Twitter by publishing that “to face the economic crisis caused by COVID-19, the president López Obrador does not help or help is leftr, but it does lie. The financing program of the Inter-American Development Bank (IDBInvest) -CMN for 30,000 companies, does not involve (as it said) public resources. Here we are in “mode” of support. And the?”.
Given this anger between the federal executive with private initiative, Herrera Gutiérrez went out to explain the situation of the economy and explained why IDB financing is good for reactivation.
Regarding the agreement between the IDB and the CMN, the Minister of the Treasury explained that it is “a line of credit approved two years ago, this is the second phase. I think it was a confusion. Before this type of international organizations we have a double role, we are the governors, the shareholders, but before the programs, we are recipients ”.
Regarding the economic reactivation in Mexico, in an interview for The country, explained that “Mexico cannot have a fiscal stimulus program the size of Germany or Canada“
When asked expressly what is the worst scenario that the secretary contemplates, he replied that “the figures for the first quarter, which will come out now, are not bad. The impact will be in the second quarter, based on the figures for April and May ”; However, it does not fail to contemplate the intimate commercial relationship with the United States and the global expectations of economic recovery.
“A vast majority of countries are waiting a (cheap) ‘V’ bounce, which says that the economy is going to recover. The opening of the country is going to have to be gradual. We have an additional variable that we are going to have to play with. Our economy has a very high correlation and level of complementarity with that of the United States, and the pandemic did not occur at the same time. Having given before in the United States, it is assumed that it will open sooner. We are going to have to find some mechanism so that companies that are on the Mexican side, that are connected to the value chain in the United States, can join earlier, “he added in his explanation.
It is also noteworthy that the owner of the Mexican hacienda was optimistic about negotiations with financing institutions abroadBecause IDB financing is not the only one to be implemented to support Mexico.
“We have others with him world Bank, we have with the CAF (development bank), last week we placed $ 6 billion through three issues”, Reported the secretary; however, it does not deny financial difficulties. For example, he pointed out the little room for maneuver that the Bank of Mexico (Banxico) to lower interest rates. “Canada has a 0.25 percent rate. Our benchmark rate is 6%, 24 times higher than theirs. We have to be very careful in what we can do with the budgetary resources and that is the reason why we sweep the resources of the trusts“
Despite the adverse scenario, the Treasury still expects to have an increase of between 1.5% and 2% of the Gross domestic product (GDP) and trusts that the fiscal incentives granted to Pemex yield the expected results.