AMLO Increases Debt: Here’s How Mexico’s Next President Will Find Public Debt

“AMLO will go down in history” for multiplying Mexico’s foreign debt in 2023

Until 2022, Mexico has a public debt of more than 13 billion pesos and in 2024 it could increase by 1.1 billion, however, the Treasury has already taken steps to transfer the debt to the next administration.

This Friday the House of Representatives authorized on the federal government will contract in 2023 a domestic debt of 1.1 billion pesos and an external debt of up to $5.5 trillion, for which Mexico’s indebtedness would exceed 14 billion pesos.

The Ministry of Finance and Public Credit was in charge of refinancing the country’s public debt, in particular bonds maturing in 2025with the aim of preventing the financial burden in the administration of the next President of the Republic from generating great pressure during his first year in office, recognized this week the Undersecretary of the Treasury, Gabriel Yorio.

The Treasury official told Reuters that about 40% of debt maturing in 2025 has already been refinanced and the percentage could increase to 70% or 80%, which implies that the payments that the Mexican government must make in the future they will be extended for a greater number of years.

President Andres Manuel Lopez Obrador asked the Treasury to refinance as much debt as possible, with lower payments and longer maturities, Yorio explained, which in practice means that subsequent administrations will face maturities.

(Photo: Pixabay)(Photo: Pixabay)

He gave us very clear instructions to reduce the 2025 deadlines so that the financial transition is as smooth as possible,” the official said.

Debt refinancing implies that payments are deferred and although payments may be lower, they are covered over a longer period, thereby increasing returns for creditors.

How much is Mexico’s debt?

The SHCP pointed out that with the July 2022 figures, the The historical balance of public sector financial requirements (SHRFSP) amounted to 13 trillion 376.1 billion pesoswhile public sector net debt stood at 13 trillion 387.9 billion pesos.

According to Treasury data, the Historical Balance in December 2018 (when Andrés Manuel López Obrador took office) was 10 billion 551 thousand 718 million pesos.

Thus, in 2022, the balance exceeds 13 billion pesos, that is. 2.6 billion more than at the start of the current administration.

According to the federal government itself, from July 2019 to April 2022, the largest foreign debt refinancing exercise was carried out, refinancing approximately $21.298 billion.

In September, the Secretary of the Treasury, Rogelio Ramírez de la O acknowledged before the Chamber of Deputies that so far in the current administration, Mexico’s debt has increased by 7%, but he stressed that the debt is under control, since it represents around 49% of GDP.

The 2024 election in Mexico and the task of the next chief executive

Morena and AMLO face a difficult road to the 2024 elections (Illustration: Infobae México/Jesús Abraham Avilés Ortiz)Morena and AMLO face a difficult road to the 2024 elections (Illustration: Infobae México/Jesús Abraham Avilés Ortiz)

Mexicans will elect their next president in June 2024 and López Obrador, who took office in 2018, cannot run for a second term by law, however, his political party (Morena) has an advantage in the polls against the main opposition parties such as PAN, PRD and MC.

The Prime Minister of Mexico, Claudia Sheinbaum, and Chancellor, Marcelo Ebrardare in the lead to occupy the presidential candidacy by the ruling party, although the Secretary of the Interior, Adam Augusto Lopez Hernandez also has the approval of López Obrador, who considers him his brother.

Since taking office, the López Obrador government refinanced the equivalent of 63 billion dollars of debt, much of which is denominated in pesos on the local bond market, which equates to approximately 11% of total debt. of Mexico,” said Gabriel Yorio.

Gabriel Yorio.  REUTERS/Edgard Garrido/File PhotoGabriel Yorio. REUTERS/Edgard Garrido/File Photo

The government would seek new opportunities to refinance or buy back external and domestic debt, added the official, whose team is also working to develop a local debt market based on sustainable bonds.

“What we’re looking to do is create all the yield curves so that private companies can use them to price their own instruments when they want to launch some kind of (green) bond or raise capital for a sustainable program,” he said.

Has he grown? Here’s how Mexico’s debt to AMLO has fared, according to an economist

Has he grown? This is how Mexico’s debt to AMLO behaved, according to an economist.

Since he was a candidate, President Andrés Manuel López Obrador had a particular proposal on the economic issue: not put the country in debt and during his tenure he reiterated it with the argument that Mexico has sound finances. “It is important to say this, because there is a lot of misinformation (…) We are not going to raise taxes, there will be no new taxes,

the public debt is not going to increase, we are not going to put the country in debt, there will be no gas crises. The formula is simple: end corruption and privilege in government,” López Obrador said in an interview with

MILENIO in November 2018.

In an interview for MILENIOeconomist Arturo Damm explained that President López Obrador does not indebt the country but the “government; the problem is that ultimately the public debt ends up being paid by citizens in many ways, one of which is through taxes”.

For the professor, also university, the debt of the Mexican government has indeed increased: “with official data from the Ministry of Finance and Public Credit, the debt has increased so far in the current administration, both domestic debt, that denominated in weight, as external debt”. “As of November 2018, the net domestic debt of the federal public sector (which includes the federal government, plus agencies and corporations, e.g. Pemex and CFE, plus the Business Development Bank),

was 6.7 billion pesos.

Last April, which is the last month for which we have information, this debt was already 7.8 billion pesos, which represents an increase of 16.7% compared to the net debt of the federal public sector, but if we only consider the federal government, we remove from this grand total the agencies, companies and development banks, since

in November 2018, this federal government debt was 6.5 billion pesos and last month, in April, it was already 7.8 an increase of 20.2%,” Damm explained.

Regarding the external debt, Arturo Damm explained that if “we consider the federal public sector, we have that in November 2018 it was 198 billion dollars, last April it was already $225 billion, an increase of 13.5% . “And if we only consider the external debt of the federal government, in November 2018 it was 95 billion dollars and in April 2021 it was already totaling 118 billion, an increase of 23.5%.” “Strictly the one who is in debt is the government and it is this government that indebts the governments that will come later (…) the current government is paying the debts that the previous governments have contracted and is contracting new debts that the governments future will have to pay,” he explained.

Consulted by MILENIOErika Cruz, economist graduated from UNAM, calls for understanding why debt is contracted, how it is structured in Mexicoas well as an understanding of the current economic situation.

“In constitutional terms, Article 73, Section VIII, declares that Congress has the power in matters of public debt to approve the borrowings and payments of the national debt and explains that the subscription of a public debt or financing is intended to invest in works that increase public debt income, as an instrument of monetary regulation or in the event of an emergency declared by the President of the Republic under the terms of Article 29. This means that

the executive does not operate alone, but rather there is a consensus in Congress to approve the annual economic package which includes the public debt and the national accounts, as well as the debt ceiling authorized for the purposes provided for by law. , there is therefore a shared responsibility between the executive and the legislature”.

The decisions of the 4Ts hit the confidence of businessmen “very hard”

The removal of Texcoco airport or the “energy counter-reform”, among other decisionshit the confidence of businessmen “very hard”, assured Arturo Damm. “There is the Inegi Business Confidence Indicator, if we analyze it we can see very well how, above all, at the end of 2018, from the fourth quarter, the confidence of businessmen, both in the manufacturing sector and in the merchant, in construction, is down.”

This greater mistrust has already resulted in a sharp drop in direct investment, more precisely, in gross fixed investment, that is to say the investment made in plant, machinery and equipment. “Last March, the level of investment in Mexico in plant, machinery and equipment was equal to what we already had in April 2011,” Damm detailed.

On June 28, Arturo Herrera, Secretary of Finance and Public Credit, maintained his expectation of economic growth of 6.5% for this year. Arturo Damm agrees, although he explained that the number can be misleading. “That year, yes, I believe the economy can grow by six percent (…)

From 1934 to 1981, the average annual growth of the Mexican economy was 6.2%; from 1982 to 2018, the average annual growth was 2.2%. “If this year we go to six, we could say that we are increasing at the rate we had in those years when we were talking about the Mexican economic miracle, but beware,

if we go to 6% this year, this figure will be very misleading because we would be comparing 2021 to a year like 2020 in which the economy shrank by 8.3% We compare with such a bad year that it is not difficult for us to have only six percent, but we should take it very seriously,” he said.

Mexico Daily Post