“It was a good decision to leave him in office. Keeping the same heads of key ministries, such as the Treasury, can generate consistency in fiscal policy in Mexico, making it less likely that there will be ‘swings, commandos’, I mean changes in policy that are very abrupt, that can provide stability in the entire fiscal policy; in income, expenses, and in debt,” said Christián Cernichiaro, a postdoctoral researcher at the Universidad Autónoma Metropolitana (UAM).
The economic outlook that will begin with the new six-year term will be different and more favorable, unlike the one experienced in the current administration with the pandemic, the wave of inflation and the geopolitical situation. Therefore, “the Treasury will have the great challenge of acting in a period of economic stability, where you no longer have excuses to meet the objectives that you set at the beginning of the six-year term,” commented the UAM researcher.
The first big test is in the delivery of the 2025 economic package, where Rogelio Ramírez de la O will have to show the way to reduce the deficit, the debt, generate more public income and give support to Pemex, without having to be the agency that saves its finances, consider analysts consulted by Expansion.
Reduce the deficit
The great challenge will be in the management of public finances, considering that during López Obrador’s administration there was no tax reform, that is, taxes were not increased. This means that we are ending the six-year term with very tight public finances, which is why it was proposed and approved to increase the deficit and public debt for 2024, explained Janneth Quiroz, Director of Analysis at Grupo Financiero Monex.
“The fact that public finances are tight means that expenses are high and income is limited, so there is a deficit that is financed with more debt. Maintaining a deficit close to 0% and not significantly increasing the debt is one of the main challenges,” said Quiroz.
In this deficit reduction, Rogelio Ramírez de la O and his team will have to be strategic so that it is not abrupt enough to cause a recession, nor too slow so that the rating agencies cut Mexico’s credit rating or change its outlook to negative. “We have to make spending more efficient and cut expenses where they are not as efficient,” added Gabriela Siller, Director of Economic Analysis at Grupo Financiero Base.
Generate more income
By the end of the year, a public deficit of 5.0% of GDP is anticipated, and 2.5% for 2024 and 2025, respectively, according to the Pre-Criteria. More than a week ago, in a meeting with members of the Business Coordinating Council (CCE), Claudia Sheinbaum, virtual president-elect, reported that the goal is to reduce the difference between public income and spending (deficit) to less than 3.5% of GDP, and that a tax reform to increase tax revenues is not contemplated, as this will be achieved through the digitalization of the processes of the Tax Administration Service (SAT).
Another big challenge will be to see “where they will generate more resources, because transfers are already by law and the population is aging, with that, more resources will be required,” and a tax reform is not contemplated.
And Pemex?
Therefore, in this regard, specifying investments for flagship infrastructure projects and determining what type of support will be given to Pemex will be another of the great challenges, Takahashi commented.
“Once the markets’ nervousness has calmed down, there is no expectation of a 180-degree change in the country’s spending and budget policy. We will try to see how we can contain the major risks that exist, a little bit with Pemex, CFE, and finish the major infrastructure projects and everything that remains pending, such as the major spending pressures that the federation has,” explained Takahashi.
Siller considered that although changing Pemex’s business model is not the responsibility of the Treasury Secretary, he is responsible for determining what support will be given and in exchange for what; for example, when the IMF grants support, it establishes a series of agreements to grant that support, “the Treasury should set requirements in order to continue supporting the oil company.”
“What we are going to see in this economic package is going to be the answer to the persistent question of the historic fiscal deficit, so cuts and the culmination of expenses may come, there will be a moment in which we will no longer see the large investments for refineries, the Mayan Train,” which will help reduce the deficit, considered Rolando Silva, Vice President of Fiscal of the Mexican Institute of Public Accountants (IMCP).
With information from José Ávila.
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