Mexico will be one of the last Latin American countries to emerge from the crisis

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Moody’s Analytics states that the country’s growth in the medium term will be limited to rates between 2% and no higher than 3%

Mexico is one of the Latin American (LA) countries with the lowest prospects for its economy in 2020 and with less fiscal stimuli for families and companies in proportion to its GDP to solve the economic crisis unleashed by coronavirus, so it will be economies that recover slower, refer estimates from Moody’s Analytics released this Wednesday.

“Although the Mexican economy is going to recover and will have positive growth in 2021, its growth capacity in the medium term will continue to be limited to rates of between 2% and at most 3%, which will lengthen the time necessary to recover lost capacity. in at least 5 years, if and only if an acceleration of private investment is promoted, ”said Alfredo Coutiño, director at Moody’s Analytics.

Peru will be the Latin American economy with the greatest drop in its GDP during 2020 with -13%; and only after this country is Mexico with a perspective of -10%; Argentina follows with -9%.

In terms of tax relief for families and companies, Mexico is the country with the lowest level of proportion to its GDP; with less than 1%, Uruguay follows with a similar level. Argentina and Colombia are between 3%, Brazil above 5%, and Peru is close to 8%, said Jesse Rogers, an economist at Moody’s Analytics, during the virtual seminar Latin American Economic Outlook: Recession and Recovery.

Due to these factors, in addition to the fact that Mexico did not request debt for productive purposes, and thus generate jobs, it is expected that Mexico’s recovery will be slow, gradual and at low growth rates.

“The great cost of not having intervened in the critical moments of the crisis, at least in the case of Mexico, is precisely that the recovery is going to be limited in the medium term,” said Coutiño during his participation in the seminar.

Andrés Manuel López Obrador, president of Mexico, barely mentioned Tuesday in a press conference that it is positive for the Mexican economy not to have requested debt, since the payment of interest would absorb resources that can be used for social programs and for the attention of the pandemic.

“There are advantages and disadvantages in the case of Mexico, the official version says that it is better not to go into debt now because according to past experience, that ends up harming the country and the economy more in the future, which is proven, there is evidence that this has happened in the crises of the past, and that has been the important argument of the current administration, not to go into debt, ”Coutiño commented.

However, the debt in Mexico is growing, it is accelerating for two reasons: the fall in the economy, which is quite deep and has generated a significant drop in public sector income. At the same time, if spending cuts are not made, the deficit widens, and if the deficit widens there is a need to finance, he explained.

Data from the Ministry of Finance and Public Credit refer that the Federal Public Sector Debt Balances, in gross terms, went from 11,427 trillion pesos (bdp) in December 2019, to 12,841 bdp in June 2020.

“When we consider the country’s vulnerability coefficient, that is, when we measure the debt in terms of GDP, as the denominator decreases, that factor increases; What we have seen is that only in the first half of this year, that country’s vulnerability coefficient has increased by more than 10 percentage points of GDP, even with the argument that the country has not taken on internal debt or external debt additional, that is to say that due to the simple inertia of the economy, the debt is accelerating. At least the country vulnerability coefficient B has grown, and will continue to grow, especially when interest rates start to rise later, ”warned the director of Moody’s Analytics.

Source: expansion.mx

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