The cancellation of the work of the New International Airport of Mexico City (NAIM) in 2018 was one of the most controversial decisions of the current administration, and its economic repercussions were long-term, to date the Mexican economy suffers from them.
Gross fixed investment is one of the main determinants of economic growth over a broad horizon, since it is an indicator of the confidence of capital in the economy. Growth in fixed investment keeps other indicators constant such as increases in productivity and wages. In this sense, fixed investment is determined by sales, costs, the interest rate and economic expectations.
In Mexico, the low fixed investment is a burden, in fact it has not recovered from the collapse registered since the beginning of the six-year term, the decision to cancel the NAIM has been and was decisive for the fall in investment. In fact, it meant a sign of distrust of capital towards Mexico, and it remains.
The numbers say it all
According to figures from Banco Base, the indicator of gross fixed investment (GFI) of Mexico, shows an average growth of 0.29 percent per month and 5.69 percent per year as of July 2022, with which it managed to be above its previous level. pandemic (February 2020) during March, April, May and June 2022. However, in July a drop of 1.40% was observed, so it was once again below the pre-pandemic level.
The Bank’s analysis mentions that the deterioration of investment began before the pandemic. According to seasonally adjusted figures, the Gross Fixed Investment indicator registered its highest level in recent years (111.88 points) during July 2018. It is evident that the start of the fall in investment coincides with the victory of the current Government of Mexico in the federal elections of 2018, in which the Morena party and its allies obtained the Presidency of the Republic and the majority in the Congress of the Union.
Once with the victory and already started the administration, the Government had the facility to implement unconventional economic policies, which in the view of the private sector were detrimental to the institutional framework of the Mexican economy. In this context, the first of these policies, one of the most controversial or perhaps the most controversial, was the cancellation of the construction of the New Mexico City Airport.
Thus, as of July 2022, Gross Fixed Investment is 13.56 percent below the maximum of July 2018 and it is at levels that were reached for the first time in November 2007, exposes the Banco Base. In other words, investment in Mexico is at its lowest level in 15 years.
As for the components that make up fixed investment, the one with the greatest lag compared to its maximum registered is construction, with a decrease of 26.18 percent, with levels first observed in September 1998.
inside, non-residential investment shows a contraction of 34.28 percent and residential of 22.99 percent. For its part, investment in machinery and equipment shows a lag of 4.56 percent with respect to its maximum, with the deterioration being concentrated in investment in national transportation equipment with less than 30.92 percent, as well as imported equipment with 31.27 percent.
Without investment there is no growth
The analysis of the banking institution indicates that the current levels of investment are worrying, since they determine long-term economic growth. Without investment, there is no way to grow steadily at high ratesalthough the external sector drives the economy, because it has an installed capacity that limits production.
If we measure it by GDP, fixed investment has fallen relative to the size of the economy. Thus, at the end of the second quarter of 2022, gross fixed capital formation as a percentage of GDP was 18.7 percent, a rate that is below the 18.9 percent observed in the last quarter of 2019, that is, before the pandemic.
But what stands out the most is that this indicator is well below the maximum historical level reached in the second quarter of 1994., when fixed investment represented 23.4 percent of GDP. In 2008, investment once again approached levels of 23.0 percent of GDP, but since then a clear downward trend has begun, which has taken it to current levels of between 18 and 19 percent.
Fixed investment has a significant component of private capital; In this sense, it is a fact that the slow recovery of investment is mainly due to companies, because they have slowed down their investments due to uncertainty, highlighting factors such as insecurity, changes in economic policy and recently due to the limited production of electrical energy. In the same sense, Banco Base considers that gross fixed investment will grow 4.94 percent in 2022 and 2.27 percent in 2023.
Thus, the fall in fixed investment, especially in the private sector, is an indicator that will mark the economic management of the current government; The cancellation of the NAIM has affected this indicator and there are no conditions for it to recover in the coming years to the levels prior to the most controversial economic decision in years.
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