However, we can be optimistic about the evolution of public investment, since the Federation Expenditure Budget Project (PPEF) 2022 proposes to allocate 3.1% of GDP in 2022 to investment, which represents 18% more than in the PEF 2021.
Why mention the Evergrande case?
We must be optimistic but cautious with both public and private investment projects and what better lesson than what is happening in international financial markets. The situation is not simple, we are talking about the most indebted real estate company in the world, any simile with the oil company the world’s most indebted is mere coincidence.
To this must be added the Chinese economic model called a socialist market economy and the predominant role of the government in all activities in this country, which has indirectly caused large infrastructure developers to acquire high percentages of unprofitable debt, but which is believed that have an implicit guarantee from the government of China, a situation that today has the markets sleepless.
The implications of Evergrande’s failure to pay the debt coupon that expires this week has the potential to become a systemic event affecting financial markets around the world, increasing volatility and creating a liquidity crisis amid the pandemic. In addition to reducing growth expectations in China, a situation that would cause a lower demand for goods and services that would further complicate the economic recovery.
The other option is for the Chinese government to restructure or assume the real estate debt and pay its creditors, reducing nervousness in the markets, but sending the signal that the Chinese government will rescue companies that despite not being profitable , due to their size, are a systemic risk.
Returning to the issue of investment in Mexico, the country needs more investment, but profitable and quality investment that allows Mexicans to have better living conditions and that allows us to develop. For this reason, our leaders must be cautious to which public investment projects they allocate the budget 2022 and what implications would they have for public finances if they are not profitable and the government has to assume its liabilities.