Among those looking beyond the day’s numbers and official propaganda, concerns are growing that the Mexican economy faces a series of negative signals that threaten to undermine its stability in the medium term. Two great challenges emerge in the foreground of such a disastrous scenario: the growing deficit in the current account and greater pressures on public finances.
Allow me to specify: the deficit in the current account of the balance of payments (Mexico’s economic transactions with the rest of the world) experienced a disturbing increase of 14,282 million dollars, 16 percent more compared to the same period in 2022, which which emerges from the most recent report of the Bank of Mexico itself (Banxico).
The data, which was above the market estimate of 10.4 billion dollars, resulted from the rise in the primary income deficit, which stood at 19.954 billion dollars, mainly because payments to the rest of the world increased. In other words: capitals are leaving the country.
Add to this that the country’s public finances face greater pressures due to the increase in debt service (interest payments due to higher rates) and the maturities of the obligations of Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE). ).
Figures from the Ministry of Finance show that interest payments on public debt (financial cost) in the first quarter amounted to 258,300 million pesosthat is, 46.3 percent more compared to the same period of 2022 and 14,100 million above what was expected by the market.
According to the firm Janus Henderson, the financial cost of interest on the national debt was 818,000 million pesos in 2022, an increase of 20 percent compared to 2021, but the asset manager anticipates that in 2023 it will rise to 25 percent. In other words, this year Mexico would pay one trillion (one million million) pesos of pure debt interest.
In turn, the Center for Economic and Budgetary Research (CIEP) reveals that Pemex and the CFE have debt maturities equivalent to 3.5 and 2.2 times the available budget, so –given the reduced fiscal space of the country– it is very possible that refinancing of credits will be resorted to. And this would mean extending the term and interest payments, that is, a greater burden on the future cost of the debt. As they say, they are going to “kick the boat” for later, and let the “bomb” explode on others.
In the 2023 Federation Expenditure Budget (PEF) 148,086 million pesos were approved to Pemex for the financial cost of its debt, of which the oil company in charge of Octavio Romero exercised 54,580 million in the first quarter; this is that in just three months 37 percent of the total was spent, and 329,131 million will expire (3.5 times the budget available for that purpose).
The CFE led by Manuel Bartlett is not far behind, since in the PEF it was granted 35.841 million pesos and in January-March it exercised 24.899 million, that is, 64 percent, but it still has 23.960 million left to liquidate (2.2 times the budget available).
Whoever wants to see, let him see.
Inflation is “deflated”, the exchange rate continues to account for the strength (bubble) of the “super peso”, unemployment is at a minimum and there are no imminent signs of recession in the country. In this scenario, it is easy to believe that the economy is doing wonderfully like rarely, but a simple look at the fundamentals allows us to realize that this calm on the surface is just an opportunity to prepare for the storm that will come, yes or yes. , sooner or later.
The downside is that everyone will want to “prevent” (correct) when it is too late.
Editor’s Note: This text belongs to our Opinion section and reflects only the author’s vision, not necessarily the High Level point of view.
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William Beard Master in Economics from the Austrian School; liberal, gold market specialist and editor of investment newsletter Top Money Report