AMLO’s austerity plan could save up to MXN$132 billion

As wages for high government officials will be cut to half and benefits for members of Mexico’s public administration will be reduced, it is estimated that 2019’s economic package will generate savings of up to 132 billion pesos , which represents an 11% of the chapter 1000 for personal services from the Expenditure Budget of the Nation (PEF) .

According to the Savings and Budget Reallocation Plan developed by the financial management team of the president-elect Andrés Manuel López Obrador (AMLO) , the austerity measure will only be applicable for the president himself, as well as high officials making more than a million pesos a year.

The measures will cover nine echelons from levels G to O , which includes secretaries of State, undersecretaries, major officials, heads of unit, general directors, deputies, and department heads . Liaison and operation staff will not be included.

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This will be the third adjustment to be applied in Mexico’s public administration in terms of wages. The first was implemented by Vicente Fox , who issued an act to reduce salary payments for public servers of mid and high level positions, a policy that the following president, Felipe Calderón , maintained through his six-year administration.

During Enrique Peña Nieto ’s term, one of the first measures implemented by the former secretary of treasury, Luis Videgaray , was to compensate public officials’ reduced wages at mid and high level positions in order to “compensate” inflationary fluctuations.

A recent financial diagnose showed that there was a staff of 1,766,191 public servers , representing an annual expense of 740,043 million pesos and 64% of the personal services chapter for the PEF .

The proposal to cut high government officials’ wages in half will be implemented gradually and proportionally, meaning that cuts will be moderate for public servers of mid-level positions while officials making more than 220,000 pesos a month will be subject to higher cuts. The latter encompasses the President, state secretaries, deputies, senators, judges, and ministers from the Supreme Court of Justice . During the next administration, no one will be paid more than 110,000 pesos a month .

The president-elect’s financial management stated that these high wages were originally given to high government officials so that they would become incorruptible and efficient, which has clearly not worked out.

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According to the project, through the reduction of wages, the government will save around 70,360 million pesos . Should they perform an adequate management of payroll services, they could save another 7,619 million , and private insurance cuts could save another 8,970 million .

Furthermore elimination of private insurance for major medical expenses for the government’s mid and high level officials could save up to 4,322 million pesos .

All 19 Ministries of State would be operating with 30% of their current high-level officials , which means that payrolls for a total of 6,244 public servers would be cut down to 827 . There will be no more private secretaries or assistants.

Without giving further detail, certain positions and non-fundamental administrative tasks will disappear. Public servers in charge of security and law enforcement will be the only ones allowed to have guards and convoys.

The proposal to incorporate the Presidential Guard (EMP) into the Ministry of National Defense (SEDENA) , would represent savings of 13,878 million pesos .

Overall, the austerity measures could save the government 132 billion pesos.

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