Peña Nieto will leave an ominous financial legacy for AMLO

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On December 1 , Mexico’s president-elect Andrés Manuel López Obrador will receive an economy that has been characterized by ups and downs from President Enrique Peña Nieto’s administration . Although there wasn’t a full blown crisis as was the case during other presidential periods under the control of PRI , the current government didn’t exactly leave a buoyant scenario for the country in terms of economy.

President Enrique Peña Nieto’s administration has focused on consolidating public finances in order to reach a fiscal surplus. During the first half of 2018 , this surplus was of barely 0.8% of Mexico’s GDP ; however, the national debt reached a 45.4% growth rate with regard to the GDP.

“The room for manoeuvre in terms of public finances left for López Obrador’s new government will be limited, to say the least, because throughout the present administration, the national debt has shown a steady growth. Although the Ministry of Finance has kept its participation to a minimum, financial costs are still elevated and the overall financial situation is not optimal,” commented James Salazar, an economic analyst from the CI Bank .

“By contrast, in terms of inflation, the Bank of Mexico has done a good job working alongside the government during this six-year period,” stated the specialist.

“Inflation levels have been at a historic low compared to previous administrations. Economic growth was the highest in ten years at the end of 2017 (7.44% at an annual rate) , although 2015 showed the lowest growth rate in years , with 1.66% at the end of December .”

AMLO will inherit almost MXN$10 trillion worth of debt

In recent years, inflation has shown an upward trend , rising to 4.85% in the first half of July ; however, specialists predict that it might decrease to 4.3% at the end of the year, approaching the goal level of 3% (with a 1% tolerance) , which is why overall inflation levels during the present administration have remained relatively stable.

Overall economic growth, however, fell short. Peña Nieto’s administration had promised an average 4-4.5% growth rate after the implementation of Mexico’s structural reforms , but in reality, it remained at a 2.4% rate during the six-year term.

On the international stage, in spite of uncertainty surrounding NAFTA renegotiations , the expert considered that the administration had maintained a focus on foreign affairs. Mexico upheld its strategy for market diversification, signing the new Trans-Pacific Partnership which excludes the United States , among other measures and trade deals with Latin American countries . This policy has contributed to building more dynamic exports, with an 11% growth rate during the first half of the present year.

As for the exchange rate , there was a period of high volatility. The most important central banks, including the U.S. Federal Reserve , began to reduce monetary stimuli, which made the U.S. dollar stronger, leading to higher interest rates.

Job generation

was the most important banner of Peña Nieto’s administration. During this six-year period, 3.6 million people adhered to the formal employment market , and although the formal market displayed a considerable growth, informality is still at a very high level. According to the National Institute of Statistics and Geography (INEGI) , 56.9% of the economically active segment of the population belongs to this sector, which represents 30 million workers with low wages and no employment benefits.