How will Mexico overcome a mild recession?

Debating whether Mexico succumbed to a mild recession or economic stagnation in 2019 is useless

How will Mexico overcome a mild recession?
Obtaining 0% growth rates, after usually obtaining 2%, is the result of government decisions - Photo: Edgard Garrido/REUTERS
English 03/12/2019 09:25 Mexico City Editorial Actualizada 09:25

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One of the most important challenges the federal government faced in 2019, and that will prevail in 2020, is to overcome a poor economic dynamism. The fall or rise of the Presidential approval rates will be proportionate to the results obtained in regards to the economy, as well as the results obtained in regards to security.

In regards to the economy, debating whether Mexico succumbed to a mild recession or economic stagnation in 2019 is useless. Obtaining 0% growth rates, after usually obtaining 2%, is the result of government decisions, or the lack of these.

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Experts have said that one of the main factors that encourage investment, trust, has been damaged. The government's discourse, which used to criticize the business industry, delayed the assignation of resources to new investments. That seemed to change last week when business leaders and the federal government unveiled the National Agreement for Investment in the Private Sector Infrastructure. They announced investments worth over MXN $800,000 million in the following years. Perhaps the economy would have had a different performance if those numbers had been announced six months ago, several projects would have been launched, and time was wasted on a hostile discourse.

Nevertheless, it should be acknowledged that this administration has promoted the recovery of the purchasing power of the minimum wage. During previous governments, politicians argued that it was impossible to increase minimum wages above inflation as it would have negative effects. Almost a year after the minimum went from MXN $88 to $102 per day, inflation is under control.

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On Sunday, the President acknowledged that Mexico hasn't reached the expected growth rates but there is a better “wealth distribution” now; López Obrador also said that resources are now directly allocated to the beneficiaries and not through intermediaries.

What should be worrying is the case in which the economy doesn't improve. If the government doesn't obtain resources as a result of a low tax collection, welfare programs would have to be canceled, reduced, or lead to debt.

Well-being will only be achieved if it is accompanied by economic growth. The road ahead is not clear but the government has that opportunity in its hands.

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