Economics: A Look Back at Peña Nieto’s Mexico
As one presidential administration draws to a close and another prepares to take the reins of power, President Enrique Peña Nieto’s sixth and final State of the Nation Report to Congress provides a good starting point from which to assess the main achievements and failures of his six-year term and what sort of country he is leaving his successor.
In economic policy, the outgoing administration’s National Development Plan promised to bring about a prosperous country by consolidating economic stability, a point on which it enjoyed its greatest success as the country’s macroeconomic health weathered considerable international tensions. But the plan also offered improved productivity and competitiveness, and a more balanced pattern of regional development.
Economic growth may have improved over levels of the two previous administrations but it fell increasingly short of administration targets, and the upswing in inflation of the past year and a half can be expected to persist in the near future as higher production costs are only now beginning to filter down to consumers, with the regressive effect on family incomes especially pronounced among low income households. And the government is leaving public finances in a vulnerable position.
The importance and timeliness of the structural reforms mark tremendous progress for the country’s development potential and competitiveness. However, some of the reforms have had their shortcomings, with their goals far from realization and leaving behind a number of persistent structural problems still troubling the economy.
With all of this, and against a backdrop of international uncertainty, economic slowdown, rising inflation, higher domestic and international interest rates and exchange-rate volatility resulting from doubts over the outcome of the Nafta process, Mexican public finances are under considerable pressure. Although this does not mean the incoming administration of Andrés Manuel López Obrador will be inheriting a “bankrupt” country, he is assuming responsibility for public finances for which there is no leeway and little room to increase revenues, with a deficient spending structure and rising public debt. He also faces numerous challenges that could become opportunities, but this will depend on cautious, realistic planning and efficient execution.
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