Economics: No one at the wheel as the economy skids
Economic news during April continued to confirm the accelerating weakening trend apparent since last year and also offered some very initial indications of how the Covid-19 epidemic will increasingly squeeze the economy. For starters, the March report from Antad showed the country’s retailers experienced a sharp drop in the sales even though some department stores and shopping centers only began to close their doors late in the month. Meanwhile, consumer confidence headed further south that same month, including a particularly pronounced deepening of pessimism as to Mexico’s economic prospects for the next 12 months. And Banco de México’s monetary policy board moved up its review to April 21 to implement a half-point rate cut while warning that the COVID-19 pandemic will lead to a significant contraction of GDP.
Meanwhile, it has become increasingly obvious that the federal government is still wed to a totally ineffective economic emergency program as it further doubles down on the same formula of recklessly crippling government austerity and shuffling of bureaucratic ministerial departments as the ship of state takes on water. In addition to the multiple legal problems that such strategies could entail, much of the remainder of President Andres Manuel Lopez Obrador's 11-point program is largely fictitious.
Moreover, the president is impervious to any alternative suggestions for mitigating the broad impact of a global economic recession and the Covid-19 pandemic, especially if it comes from anyone remotely associated with the private sector and his political detractors. He even denounced the Mexican Business Council’s own program with IDB-Invest to create reverse factoring lines of credit for major businesses to help support the operations of small and medium-sized businesses in their value chains, which he somehow concluded would add to the public debt.
Hence, it should come as no surprise that AMLO’s handling of public finance is not inspiring any optimism as evidenced by continued cuts to Pemex bond ratings and warnings from major agencies that Mexico's sovereign debt is on the cusp of an increasingly swamped junk bond market.
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