Almost all major economic growth drivers have stalled or are in retreat, particularly investment, and to a lesser extent both public and private consumption, while economic expectations continue to slip lower. So far the government’s efforts to reassure all stakeholders have proven, at best, poorly conceived and off target while the governing camp further undermines trust with its wholesale rejection of public-private partnerships, insistence on pursuing dubious investment projects, and penchant for walking away from existing contractual commitments while trying to lure private capital with new arrangements with new contracts of questionable profitability.
The general sense of distrust and frustration, reflected in last Tuesday’s resignation of AMLO’s finance minister, has long been mirrored in months of steadily lowered GDP growth estimates.
A mostly shell-shocked private sector continues to go through the motions of signing onto commitments to deliver massive levels of private investment even as such expenditures have stalled, while public investment has contracted a real 11% as the new presidential administration’s learning curve is looking more like an exercise in simple incompetence.
Exports, especially non-petroleum ones, have been the only bright spot, but the prospect of a looming US slowdown and the White House's continuing to regularly impose additional tariffs do not bode well for Mexico’s export performance going forward. Nor can we expect the government to come up with much to correct the perception of deteriorating fiscal health that has sent debt ratings lower and borrowing costs climbing. No relief can be expected from the installment of a new finance minister, as Herrera’s proposals to date have been little more than boilerplate proposals that have failed to deliver results throughout past fiscal reforms, and new ones that face major structural hurdles or offer only the faintest of cosmetic changes. Some may prove beneficial in some dimensions, but can’t be expected to revive the economy in the short and medium terms.
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