So the IMF things the magic number will be 0.9%, Citibanks things 1.4%, and HSBC 1.5%. Who is right? really not important, what is important is that growth is substantially lower than the 3% that AMLO was hoping to achieve in 2019 and 2020. But this almost irrelevant
There are three issues here (1) Domestic generated growth, (2) foreign investor generated growth via investments and (3) US import driven growth. AMLO has the ability to influence the first two; needless to say that over the past 12 months AMLO has made sure that foreign investors feel "unwelcomed", mainly because of his decision on "reforming" Mexico's energy sector -- the first is the shutting down of all new energy project. Now for most builders a solar and wind farms the use of PPA -- where the government (via CFE) buys all the power is the easiest and cheapest; using a combination of export credit agency funding and private equity finding CFE has the ability to acquire energy. It's simple and it relies entirely on the credit of the state-owned power company. Moreover, export credit agency borrowing is a source of financing that the government of Mexico could not otherwise access. Nevertheless, the government has decided to do something else...we don't know what yet but eventually. The government has also decided to go to 'war" with the three companies that have spent nearly US$ 5 billion in building pipelines for natural gas. They are almost certain to lose since the type of contract they are contesting is typical for these types of projects.
So AMLO has successfully antagonized the foreign business community, then made them think that they are even more ignorant in building Dos Bocas and canceling Mexico City's new airport. Demonstrating its desire to ignore expert opinion. It is AMLOs right to do as he pleases.
AMLOs biggest decision is not to increase the government's borrowing, therefore, th4 only way he can meet his 4T (4th transformation) is to cut expenditure on "old" programs. So far, Mexico has reduced expenses by nearly 30% -- cutting services and salaries, however, 100% of government spending is spent -- little is saved therefore the lower government spendings result directly in a contraction in GDP (Mexico's government expenses account for only 25% of GDP) nevertheless this has a negative impact on GDP growth.
The third impact on Mexico's GDP is what's happening in the North. -- the USA! There things are getting weird. Some days the press is saying everything is great, the next stats come out and the indicators are that the US economy is slowing down. Again the indicators are on and off as to the state of the economy, the "bad news" has not been priced in. Still for AMLO, the great risk is that US demands falter. AMLO doesn't believe the IMF's 0.9% GDP growth forecast -- first, because there is no consequence to him saying such a thing, and secondly because fundamentally he doesn't care.
That is the overall issue for AMLO is all about power and politics, the rest is irrelevant
There are three issues here (1) Domestic generated growth, (2) foreign investor generated growth via investments and (3) US import driven growth. AMLO has the ability to influence the first two; needless to say that over the past 12 months AMLO has made sure that foreign investors feel "unwelcomed", mainly because of his decision on "reforming" Mexico's energy sector -- the first is the shutting down of all new energy project. Now for most builders a solar and wind farms the use of PPA -- where the government (via CFE) buys all the power is the easiest and cheapest; using a combination of export credit agency funding and private equity finding CFE has the ability to acquire energy. It's simple and it relies entirely on the credit of the state-owned power company. Moreover, export credit agency borrowing is a source of financing that the government of Mexico could not otherwise access. Nevertheless, the government has decided to do something else...we don't know what yet but eventually. The government has also decided to go to 'war" with the three companies that have spent nearly US$ 5 billion in building pipelines for natural gas. They are almost certain to lose since the type of contract they are contesting is typical for these types of projects.
So AMLO has successfully antagonized the foreign business community, then made them think that they are even more ignorant in building Dos Bocas and canceling Mexico City's new airport. Demonstrating its desire to ignore expert opinion. It is AMLOs right to do as he pleases.
AMLOs biggest decision is not to increase the government's borrowing, therefore, th4 only way he can meet his 4T (4th transformation) is to cut expenditure on "old" programs. So far, Mexico has reduced expenses by nearly 30% -- cutting services and salaries, however, 100% of government spending is spent -- little is saved therefore the lower government spendings result directly in a contraction in GDP (Mexico's government expenses account for only 25% of GDP) nevertheless this has a negative impact on GDP growth.
The third impact on Mexico's GDP is what's happening in the North. -- the USA! There things are getting weird. Some days the press is saying everything is great, the next stats come out and the indicators are that the US economy is slowing down. Again the indicators are on and off as to the state of the economy, the "bad news" has not been priced in. Still for AMLO, the great risk is that US demands falter. AMLO doesn't believe the IMF's 0.9% GDP growth forecast -- first, because there is no consequence to him saying such a thing, and secondly because fundamentally he doesn't care.
That is the overall issue for AMLO is all about power and politics, the rest is irrelevant
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