UPDATE 1-Mexican President to Unorthodox Coronavirus Plan to Help Economy, Poor

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(Adds comment from a former government official)

By Drazen Jorgic and Dave Graham

MEXICO, April 5 (Reuters) – President of Mexico Andres Manuel Lopez Obrador will present measures on Sunday to lessen the economic impact of the coronavirus epidemic by focusing on protecting the poor, but will likely resist calls to borrow massively for a giant package stimulant.

Governments around the world have released unprecedented spending pledges to minimize the damage to their economies from the fallout from the coronavirus, including a $ 2 trillion package from Mexico’s largest trading partner, the United States.

Lopez Obrador, a leftist, has shown little appetite to follow in the footsteps of Mexico’s neighbor and pledged to come up with an “unorthodox” plan. On Saturday, he said he would try to do “everything possible” to keep Mexico from going into debt.

The socialist leader has made it clear that he will focus all economic measures on protecting the poor rather than big business from an upcoming recession, with some analysts predicting that the economy could contract by as much as 10%.

Lopez Obrador, known by his initials “AMLO”, plans to draw about $ 10 billion from various funds for rainy days and this week the Department of Finance said that “buffers” for the economy included about 6, $ 6 billion available in budget in late 2019. Income stabilization fund.

“AMLO does not understand the depth of the economic crisis that this can cause for a country like Mexico,” said Viri Rios, Mexican political analyst.

“The mechanisms that AMLO is considering will be totally insufficient to deal with this type of recession.”

Before his speech to the nation on Sunday, Lopez Obrador faced mounting opposition criticism for failing to act quickly enough with relief measures amid growing calls for higher spending.

The Mexican PRI opposition party has criticized Lopez Obrador for intending to draw $ 10 billion from various funds and trusts, saying it “endangers” pension funds that have workers’ resources as well as money that ensures the stability of national finances.

Former Lopez Obrador finance minister Carlos Urzua called Mexico earlier this week to run a larger deficit, saying it was “obvious” that national governments would have to increase public deficits significantly during this crisis.

On Friday, a group of respected economists, seasoned policy makers and politicians wrote an open letter to Lopez Obrador calling on his government to act quickly, warning that without unprecedented action there could be “economic depression and deepening of the poverty that we have not seen in Mexico in several decades. “

Francisco Suarez, a former deputy finance minister who signed the letter, told Reuters that the measures the government has proposed so far seem “extremely lukewarm” in a global comparison given the scale of the economic crisis nascent.

He urged Lopez Obrador to develop a more ambitious plan, ease spending and build a national consensus on how to proceed, if only for the good of his administration, which the president dubbed the “Fourth Transformation” from Mexico.

“If it does not make these corrections, the coronavirus will eventually bury the” Fourth Transformation “,” he said.

The latest forecasts from the Mexican government predict that the economy could contract by 3.9% in 2020, although analysts say the figure understates the severity of the next recession. The government forecasts a budget deficit of 0.4%. (Writing by Drazen Jorgic; Edition by Diane Craft and Daniel Wallis)

Our standards:Principles of the Thomson Reuters Trust.

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