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Back finally from travels, I comment on the Mexican Treasury's fiscal stimulus announced last July 29. It does not alter my dismal outlook. I see four reasons for today's slump: /1
1) investor confidence has been wiped out by 1a) the policy direction; 1b) the president's authoritarian rhetoric (he is irrational, anti-accountability, anti-institutions, in general anti-modern, infusing business leaders with the sense that the country is moving backward), /2
and 1c) non-ratification of USMCA; 2) budget execution has been stalled by the ordinary friction felt every 6 years when a new administration takes power; 3) the extraordinary friction felt this time owing to the inflow of functionaries inexperienced or ill-matched /3
to their job responsibilities and under pressure to wipe out corruption and reverse the policy direction overnight (in a hurry and arrogant, there is a lot of are throwing out of the baby with the bath water); 4) a global manufacturing and trade slowdown. /4
The announced stimulus increases lending to SMEs who have no appetite for risk taking, moves up spending scheduled for next year, and hurries up the execution of budgeted spending stalled since last semester. In announcing the stimulus, the government /5
attributes the slowdown entirely to the external slowdown so, naturally, makes no policy corrections. Without policy corrections, I can't see any awakening of appetites for fixed investment. What can help is for the officials to at last find their checkbooks ... /6
& write some checks. However, I judge that this will take place too late and have insufficient oomph to offset a weakening in the global environment I expect to accelerate, falling oil output, anti-growth policies, and a nonstop barrage of confidence-wrecking /7
presidential rhetoric. 8/8
