Government departments in Mexico to face significant cuts, as 2017 budget sets out fresh austerity plans

By on 09/09/2016
José Antonio Meade (pictured) was appointed Minister of Finance earlier this week after his predecessor Luis Videgaray resigned.

Government departments in Mexico are to face significant budget and workforce reductions, as the country’s new finance minister has pledged a return to a primary surplus for the first time since 2008.

Presenting his 2017 budget to MPs yesterday, José Antonio Meade, announced spending cuts of of 239.7 billion pesos ($12.83 billion), or 1.2% of gross domestic product, targeting a primary surplus of 0.4 % of (GDP) in 2017.

Meade, who only took up the post on Wednesday following the sudden resignation of his predecessor, said spending cuts would come from cuts in government personnel, and from reducing government operating costs by about a fifth, according to a report by the Financial Times newspaper.

He also said that the cuts would be spread across ministries, according to Reuters news agency.

A hefty chunk of the cuts — about 100bn pesos ($5.36 billion) — will fall on state oil company Pemex, which is already facing a funding squeeze and has racked up losses worth several billion dollars over many years.

Since the government ended its oil and gas monopoly nearly three years ago, Pemex has faced tough competition from the private sector and already cut its 2016 budget by about $5.4 billion or 20% because of low oil prices.

“Pemex is making the biggest contribution to the cuts,” Meade said, presenting the budget proposal to Congress, Reuters reports.

The plans also include reductions in payments and transfers to state and municipal governments, as well as several tax simplification measures, especially for small companies, according to Dow Jones Newswires.

It also maintains social programmes designed to reduce poverty.

“No one who today benefits from some program included in the budget will cease to receive the benefit,” Meade said, according to Dow Jones Newswires, which also reports that that the government will give priority to strategic investments and seek to take advantage of public-private partnerships to support levels of investment.

Mead had just over a day to digest the budget package before presenting it to Congress, after Luis Videgaray resigned amid a public uproar over last week’s visit by US Republican presidential candidate Donald Trump.

The visit was seen as a disaster for Mexico’s president Peña Nieto, who was seen as failing to stand up to Trump.

Nieto failed to declare publicly that Mexico would not pay for a wall Trump wants to build between the two countries, and was widely criticised for treating him like a visiting head of state, despite his previous comments in which he described some Mexicans living in America as “criminals, drug dealers and rapists”

Nieto’s approval ratings went down sharply after the visit, with one poll showing that 85% of Mexicans thought the Trump visit was a bad idea.

Videgaray’s resignation came as a blow to the president.

Videgaray, a former investment banker, was widely regarded as the brains behind the Mexican president and the driving force behind a series of high-profile overhauls in the past few years, including opening Mexico’s closed oil industry to private investment for the first time since 1938.

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About Winnie Agbonlahor

Winnie is news editor of Global Government Forum. She previously reported for Civil Service World - the trade magazine for senior UK government officials. Originally from Germany, Winnie first came to the UK in 2006 to study a BA in Journalism & Russian at the University of Sheffield. She is bilingual in English and German, and, after spending an academic year abroad in Russia and reporting for the Moscow Times, Winnie also speaks Russian fluently.

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