By MARK STEVENSON (Associated Press)
MEXICO CITY (AP) — Mexico is nearly sure to elect its first feminine president in June — each main candidates are ladies — but it surely’s nearly equally as sure that she received’t have a lot room to behave independently of outgoing President Andrés Manuel López Obrador.
The populist president has continued proposing new, costly initiatives within the closing months of his administration, earlier than he leaves workplace on Sept. 30. He may even go away numerous big-ticket initiatives unfinished.
That will most likely go away his successor along with her palms tied for a lot of her six-year time period. Even if opposition candidate Xóchitl Gálvez wins, a mountain of monetary commitments will weigh on her. The candidate of López Obrador’s occasion, former Mexico City mayor Claudia Sheinbaum, leads in polls. A 3rd male candidate from a small occasion has nearly no likelihood of successful.
“The next administration will inherit a country with a financial hole that will limit the maneuvering room throughout the next term,” stated Moody’s Analytics Director Alfredo Coutiño. “In order to deactivate the current fiscal vulnerability, the incoming administration will have to adjust fiscally (spending or taxes) in 2025.”
López Obrador has stated that earlier than he steps down, he’ll expropriate U.S.-owned Vulcan Materials, a transfer which might price the Mexican authorities as a lot as $1.9 billion if the Alabama-based quarry firm wins an ongoing worldwide arbitration grievance towards Mexico.
Then there’s a yet-to-be-fleshed-out promise to carry passenger trains again to Mexico earlier than he leaves workplace. On Nov. 20, López Obrador printed a decree stating that if personal freight operators refuse to run passenger service, the federal government would step in to take action.
While the trains must run on tracks run by the personal concessionary operators — Mexico folded its money-losing state-run railroads within the late Nineteen Nineties — the federal government would most likely have to purchase the trains, repair up stations and arrange a ticket-selling scheme.
The money-losing concepts hold coming. On Dec. 26, López Obrador launched a state-owned airline at a time when most nations have determined to close down or unload their very own. With assured ultra-low ticket costs on flights to little-used, government-run airports, the prospects for hemorrhaging money are countless.
To cap all of it off, on Feb. 5 he introduced the federal government would assure staff retirement at full pay.
The plan, as soon as defined, was much less beneficiant than initially depicted. Only staff in official retirement plans would have their pensions topped up, and solely to the extent of the median wage of registered workers to about $10,000 per 12 months. Still, that may most likely price billions of {dollars}.
On that very same day Sheinbaum, who’s working for López Obrador’s Morena occasion and is seen as his most devoted follower, claimed she would perform the president’s applications, and add a couple of of her personal.
“Of course these (López Obrador’s programs) are the foundations, the base of what our government will be, and what’s more we are going to present other proposals,” Sheinbaum stated.
But nearly as quickly as she spoke, proof emerged that she received’t have the monetary energy to take action.
A number of days later, Moody’s ranking service downgraded the debt of the nationwide oil firm, Petroleos Mexicanos, or Pemex, even additional into junk bond standing.
Moody’s based mostly that on “projections of the government’s further deterioration in fiscal conditions in 2024,” as a consequence of “a material increase in the deficit, fueled by social spending, persistently high borrowing costs, and augmented expenditures in flagship projects.”
Consider what the subsequent president will discover on her plate: She must end an oft-delayed, $20 billion oil refinery suffering from price overruns. There’s a equally priced, 950-mile (1,530-kilometer) railway meant to run in a tough loop across the Yucatan peninsula to attach seaside resorts and archaeological websites. López Obrador considers each to be his flagship initiatives, however the practice is way from completed.
Work additionally received’t be accomplished on modernizing different oil refineries, or on a practice service main into Mexico City, or one more practice service crossing from the Pacific to the Gulf of Mexico. A number of different constructing initiatives are nonetheless unfinished as effectively.
López Obrador claimed at first of his administration in 2018 that every one these initiatives can be completed by the point he left workplace, and that every one can be paid for out of presidency cost-cutting and lowering corruption. That turned out to not be true.
“In fact, last year we finished with a budget deficit of 3.4% of GDP, the highest since 1989,” stated Gabriela Siller, the director of study at Nuevo Leon-based Banco Base. “This year they are predicting a deficit of 4.9% of GDP, the highest since 1988, and debt means more borrowing. Their numbers don’t add up.”
The infrastructure initiatives — the planes and trains — are unlikely to ever flip a revenue on the present tempo.
For instance, the primary part of the Maya Train mission on the Yucatan peninsula carried about 1,780 overseas vacationers in its first two months, or about 5 per practice run.
The authentic plan acknowledged vacationers can be the practice’s most profitable supply of revenue, however now officers are suggesting the practice’s income might come from quick commuter runs or freight shipments. The peninsula has little trade and nothing suggests there may be an pressing want for trains to hold shipments of sunscreen.
López Obrador has defended his free spending methods and elevated debt, saying it was lower than the debt his predecessors had piled up.
“We are going to be lower in the percent of borrowing than (Enrique) Peña and (Felipe) Calderon,” the president stated in September.
Mexico’s debt at present is round 50% of its GDP. While that doesn’t sound excessive in comparison with the United Kingdom and United States, who’re each round 100%, Mexico has further debt held by the state-owned oil firm and doesn’t have limitless entry to low-cost borrowing, just like the U.S. does.
Historian Lorenzo Meyer wrote within the newspaper El Universal that López Obrador’s actions weren’t “an attempt to limit his successor’s freedom of action, but rather as a productive investment of the huge political capital he has built up to help the new administration start off.”
The greatest bombshell ever handed by an outgoing president to his successor in Mexico got here on Sept. 1, 1982, when President José López Portillo, who had three months left in workplace, introduced that he was expropriating your complete banking trade amid a foreign money devaluation and debt disaster.
His successor, Miguel de la Madrid, spent his total six-year time period struggling to take care of the fallout and paying the massive debt to financial institution house owners.
López Obrador’s debt mountain, whereas much less dramatic, is “a way of setting the political agenda for the next administration, a way of placing his imprint on the next administration,” stated Siller, the evaluation chief at Banco Base.
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