Christmas Bonus Cut for Gov Workers, Mexican Outlook StableBy Peter Appleby | Thu, 11/12/2020 - 16:52
Austerity will not be getting a break for Christmas, AMLO reported, as government officials are asked to accept a cut on their aguinaldo bonus. Meanwhile, Mexico is an ideal location for startups to prosper, says Antoni Lelo de Larrea Venture Partners (ALLVP). Finally, Fitch Ratings gives the thumbs up for Mexico to remain at BBB- rating.
All this and more in The Week in Finance.
The National Official Gazette announced that high-ranking government officials, including President Andrés Manuel López Obrador, will have their aguinaldo (Christmas bonus) slashed by 50 percent this year. The move is in line with MORENA’s austere approach to national finances, which has accelerated with the arrival of COVID-19. The savings will go towards relieving the impact from the pandemic, said the president.
“Those in high ranks will receive less but they will have their bonus. The cut is voluntary and resources will be used for the fund that is being created for the COVID-19 situation,” said Andrés Obrador on the decision. Some government workers received their aguinaldo on Nov. 4 to give them a helping hand following the economic difficulty caused by COVID-19.
In an interview with MBN this week, ALLVP said that Mexico is a brilliant location for fintech startups as the amount of talent in Mexico is enormous while the quality of life is also attractive for foreign workers. The recent success automotive sale and purchase platform Kavak, which became Mexico’s first unicorn investment, points to Mexico’s growing strength as a regional player. “Talking to different funds, I have noticed an unjustified perception that only Brazil was big enough to make a unicorn. Cases like Kavak and Rappi deny this false perception. Kavak demonstrates that unicorns can be born in this region. These projects create jobs and value. Many people look at Kavak and start believing that they too can do it,” de Larrea said.
Equality between men and women in the way they were approached by investment funds was also a topic of discussion.
Credit rating agency Fitch Ratings reaffirmed Mexico’s long-term foreign currency issuer default rating (IDR) at “BBB-“ with a “stable” outlook this week.
The agency said “Mexico’s rating is supported by a consistent macroeconomic policy framework, relatively stable and robust external finances and government debt/GDP projected to stabilize at levels in line with the 'BBB' median.” However, it “is constrained by relatively weak governance and muted long-term growth performance.”
The company noted that Mexico had outperformed tax revenue expectations and that it “will record one of the lowest 2020 fiscal deficits in the 'BBB' category.”
Though economic recovery had been positive in 3Q20, output remains 9 percent below its pre-pandemic level. This could remain the case until mid-2024, Fitch warned. Remittances, which earlier in the year reached record levels, have helped the recovery thus far, said the report. Minister of Finance Arturo Herrera took to Twitter to post the government’s response to the rating, which pointed out Fitch’s positive review of the government’s macroeconomic policy and the country’s stable level of debt.