Image credits: SHCP
News Article

A Health and Economic Crisis, But Not a Financial Crisis: SHCP

By Gabriela Mastache | Thu, 05/14/2020 - 13:06

After weeks of silence and in the midst of the most contagious stage of the COVID-19 pandemic in Mexico, the Ministry of Finance and Public Credit (SHCP), Arturo Herrera, has given an interview to the newspaper El Economista where he assures that during the stage of economic reactivation, the presence of the SHCP “will be felt more.”

According to Herrera, the country is about to start the normalization period and the role of the SHCP is to spend money where it is most needed. “It will depend a lot on the speed with which we can enforce public expense where it will have the most impact,” said Herrera. He mentioned that the Santa Lucia Airport is one of those projects that in the short-term can have a positive impact since it can hire an important number of workers for construction and make “important purchases in terms of materials and inputs.”

For Herrera, the current economic crisis the world is living is not yet a financial crisis. “In Mexico and in the world, there is a health crisis and an economic crisis, but we are not in a financial crisis. It is very important to prevent this from happening. The challenge is to avoid the liquidity crisis from becoming a solvency crisis. Every big crisis has been a solvency crisis.”

Herrera also mentioned that unlike other countries that have opted to implement a series of fiscal measures, in the case of Mexico there is still room to maneuver with the country’s monetary policy. “A natural limit for the monetary policy is when the rate reaches 0 percent. In Mexico it is 6 percent, in Canada is at 0.25 percent, in England is in 1 percent and in Japan is 0 percent. I do not want to simplify the discussion but we are in another situation.”

You can read the rest of the interview here

Though the announcement of the plan for opening up the economy was received as overall good news and implied a breath of fresh air for many businesses, experts believe that a mere calendar for opening the economy falls short of what the economy needs and that an economic reactivation plan is needed. According to José Luis de la Cruz, Director General of the Institute for Industrial Development and Economic Growth, the government needs to present something more tangible than just a calendar for gradually opening the economy. “It looks like the government still does not consider appropriate to present strategies that involve development banks, fiscal stimulus or regulation that allows to provide support for companies.”

However, Rodolfo de la Torre, member of the Center of Studies Espinosa Yglesias, says that the fact that the country lost 555,000 formal jobs in April generated pressure on the government, which led them to present an “improvised” strategy. Moreover, de la Torre says that the economic recovery will not come in the V-shape that the government is hoping for. “Planning a quick reboot of the activity is far from the reality, specially since there are no resources for people and businesses to resist and return to their jobs.”


The data used in this article was sourced from:  
El Economista
Photo by:   SHCP
Gabriela Mastache Gabriela Mastache Senior Journalist and Industry Analyst