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For Mexico, Incurring in Debt is Not That Easy: Herrerra

By Gabriela Mastache | Fri, 04/17/2020 - 11:46

Arturo Herrera, Minister of Finance and Public Credit, says the recent downgrades of Mexico’s sovereign rating by S&P and Fitch are something that worries the public administration but that are also understandable. Herrera said that the government needs to wait for the “dust to settle,” and then perform an assessment of the viability of companies to make a more precise evaluation. Herrera also mentioned that for Mexico, it is not as easy as it is for other countries to incur in debt since the country would have to pay a higher interest rate. 

Yesterday, IMF said that Mexico can access the institute’s flexible credit line to compensate part of the income that the country will not receive in 2020 and 2021, said Alejandro Werner, Director of the Department of the Western Hemisphere of IMF. The credit line was renewed in November 2019, and has a two-year window for using it, which means that the country can use it before November 2021. IMF’s flexible credit line for Mexico currently stands at US$61 billion and Werner said that it can be used either to strengthen international reserves or support the federal budget.

Werner also mentioned that governments must support their citizens and businesses in the current crisis, through money transfers, employment subsidies, unemployment insurance, direct support for companies, delays on tax payments and guarantees that support restructuring credits. All done in a context that guarantees medium-term liquidity.

IMF’s recommendations join those of the private sector. Gustavo de Hoyos, President of COPARMEX, has asked the government to contribute to the payment of workers’ salaries. According to de Hoyos, the government would have to contribute to this “salario solidario” (solidary salary) scheme with around MX$97 billion (US$4.05 billion) per month to cover 100 percent of the salary of workers that earn between one and two minimum wages and to cover a percentage of salaries in other ranges.

Meanwhile, CCE has asked businesses to join the great national agreement the organization announced in past days. According to Carlos Salazar, President of CCE, the business class aims to show its “muscle” to reactivate the Mexican economy through a series of measures to boost the national economy, so “everyone has the possibility of recovering their employment and their companies.”

After President López Obrador announced that the cities that are less impacted by the COVID-19 pandemic can start returning to their activities on May 17, Salazar said CCE will start coordinating with the government to plan the recovery.

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