Mexico to Receive World Bank Loan; Young People’s Outlook Sours

The US$1 billion loan that Mexico is set to receive from the World Bank will be used to “boost financial inclusion efforts, particularly for young people between 15 and 17,” the Deputy Minister of Finance Gabriel Yorio told El Economista. It will not be used for emergency services related to the pandemic, Yorio insisted.

Mexico’s loan is a Development Policy Lending loan that, according to the World Bank, which “aims to help a borrower achieve sustainable reductions in poverty through a program of policy and institutional actions that promote growth, enhance the well-being and increase the incomes of poor people.”

Though at odds with President Andrés Manuel López Obrador’s austerity policy and promise not to burden the country with more debt, measures are necessary to protect one of Mexico’s largest population groups against the severe consequences of the 8.16 percent GDP contraction predicted by Banxico on June 1.

Mexicans aged between 15 and 19 represent 4.5 percent of the country’s population, according to INEGI. This age group is the third-largest in the country behind the second-placed five to nine age group (4.7 percent) and the largest group, children aged between 10 and 14, which represent 4.8 percent of the population.

Despite insistence from Minister of Finance and Public Credit Arturo Herrera that Mexico’s recovery will be rapid and tick-shaped, signs from the private sector are not so optimistic. Private financial group Citibanamex has declared the risk against Mexico’s credit rating, which currently stands at BBB- with a stable outlook from Fitch, BBB with a negative outlook from S&P and A3 with a negative outlook from Moody’s. 

President Andrés Manuel López Obrador predicts that COVID-19 will cost Mexico 1 million jobs. Yet, experts have pointed out that it is not only the jobs being lost that generate problems for Mexico, but the lack of jobs that will be created because of the crisis. This is particularly apparent for Mexico’s young population.

General Director of the Institute for Industrial Development and Economic Growth José Luis da la Cruz recently told El Economista that "these unemployment figures and loss of employment reflected by IMSS must not only be read for what is being lost, but also for the million jobs that are not being generated and that are required for young people that start looking for a job.”

The loan appears also at odds with the austerity policy the MORENA government has used to justify not giving financial support to Mexico’s 4.1 million MSMEs, which employ some 18 million Mexicans. Indeed, Deputy Minister Yorio’s has stated that there was “no condition or compromise” for the government as a result of the WB loan, which is the first loan of its kind in the López Obrador administration. But without government support for the generators of employment in Mexico, SMEs among them, the WB loan could be a drop in the ocean for the coming needs of Mexico’s young people.