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News Article

Concerns Over Projects Mirror Concerns Over Spending

By Pedro Alcalá | Tue, 04/28/2020 - 17:44

By now, the message has been heard loud and clear: there are a number of individuals, groups, organizations and relevant stakeholders that are not okay with the continuing prioritization of this administration’s flagship infrastructure projects. These include the Mayan Train, the Dos Bocas refinery, the Santa Lucia Airport and the Transisthmic Corridor. These kinds of reactions predate the current COVID-19 and oil barrel price crises, but they have certainly intensified and originated from a wider variety of sources since the pandemic-derived shutdowns began, as has been reported previously. These complaints show no signs of stopping and if anything, continue to escalate further. For example, last Friday, April 24, El Economista reported that five governors and 2,000 businessmen agreed on a strategy to pressure the government into suspending “non-priority projects for Mexico, as is the case of the Mayan Train and the Dos Bocas refinery.” These governors come from the states of Tamaulipas, Coahuila, Durango, Michoacan and Nuevo Leon. While this might be the latest of these kinds of efforts, it can certainly be expected to be anything but the last. 

Other items discussed during the meeting dealt with how resources that were currently being spent on those projects should be better allocated to truly protect the Mexican economy from the effects of COVID-19. In other words, this is a conversation about budgets and spending, which needs to take place due to the need for an economic recovery. The specific nature of these infrastructure projects is not as large a part of the issue as it might seem. If it was, the arguments against them would be more focused on the fewer jobs that these projects would create when compared to other alternatives. Instead, the arguments are focused on how much the money being spent on these projects should instead be spent elsewhere. This could be interpreted as defining what is really being contested: who has control and influence over public spending and over the way in which spending is structured into packages and stimuli of economic recovery. 

Second Baja California District Head Judge José Rivas González’s ruling, which showed that the judicial branch could use a legal argument to determine that the federal government needs to divest from these projects, framed the argument regarding these projects in terms of who should have control over federal spending in times of crisis and why. 

This hypothesis is to a certain degree proven by two recent news items. The first one is yesterday’s report from Forbes on the first day of the National Conference for Economic Recovery organized by CCE. In the discussions that took place, one of the points that became highly emphasized was made in response to recent comments from President López Obrador. In these comments, the president dismissed the possibility of structuring an economic rescue package for financial institutions by comparing it to the catastrophic and ultimately fraudulent FOBAPROA initiative, structured for economic recovery from the mid-90s “Tequila Effect” market crash. 

During the National Conference for Economic Recovery, CCE president Carlos Salazar made it clear that companies had never proposed anything of this sort and that they were instead interested in being supported through the delayed payment of taxes and also through a public spending plan that focused on infrastructure projects that could mitigate unemployment. This plan should be “different from the government’s current plan based on projects such as the Mayan Train, the Dos Bocas Refinery, the Santa Lucia Airport and the Transisthmic Corridor”. Their argument is in favor of their right to have a larger say in what the spending plan will be. The projects only represent their lack of influence: they make up a plan they had no say in. 

This relates to the second news piece, also from Forbes, in which experts comment on the initiative sent by the president to the legislative chambers calling for a reform to the Federal Budgeting Law. They conclude that this move to make budgeting and spending more flexible to economic emergencies  poses considerable risk. These risks include an encroaching from the executive power: the executive’s control over budgets and spending could become too excessive if the president and his party are given more legal power to change budgets when considered necessary by an economic crisis. The power that President López Obrador’s MORENA party holds over these chambers might create synergies between the legislative and the executive powers, but making those synergies into law could create problems down the road. This is what highlights the central issue: when people discuss these flagship infrastructure projects, it is possible that what they are really discussing is who gets control over the spending of public funds.

The data used in this article was sourced from:  
MBN, El Economista, Forbes
Photo by:   Forbes
Pedro Alcalá Pedro Alcalá Senior Journalist & Industry Analyst