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News Article

Federal Government Will Not Receive Banxico's Surplus This Year

By María Fernanda Barría | Tue, 04/27/2021 - 17:02

Mexico´s government will not benefit from Banxico's operating surplus, despite President López Obrador's request last year to the Bank to deliver in advance Banxico's assets to combat the pandemic crisis. 

This petition was declined due to the Bank's internal regulations. Moreover, the Bank did not obtain any operating surplus during 2020 due to significant fluctuations in the exchange rate that affected the value of international assets that Banxico owns in national currency. In addition, the variations influenced a wide range of liabilities both in the public and private sectors designated in foreign currency.

There are a couple of reasons why Banxico determined not to give out the surplus. First, the bank´s law determines that with the year's results, the institution must first redeem the accumulated losses from previous years. Second, the institution must preserve the actual value of the bank's capital, add to its reserves and increase the utility in concordance to the Gross Domestic Product (GDP) increase in real terms. Once these clauses have been fulfilled, the additional reserves could be established as a surplus of operation.

Several analysts suggest that the federal government should not expect Banxico to generate additional income, as the Treasury must be the one to strengthen public finance accounts. "The one who has to manage healthy public finances to be self-sufficient is the Secretariat of Finance and Public Credit. In a duality of mirrors in financial management, the institution must behave like Banxico to generate budgetary income and maintain its savings funds for when incidents arise," stated Luis Pérez Lezama, Director of Economic Research at the think lab Saver to El Economista.

With the current health contingence, the situation has warned the relevance of improving a structural development in the fiscal system. In that sense, Ignacio Martínez Cortés, coordinator of the Laboratory of Analysis in Commerce, Economic and Business at UNAM pointed out that public finances will be pressured by not receiving this surplus from Banxico due to the decline in the budgeted tax income. In contrast, not every standpoint seems adverse as Gabriel Yorio, Undersecretary of Finance and Public Credit (SHCP) stressed that even though the Central Bank will not deliver any surplus in general, the public sector benefits from the situation more due to the appreciation of the exchange rate. Yorio stated that "we must remember that the reserve base is less than the public debt base, which is why the administration earns more in the revaluation of the debt, downwards," La Jornada reports.

The data used in this article was sourced from:  
Banxico, Expansión, Forbes, El Economista, El Universal, La Jornada
María Fernanda Barría María Fernanda Barría Junior Journalist and Industry Analyst