A range of financial institutions have criticized President López Obrador’s plan to mitigate the economic impact of the coronavirus pandemic, describing it as indicative of his ideology and stubbornness.
The Bank of America said that the plan outlined on Sunday by AMLO, as the president is widely known, places additional downward pressure on the economy because it doesn’t include financial support for businesses and doesn’t amend tax policy to help them get through the inevitable coronavirus-fueled downturn.
“We expected a contraction of 8% this year and a 4.5% recovery next year. But after AMLO’s speech, we now see clear downside risks for both years, especially for 2021,” the bank said.
It predicted that Mexico’s sovereign rating will be downgraded by Moody’s or Fitch in a matter of days or weeks.
For its part, Citibanamex described López Obrador’s plan as disappointing and claimed that the government is seeking to downplay the economic impact of the growing Covid-19 outbreak. It also said that the economic response needs ideas rather than ideology.
López Obrador on Sunday stressed that his administration, unlike the “neoliberal” governments of the past, will not bail out large companies or banks or cut their taxes. Citibanamex was critical of the latter stance, charging that business needs tax concessions to help them through the pandemic.
The investment bank Goldman Sachs pointed out that Mexico is the only large country in Latin America that has not announced a stimulus package to lessen the economic impact of Covid-19 and the measures put in place to contain it.
“Although the macroeconomic environment is quickly deteriorating, the administration of Andrés Manuel López Obrador continues to be reluctant to ratify a fiscal stimulus package in spite of having greater fiscal space [to act] than its emerging [market] peers,” the bank said.
The financial group Monex said that the absence of a robust plan to combat the effects of the pandemic on the economy will likely cause a sharp downturn in economic activity in April and that negative growth will continue at least until the end of June.
Similarly, the general director of Mexico City brokerage firm Bursamétrica said that the lack of action by the government will probably cause a deeper than anticipated recession. (The Finance Ministry is predicting that the Mexican economy could shrink by as much as 3.9% this year).
“The president hasn’t grasped the size of the problem we have in front of us,” Ernesto O’Farrill said.
Santiago Levy, a former deputy finance minister, said the government should absorb the losses incurred by businesses while they are closed as a result of the health emergency declared last week, explaining that the support might have to continue for three months. He also said that the government should issue new bonds and use the resources to implement measures to combat the coronavirus and its economic impact.
The criticism from financial institutions and experts adds to the disapproval of AMLO’s economic plan, which primarily focuses on providing aid to the poor by increasing public investment and social spending and offering loans to small businesses and individuals.
Many of Mexico’s prominent business groups were also critical of the plan, stating that it is “disappointing,” “incomplete” and its consequences could be “grave.”
Source: El Universal (sp)
