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Dulce María Sauri, president of the executive board of the lower house of Congress, accepts budget documents from Finance Minister Arturo Herrera. Dulce María Sauri, president of the executive board of the lower house of Congress, accepts budget documents from Finance Minister Arturo Herrera.

Covid-19, economic recovery, stronger social safety net are 2021 budget priorities

Finance Ministry submits its proposed spending plans to Congress

Health, welfare, education, the military and infrastructure projects are among the winners in the federal government’s proposed 2021 budget, which aims to protect the most vulnerable as the nation attempts to recover from the dual economic and health crisis precipitated by the coronavirus pandemic.

The Finance Ministry (SHCP) delivered its economic package to the lower house of Congress on Tuesday, setting out government expenditures of just under 6.3 trillion pesos (US $292 billion) next year.

“This economic package is aimed at protecting those who have the least,” said Finance Minister Arturo Herrera. “I say to citizens that you’re not alone and that we’ll come out of this together.”

Spending in 2021 will prioritize responding to the coronavirus crisis, supporting the recovery of the economy from what is forecast to be Mexico’s deepest recession in almost a century and strengthening the social safety net for the nation’s most vulnerable.

At the same time, the government’s policy of austerity and its commitment to combat corruption will be maintained, the SFP said.

Health care is one of the main priorities of the 2021 budget.
Health care is one of the main priorities of the 2021 budget.

The government will seek to broaden and strengthen the public health system, foster a rapid recovery of economic activity and employment and further reduce inequality.

Herrera conceded that the economic crisis has left the government without “great room to move” but stressed that it is upholding its responsibility to “maintain economic and financial stability.”

Deputy Finance Minister Gabriel Yorio said the 2021 budget was designed to foster macroeconomic stability and establish a balance between expenditure, revenue and debt.

“A fiscally responsible budget that is balanced in its expenditure is proposed,” he said, adding that it’s “sensitive” to the health and economic challenges the nation will face in 2021.

According to the proposed budget, which must be approved by Congress, the Health Ministry will see its funding increase by almost 16.6 billion pesos (US $771.7 million) next year while the Welfare Ministry will receive an extra 8 billion pesos.

Funding for the Education Ministry is slated to increase by more than 11.7 billion pesos while the navy, army and Security Ministry will all receive billions of additional pesos.

The government has proposed significantly increasing spending on a range of large-scale infrastructure projects currently under construction including the Maya Train railroad, which will run through five states in Mexico’s southeast.

Expenditure on the tourist train will increase 48.5% compared to this year to just under 36.3 billion pesos.

The funds will be used to continue construction of sections 1, 2, 3 and 4 of the railroad and commence construction of sections 5 and 6.

Spending on the Dos Bocas oil refinery on the Tabasco coast is slated to increase 9.1% in 2021 to just over 45 billion pesos while spending on construction of the new Mexico City airport is set to almost quadruple to just over 21.3 billion pesos.

The Mexico City-Toluca intercity railroad, left incomplete by the previous federal government, is scheduled to get 7 billion pesos in 2021, an increase of 246% over the funding allocated to the project this year.

The proposed funding for the Welfare Ministry includes just over 135 billion pesos to pay pensions to seniors. None of the government’s numerous other social programs will receive more funding than the pension scheme.

Defense Ministry spending increases more than 15% under the proposed budget.
Defense Ministry spending increases more than 15% under the proposed budget.

Just over 65 billion pesos is projected to be spent on student scholarships, 28.9 billion pesos will go the government’s tree-planting employment program and 20.6 billion pesos has been earmarked for the apprenticeship scheme known as Youths Building the Future.

“The return to the new normal must be accompanied by the conviction to deepen the changes already initiated by the government and to move forward in the construction of a welfare state that allows the impact of external factors on the national economy and the living conditions of the population to be reduced,” the SHCP said.

The budgets of 12 government departments will be cut in 2021, according to the spending proposals. Among those are the ministries of Culture, the Interior, Finance, Energy, Public Administration, Foreign Affairs and Labor.

Funding for the president’s office will also be cut as will that for the Energy Regulatory Commission and the National Hydrocarbons Commission.

The total outlay proposed in 2021 is 188 billion pesos more than spending approved for 2020 but 0.3% lower in real terms. Mexico’s 32 states will see their funding cut by 5.5%, a move that will no doubt further anger state governors who already say that they are not receiving a fair deal from the federal government.

The SHCP predicts that the economy will grow 4.6% next year after an 8% contraction in 2020, a forecast that is significantly more optimistic than the central bank’s worst-case prediction of a 12.8% contraction.

The Finance Ministry said its growth forecast could increase if a coronavirus vaccine is available in early 2021. It also said it expects the new North American free trade agreement, called the USMCA, will help boost the economy and attract new investment.

The SHCP forecasts government revenue of 5.4 trillion pesos in 2021, and has asked Congress to approve an increase to the public debt ceiling in order to fund that part of the budget not covered by income. The SCHP wants the debt ceiling to be increased to 700 billion pesos from its current maximum of 532 billion.

As a result, the SHCP expects that the primary budget balance, which excludes interest payments for existing debt, will be 0% in 2021.

The budget estimates that the United States dollar will buy an average of 21.9 pesos in 2021 and that Pemex will produce 1.86 million barrels of Mexican crude per day and sell each barrel for an average of US $42.10.

The heavily indebted state oil company, which President López Obrador is determined to “rescue,” will see its funding increase slightly in real terms in 2021, according to the proposal submitted to Congress.

Source: La Jornada (sp), Reforma (sp), El Financiero (sp) 

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