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A food bank lineup in Mexico City. A food bank lineup in Mexico City.

López Obrador’s frugality drive takes toll on civil servants

'The great paradox is that by not spending, you damage public finances more:' former finance official

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Earlier this summer, President López Obrador suggested that officials at the Economy Ministry share computers to support the government’s push for a lean administration.

The country’s revolutionary heroes had not needed such devices, so public servants could implement his policies without them, the left-wing nationalist explained at his daily press conference.

The idea was dropped after the ministry realized it would struggle to store its data if computers were sacrificed. But it was a proposal emblematic of López Obrador’s views: for the son of shopkeepers, a shoestring government is a sign of efficiency and honesty in an economy belonging to the G20 but where half the population is poor.

However, López Obrador’s demand for frugality has alienated civil servants and left some struggling to make ends meet. “My salary has gone down by 50% since before the pandemic,” said one experienced public servant who asked not to be named. She is still in her job, but many others have quit in the face of the government’s preference for political loyalists over experts.

As Covid-19 deepens Mexico’s economic pain — GDP is expected to contract more than 10% this year — López Obrador has stepped up cost cuts, slashing ministerial operating budgets by 75% and asking senior officials to forgo bonuses voluntarily.

He has abolished eight deputy minister positions, wants to cut two more and says this frugality drive has saved 560 billion pesos (US $26 billion) since he took office, allowing funds to be redirected to welfare.

No saving appears too small: Pemex, the debt-laden state oil company, slashed its spending on soap by three-quarters in 2019, López Obrador’s first year in office.

The savings have continued during the Covid-19 pandemic: the national health insurer spent 22% cent less in the first six months of this year, compared with the same period in 2019, according to the Mexican Institute for Competitiveness, a think tank.

The strain of the belt-tightening was showing, even among supporters of López Obrador’s self-styled “fourth transformation” of Mexico — which he says will be as epoch-changing as the 19th-century liberal reforms and independence from Spain and the revolution of the early 20th century.

“I’m clearly annoyed at some of these cuts — they don’t make any sense,” said another official. With cash likely to be even tighter next year as the pandemic squeezes tax revenues, “I’m scared about what will happen — the only way López Obrador reacts is to be more aggressive in his austerity.”

The president, who kicked off his term by scrapping a $13-billion partially built airport in Mexico City that he said was too expensive and plagued by corruption, has resisted stimulus measures he says Mexico cannot afford and has refused to take on new debt. Instead, he has urged people to shun “consumerism … luxuries, extravagances and frivolities.”

lopez obrador
President to civil servants: ‘Don’t be selfish.’

He flies economy class on commercial airlines — even to visit Donald Trump in July — and is trying to sell the presidential jet, with its king-size bed and running machine, that he refuses to use.

But not all share his thrifty tastes. Days after the president appealed to Mexicans not to fixate on material things, Marcelo Ebrard, his foreign minister who is seen as a potential successor, was caught on camera surreptitiously sliding what appeared to be a $14,000 Rolex up his sleeve.

Even Mexico’s Covid-19 bailouts have been on a shoestring, largely consisting of small loans, even though 12 million have lost their jobs and incomes.

For one former senior finance ministry official, “the great paradox is that by not spending, you damage public finances more. If you don’t spend more to smooth the shock, you will have a bigger contraction than you would otherwise have had.”

Government cuts “go beyond austerity — it’s austericide,” he said. “You make it very difficult to provide basic public services.”

A government agency charged with protecting the rights of victims of crime and abuse complained in June that budget cuts would “paralyze” it, leaving just 175 million pesos to spend on fulfilling its activities for the remainder of the year after paying rent, telephones and utilities.

Jorge Andrés Castañeda, an energy consultant, also noted that as the government slashed spending on advisers and travel, “that’s money that isn’t going into the economy.”

López Obrador says public servants must not be selfish and that eradicating corruption will mean that “however much or little we have will be distributed fairly, it will be enough for everyone.”

But the official who called some of the cuts senseless disagreed: “If I get a new salary cut, I’m going to start looking for another job.”

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