Federal budget is overly optimistic about growth and oil production, analysts warn

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September 10, 2019

Optimists President López Obrador and Finance Secretary Herrera.

The macroeconomic assumptions and revenue estimates in the federal government’s 2020 budget are overly optimistic, analysts warn.

Financial experts consulted by the newspaper El Economista said the government is overestimating both its capacity to increase tax revenue and the petroleum production potential of the state oil company.

The budget estimates growth of 1.5% to 2.5% in 2020 and oil output of 1.95 million barrels per day by the end of next year.

To achieve the latter, Pemex will have to increase production by about 17%, the news agency Bloomberg said, something that hasn’t been achieved for almost four decades.

Ariane Ortiz of the ratings agency Moody’s said that the “optimistic” economic growth and oil production forecasts will lead to an “overestimate of government revenue for next year.”

She contended that the government has underestimated the financial support needed by Pemex, which has debt in excess of US $100 billion, and claimed that achieving the primary fiscal surplus target of 0.7% of GDP in 2020 will require austere policies that will make it difficult for the government to stimulate economic growth.

Alberto Ramos, chief Latin American economist at Goldman Sachs in New York, agreed that “the assumptions on growth and oil production are definitely on the optimistic side.”

He said the key question for investors is whether the government will be prepared to cut spending if necessary in order to meet its economic objectives, such as the 0.7% primary surplus.

Marco Oviedo, chief economist for Barclays in Latin America, agreed with Ramos but warned that the government has left itself little room to adjust spending.

Carlos Petersen and Daniel Kerner of the research and consulting firm Eurasia Group said the government’s macroeconomic and revenue estimates are “unrealistic” and should be modified before the budget is approved by Congress.

The 2020 Economic Package, which prioritizes spending on social welfare programs, security and Pemex, was delivered to the lower house of Congress on Sunday by Finance Secretary Arturo Herrera.

Source: El Economista (sp)

Of 5,000 quake-damaged schools, only 80 have been repaired

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MND Staff

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September 9, 2019

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Businesses contracted to repair schools have abandoned the projects and in some cases have disappeared.

Only 80 of 5,000 Oaxaca schools that were damaged by the powerful earthquakes of September 2017 have been fully repaired, according to state lawmakers.

Pavel Meléndez Cruz, president of the Oaxaca Congress special reconstruction committee, said that work is currently being carried out at just 400 of the schools that still require repairs.

Projects at other schools have been abandoned because the builders weren’t paid, he said.

Meléndez said the committee he leads will ask authorities to carry out an investigation to determine what happened to the funds allocated for the rebuilding and repair of damaged schools.

The local branch of the SNTE teachers’ union has also denounced the lack of progress in repairing damaged education infrastructure, pointing out that thousands of students have been unable to return to their schools and have been forced to find alternative arrangements.

Teachers participated in a protest march in Oaxaca city on Friday to demand reconstruction be expedited, the newspaper El Universal reported.

According to a letter sent to the SNTE union on August 29, the federal government is committed to rebuilding and repairing Oaxaca schools damaged by the September 2017 quakes, the first of which caused extensive damage in the Isthmus of Tehuantepec region.

Signed by Agrarian Development and Urban Planning Secretary Román Meyer Falcón, the letter states that reconstruction projects in schools where no work has yet been completed will start either today or in the first week of October.

Projects in schools where work has been suspended will resume on Tuesday, the letter said.

The government also committed to the resumption of payments for the builders undertaking the work but the letter didn’t indicate when the projects will be completed.

However, an undersecretary at the Secretariat of Agrarian Development and Urban Planning indicated that 90% of school repairs are expected to be completed by 2020. David Cervantes also said that the government allocated 2.5 billion pesos (US $127.7 million) for school repairs this year.

About 20,000 schools in several states were damaged in the September 7 and 19 earthquakes that shook southern and central Mexico

President López Obrador announced on July 1 that funds for the construction, maintenance and repair of school buildings will be allocated directly to committees made up of teachers, parents and students after an earlier announcement that the National Institute of Physical Infrastructure for Education would be dissolved.

Pablo Iván Ángeles Guzmán, a structural engineer and academic at the National Autonomous University, warned against the plan because “there is a high risk that the rebuilding of schools will be at the discretion of people who are not professionals in construction and restoration.”

Source: El Universal (sp)

Petroleum pipeline taps continue at the same pace as last year: Pemex

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MND Staff

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September 9, 2019

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People steal fuel from a pipeline — Fuel theft and smuggling has been a major issue in Mexico for years. (File photo)

Despite claims by the federal government that petroleum theft has declined 95%, state oil company data shows that the number of pipeline taps in the first seven months of the year was virtually unchanged compared to the same period of 2018.

Pemex detected 8,655 taps between January and July, just 51 – or 0.5% – fewer than the number recorded in the first seven months of 2018.

While the number of taps on petroleum pipelines remained steady, those on LP gas lines more than tripled to 623 compared to 206 between January and July last year.

Pemex data published on the National Transparency Platform also shows that fuel carried by 32 tanker trucks has been stolen this year whereas just 14 trucks were held up during all of 2018.

Another statistic that debunks President López Obrador’s claim that fuel theft has “almost come to an end” is that the number of reports of the crime filed by Pemex lawyers in the first seven months of the year – 11,907 – is 60% higher than that recorded in all of 2018.

One figure that has declined significantly is the quantity of stolen fuel recovered by authorities.

The government seized just under 8 million liters of stolen fuel between January and July whereas it secured just under 25.2 million liters last year.

However, there is no data showing the quantity of stolen fuel that wasn’t recovered, the newspaper El Universal said. Therefore, lower confiscation levels don’t necessarily mean that less petroleum is being stolen.

The government has made combating fuel theft a priority, implementing a plan in which 15 government departments and organizations, including the army, navy and National Guard, are participating.

López Obrador claimed on Friday that on his watch, petroleum theft has declined 95% from 80,000 barrels per day to 4,000.

As a result, 50 billion pesos (US $2.6 billion) that would have been lost had theft levels remained the same will flow into government coffers, he said.

The Pemex figures, however, raise significant questions about the reliability of the claims made by the president, who on occasions has dismissed official statistics by asserting that he has “other data.”

Source: El Universal (sp)

Record number of counterfeit banknotes found despite new security

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MND Staff

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September 9, 2019

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A record number of counterfeit 500-peso banknotes was detected in the first half of the year despite the release in 2018 of a new bill with enhanced security features.

The central bank reported that 80,891 fake 500-peso notes were removed from circulation between January and June.

It is the highest number of counterfeit notes of any denomination that have been detected in a six-month period since 2015. The figure exceeds the total number of fake 500-peso notes that were withdrawn from circulation in the entirety of each of the past four years.

According to the Bank of México, 156,278 bogus banknotes were removed from circulation in the first half of 2019. The total value of the phony bills was 54 million pesos (US $2.8 million).

The fake 500-peso bills had a face value of 40.4 million pesos, or 75% of the total, and accounted for 52% of all notes withdrawn from circulation.

Among the counterfeit cash detected were fake versions of all three 500-peso notes: the inaugural bill featuring army general Ignacio Zaragoza, that with the countenances of renowned Mexican artists Frida Kahlo and Diego Rivera – which first appeared in 2010 – and the new blue-colored note featuring former president Benito Juárez on one side and a gray whale on the other.

Released on August 27, 2018, the most recent 500-peso banknote features a range of security features including fluorescent ink, a dynamic thread, embossing perceptible by touch, a watermark and a multicolor denomination.

However, it wasn’t long before the first counterfeit versions of the note were detected.

The newspaper Milenio reported that a man was arrested in Monterrey, Nuevo León, in September 2018 after trying to pay a hotel bill with nine forged 500-peso notes.

In the first half of 2019, almost 57,000 counterfeit bills that were removed from circulation – 35% of the total – were detected in Mexico City.

Almost 17,000 fake notes were detected in México state, 9,442 were discovered in Jalisco and more than 7,000 were found in each of Puebla and Nuevo León.

Bank of México reports indicate that forged banknotes are most commonly produced using inkjet or laser printers.

Source: Milenio (sp)

German manufacturer inaugurates automotive plant in Coahuila

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Cody Copeland

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September 9, 2019

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The German automotive company BMTS Technology has inaugurated its new turbocharger manufacturing plant in Ramos Arizpe, Coahuila.

BMTS official Gunter Semeja said that because of the support of authorities and conditions for its global growth, the company estimates that the plant will produce two million turbochargers annually for the North and South American markets.

The US $100-million plant employs 500 people.

“These new investments, like this one by BMTS, not only create jobs, they also favor specialization of the workforce, increases in productivity, and the creation of better working conditions,” said Interior Secretary José María Fraustro Siller.

He said the new plant consolidates the automotive cluster of the southeastern region of the state, and that the governor plans to tour China in order to secure other investment projects, as the state has done in South Korea, Germany, Canada and England.

He emphasized the strength of Coahuila’s security forces, as well as its labor reliability, skilled workforce and high educational standards.

“We are among the states with the highest social competitiveness, that is to say, that which has shown the most potential to generate well-being for its citizens through health, education, income and working conditions,” Fraustro said.

“We’re also the second biggest exporting state in the country and the first in exports of transportation equipment,” he added.

Source: El Economista (sp)

Some gourmet cooking oils not exactly as advertised: Profeco

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Simon Schatzberg

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September 9, 2019

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The consumer protection agency Profeco has opened proceedings against various different brands of gourmet cooking oils which they say falsely represented their products.

Studies found that eight brands of oils sold as pure sesame, avocado or grapeseed oil had been adulterated with safflower oil.

Five products that were marketed as olive oil or olive oil blends contained no olive oil at all, and another two brands of sesame oil and one of corn oil had a lower net content than was claimed.

The brands selling adulterated oils were San Lucas, Cate de mi corazón, Kaporo, Foreway Sesame Expert, Kum Chum, D’Artana, Navarra, Demor and Olivos Mendoza.

Profeco scientists conducted tests on 32 gourmet oils and 25 standard cooking oils. The results were published in Profeco’s magazine Revista del Consumidor.

In an interview with the newspaper El Universal, Profeco head Ricardo Sheffield said the products will be removed from stores and the companies that produce them could face fines.

In total, Profeco has opened 23 proceedings against cooking oil brands for violations of consumer law in 2019.

Source: El Universal (sp)

Private investment spurs development of fibre optic network

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Cody Copeland

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September 9, 2019

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cancun beach — There are laptops beneath all those umbrellas.

Telecommunications companies have invested over 1.5 billion pesos (US $77 million) in Quintana Roo’s fibre optic infrastructure and increased internet coverage.

The director of the state’s Institute for Development and Finance, Bernardo Cueto Riestra, said his department has worked closely with the administration of Governor Carlos Joaquín González on three projects to bring cutting-edge technology to the state.

“The economic development of the state should be robustly interwoven with new trends in technology and telecommunications,” he said at an event on Friday. “These tools don’t just generate better productivity, they also shorten distances and gaps of inequality.”

At the end of 2018, it was announced that companies like Lomas Telecom, Maya Cable, Tele Cable and GigaNet had made large investments and had plans to expand.

Also last year, Atlán Redes invested 260 million pesos in order to guarantee coverage to 95% of Quintana Roo. The company plans to have 206 access points by the end of 2019, bringing its total investment to 400 million pesos.

A third project was a US $60-million investment for the installation of 180 kilometers of broadband fibre optics by Cobalt Holdings, which announced the opening of a new center of operations in Cancún.

Director of the Quintana Roo Institute of Innovation and Technology, Marco Bravo Fabián, said that such investments meet the region’s growing demand for high-speed internet due to trends in coliving and coworking.

He said that Cancún is becoming one of the most well-connected cities in the country, and is therefore attracting more information technology development.

Mexico’s Caribbean coast is popular with remote workers called digital nomads. Bravo stated that there are no concrete numbers as to how many people are working remotely in Quintana Roo, but their importance to the economy can be seen in the modifications hotels are making to optimize their internet speeds.

Source: El Economista (sp)

Behave and ‘Think of your mothers,’ AMLO urges Tamaulipas crime gangs

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Simon Schatzberg

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September 9, 2019

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The president gets a warm welcome in Tamaulipas.

President López Obrador appealed to the consciences of gangsters in Tamaulipas during a visit to the state over the weekend and urged them to behave.

Speaking to citizens during a stop at the Tula rural hospital in southwestern Tamaulipas on Saturday, the president spoke about the continued problem of crime and violence in the state and asked criminals to consider the harm caused by their actions.

“They are in the wrong, it shouldn’t be like this, I call on them to find other things to do, to think about themselves, their families, their mothers,” he said. “They know how much their mothers suffer because of the sublime love they have for their children, and they need to think about that.”

The president also promised to improve job opportunities as part of his strategy to fight crime.

“There used to be the excuse that there were no jobs,” he said. “We’re working on bringing back jobs, and getting people back into the workforce, so they can go legitimate, and stop the suffering of their families and their mothers, who are the ones who worry most about the children.”

Specifically, López Obrador spoke about the challenge presented by the Northeast Cartel, a splinter group of the Zetas that is active in Nuevo Laredo, although he didn’t mention the group by name. In recent days, the Northeast Cartel has been threatening gas station owners in Nuevo Laredo to prevent them from selling fuel to security forces.

On Sunday, during a visit to the Soto in the eastern part of the state, López Obrador acknowledged that problems with violence persist in the state, although he noted that the situation has improved.

“In the case of Tamaulipas, there is a lot of potential, we’re advancing in a very important area, which is guaranteeing security and peace,” he said. “I’m not saying there are no problems, of course there are, but it was worse, it was very difficult, as you all know.”

The president said crime rates have declined in the state although not in the border city. “Now we only have problems in Nuevo Laredo.”

“To hell with crime,” he declared, likening it to corruption. “It’s gross! Disgusting!”

Source: El Universal (sp)

Social programs, security, Pemex are the central themes of 2020 budget

By

MND Staff

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September 9, 2019

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Finance Secretary Herrera, center, delivers the budget to Deputies Laura Rojas and Mario Delgado.

Spending on social welfare programs, security and the state oil company is a priority in the 2020 budget, said Finance Secretary Arturo Herrera on Sunday.

Herrera delivered the 2020 Economic Package to the lower house of Congress, declaring that it is a budget based on fiscal discipline that will generate macroeconomic stability and financial certainty.

“We believe that it is a realistic package and we want it to be perceived that way by markets,” the finance secretary told lawmakers.

The package outlines total spending of 6.05 trillion pesos (US $310 billion), a 4% increase compared to the 2019 budget.

Herrera forecast economic growth of between 0.6% and 1.2% this year and a range of 1.5% to 2.5% for 2020.

The government is targeting a primary fiscal surplus of 0.7% of GDP in 2020, a figure 0.6% lower than the surplus forecast in a preliminary budget forecast sent to Congress in April.

Herrera said that about 60% of the budget is allocated to fixed spending including payments to local governments and pensions, while the remaining 40% will mainly go to “three main destinations: welfare, security and . . . fiscal support for Pemex.”

The secretary said that spending on welfare is intended to reduce income inequality, noting that almost half of all Mexicans live in poverty.

“The levels of income and inequality that are seen in the south of the country are very different from those seen in the center and north of the country. Therefore . . . to address those gaps . . . we’re placing significant emphasis on programs associated with social well-being,” Herrera said.

The budget proposes funding of 257 billion pesos for eight social programs, including the youth employment and senior citizen pension schemes.

Just under 59.2 billion pesos is earmarked for spending on “security and citizen safety,” a 6.5% increase over the 2019 budget, while the army and navy are to get combined funding of around 127.5 billion pesos.

The majority of the former amount is expected to be allocated to the National Guard. The new security force was formally inaugurated on June 30 and deployed to 150 regions across the country in July but the government intends to expand coverage to 266 regions.

Security Secretary Alfonso Durazo said previously that he expected the 2020 budget to provide some 56 billion pesos in funding for the new security force, which has been tasked with not only combating record high levels of insecurity but also stemming the flow of undocumented migrants to the Mexico-United States border.

Herrera described insecurity as a problem that “hurts Mexican families” and one that has to be “attacked head-on.”

For Pemex, the budget earmarks 523.4 billion pesos (US $26.8 billion), a 9% increase compared to 2019 funding.

Herrera highlighted that the beleaguered state-run company, whose oil production has been declining for 14 years, will receive 86 billion pesos in extra support including a cash injection of 46 billion pesos.

The secretary stressed that the budget doesn’t call for taxes to be raised nor for the creation of any new ones. However, the government will aim to increase revenue by cracking down on tax evasion, among other measures.

Herrera noted that the global economy is slowing but said that monetary policy changes will help to stimulate the economy.

The central bank cut interest rates to 8% in August, citing slowing economic growth and lower inflation. Herrera said that the government expects rates to fall to 7.1% in 2020.

The 2020 Economic Package, the government’s second budget, anticipates that Mexican crude will sell for an average of US $49 per barrel in 2020, oil production will be 1.95 million barrels per day at the end of next year and a greenback will buy on average 20 pesos, which is slightly above the current rate of about 19.5.

Alfonso Ramírez Cuellar, president of the budget committee in the lower house of Congress, praised the budget for its “fiscal discipline and responsibility in spending.”

However, he said that the committee he leads will not be a rubber stamp, stating “I think there needs to be a greater effort in income generation.”

Alberto Ramos, chief Latin America economist at Goldman Sachs, said the package is “overall a relatively fair budget” but added that “the assumptions on growth and oil production are definitely on the optimistic side.

“The key question for investors and markets will be whether the administration is ultimately strongly committed to deliver the 0.7% of GDP primary fiscal target or not,” he added.

Source: El Economista (sp), Reuters (en)

Enchilada lovers can get their fill at Iztapalapa’s 17th annual festival

By

Simon Schatzberg

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September 7, 2019

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Fill up on enchiladas in Iztapalapa, Mexico City, later this month.

The 17^th annual Iztapalapa Enchilada Festival will take place from September 20 to 29 at the Macroplaza Cuitláhuac, offering visitors the opportunity to try hundreds of varieties of enchiladas.

The festival will feature the first ever enchilada contest, which will have two sections: one for professionals and another for amateurs. Winners will receive cash prizes.

Iztapalapa is the fifth-most-visited of Mexico City’s 16 boroughs, receiving more than seven million tourists per year. With the Enchilada Festival, Iztapalapa expects to attract more than 300,000 visitors.

Jaime Ortega Zaldívar, the head of sponsorship for the festival, said that he has asked the Mexico City government to recognize the enchilada as part of the heritage of Iztapalapa, noting that after the borough created the largest enchilada in the world in 2010, the dish is now associated with it.

Source: Milenio (sp)