Yesterday, Luis Videgaray Caso, Secretary of Finance and Public Credit, announced a new cut in public spending, "starting with Pemex", as part of a "preemptive tightening" forced by low international oil prices and what he called the "volatility and risk aversion that exists with respect to emerging markets".
The backdrop of this announcement is characterized by, among other things, the further fall of the national currency [Mexican peso] against the US dollar (which yesterday morning again broke the 19-peso barrier) and an increase in the price of tortillas which, according to the National Market Integration and Information System (SNIIM) at the Secretariat of the Economy, a kilo [2.2 pounds] is selling for 16.25 pesos in some regions of the country.
MV Note: The corn tortilla is the staple of the Mexican diet, comparable to bread in wheat-growing countries. On Feb. 8, 2016 SNIIM reported that the per kilo price was 16 pesos or higher in five cities in five states (Mexicali, Baja California; Campeche, Campeche; Chetumal, Quintana Roo; Hermosillo, Sonora; and Matamoros, Tamaulipas). The weighted average is reported at 12.57 pesos.
According to Antonio de la Torre, leader of the National Union of Masa and Tortilla Manufacturers, the price rise is due to the fact that although corn production is satisfactory and there is no shortage,
"the large companies link their price to the Chicago market [Commodities Exchange]", so in Mexico "[prices] soared more with the peso devaluation".This shows the fragility of promises made by the government and the Bank of Mexico in this sense that such a devaluation would not result in an increase in inflation in the country.
The official discourse presents as inevitable the implementation of new cuts in public spending and measures of additional adjustment already announced—such as laying off about 16,000 Pemex workers—but it must be accepted that such determinations strengthen the recessionary trends in the national economy, thereby worsening the impact of unfavorable international circumstances on the already damaged standard of living of the country's inhabitants.
It is true that national policymakers have under their control neither the international variables that have influenced the drop in crude oil prices—and, consequently, to a considerable reduction in fiscal resources—nor the losses experienced by the Mexican peso in the foreign exchange markets. But the federal government is certainly in a position to undertake a shift in economic policy with the goal of strengthening and revitalizing the domestic market rather than adopting measures that influence its contraction.
Today it seems more necessary than ever, on the other hand, to undertake a frontal attack on corruption, which annually costs the country about 740 billion pesos [39.3 billion USD]. At a recent business meeting held in Guadalajara, Julio Millán Bojalil, president of Grupo Azteca Corporation, related this 740 billion peso ['corruption charge'] as equal to 4 percent of Mexico's gross domestic product.
It seems no exaggeration to assert that if that monumental drain of resources from public funds could be eliminated and rationalization of public spending were implemented, it would be possible to allocate hundreds of billions of pesos to recovering and strengthening the domestic market by creating jobs, carrying out infrastructure projects with true costs (that is, without illegal commissions and other corruption), determined support for the agricultural sector, a general dignifying of public education at all levels, improved health services, the promotion of cooperatives and small- and medium-size businesses, and greater support for cultural activities, among other things.
In short, there are alternatives for dealing with the current economic situation that do not go through the traditional recessionary measures of the neoliberal recipe. Spanish original