(Bloomberg) — Mexico’s 2025 deficit could be as high as 3.5% of gross domestic product, the country’s president-elect said, an indication that the country won’t necessarily stick to a previous government forecast of about 3%.
Most read from Bloomberg
The country will maintain responsible public finances, reduce the budget deficit and postpone the start of major new works until 2026. Claudia Sheinbaum said Wednesday in a speech to the Mexican Chamber of Business Leaders. She promised the government would cut operating costs, modernize tax collection and improve customs as a way of explaining how her government will prevent this year’s cost increases from spilling over into the early part of her term.
Sheinbaum will be sworn in on October 1, replacing her mentor and fellow Morena party member Andres Manuel Lopez Obrador. Her party’s landslide victory in the June 2 election was a surprise to markets, which expected a tighter race. Investors have raised concerns about whether social programs will lead to overspending, and about Sheinbaum’s ability to push through her initiatives without much resistance from a Morena-dominated Congress.
“We’re going to maintain a responsible balance between debt and GDP, and we’re not going to increase debt,” Sheinbaum said Wednesday.
The incoming president sought to allay investor concerns about a judicial review that she has promised will be among the priorities of the new Congress when it takes power in September. Rolando Vega, the head of the Mexican Business Council, which includes the country’s most prominent leaders, said at the event that there were concerns about judicial reform, which would see Supreme Court judges elected by popular vote. and that could undermine the independence of the judiciary.
“The judicial reforms and others that have been proposed are being discussed in an open parliament,” Sheinbaum said. “This reform in no way represents authoritarianism or a concentration of power. That’s not the goal. The aim is for the judicial authority to gain autonomy.”
Sheinbaum’s proposed new deficit ceiling represents a decline from estimated deficit levels of 5% of GDP for 2024, the highest level the government had seen since the late 1980s, despite Lopez Obrador’s promises earlier in his term to concentrate on cuts. The incoming president reiterated that she will not seek major tax reforms at the start of her term and said the government will have a plan by December on how to boost Mexico’s development potential.
The press outside the event on social media featured numerous business people, including Marco Antonio Slim, member of the billionaire Slim family and head of the Inbursa bank; Agustin Coppel, chairman of the banking and retail conglomerate Coppel; and Daniel Servitje, chairman of global bread maker Grupo Bimbo. Lopez Obrador worked with some key business leaders on public-private projects during his time in office, despite criticism of Mexico’s elite, and Sheinbaum kicked off a series of meetings in the days after her election that seemed designed to boost investor confidence wake up.
The peso was little changed at 1 p.m. Mexican time, trading against the dollar at 6.44 p.m. The currency is down about 8% this month, the worst of any major market.
(Update with details from the speech on the deficit and the judiciary, starting in the second paragraph.)
Most read from Bloomberg Businessweek
©2024 BloombergLP
