Weekly Report - 18 September 2014 (WR-14-37)

MEXICO| 2015 budget presented. On 7 September Mexico’s finance ministry (SHCP) presented its 2015 draft budget to the federal congress, with Finance Minister Luis Videgaray underlining the M$840bn (US$64.3bn) allocated to public investment. He said that the significant allocation of funds to public investment programmes was a “countercyclical stimulus” measure aimed at boosting economic activity in the wake of poor growth posted in the last couple of years. Despite this claim total public investment, which accounted for 23% of the M$3.63trn (US$276bn) of total planned expenditure, represents a real decrease of 4% on the M$874bn (US$66bn) allocated to this area in the current budget. The planned public investment for 2015 is heavily skewed towards the energy sector, which will receive M$410bn (US$31bn), almost half the funds allocated. Furthermore the four largest infrastructure projects planned by the government are all energy-related (and will all be managed by the state-owned oil firm, Petróleos Mexicanos [Pemex]) with M$53bn (US$4bn) earmarked for the development of the Ku-Maloob-Zaap oil fields, the largest investment project. Outside energy, social development received the next largest chunk of resources - M$204bn (US$15.5bn) - followed by transport & communications which received M$102bn (US$7.7bn), of which M$16bn will be used to build the international airport to be located near Mexico City [WR-14-35]. The government is also planning to invest a substantial amount in Mexico’s rail network, expanding train lines in the metropolitan areas of Toluca, Guadalajara and Querétaro City. The energy, social development and transport sectors will receive 85% of the total expenditure in investment. Of the remaining funds, investment in the environmental sector accounts for 5.1% and remarkably only 2.2% will go to security. The planned increase in overall government spending comes despite a projected 7.1% fall in government income from the hydrocarbons sector this year due to both shrinking crude oil production (forecast to come in at 2.35m barrels per day by the end of 2014) and falling oil prices (down to US$82/barrel). Videgaray said the money spent on public investment, together with increased exports, will “consolidate and accelerate economic growth in an environment of stability and social inclusion”. Despite such optimism, the official economic growth forecast for 2015 has recently been slashed to 3.7%, down from the 4.7% predicted in April. Yet this is still an improvement on the official growth rate of 1.4% reported for 2013 and the 2.7% projected for 2014. Annual inflation projections of 3% and a fiscal deficit of 1% were also included in the 2015 draft budget.

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