LatinNews Daily - 21 August 2020

* A report by BBVA bank has warned Mexico’s finance ministry (SHCP) against excessive use of its emergency budget reserve funds amid a public revenue shortfall caused by the coronavirus (Covid-19) pandemic, claiming this will weaken public finances in the long term. BBVA analysts said that they expect the federal government will seek “at least” US$4.5bn from the budgetary income stabilisation fund (FEIP) in 2020, in light of predicted tax revenue losses of between US$13.5bn (8.9% of the total) and US$19bn (12.6%). The analysts added that the SCHP had already accessed US$905m in July from its other key emergency fund, the revenue stabilisation fund for federal entities (FEIEF), and that it remains “very likely” that the SCHP will continue to draw on both funds in the coming months. By diminishing these funds, they argue, Mexico’s public finances will be increasingly vulnerable to external or internal shocks that might affect public revenue in 2021. BBVA also predicted that the country’s GDP will contract by between 9% and 12% this year.

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