Background on the Federal Government’s Infrastructure Investment
The Mexican federal government has implemented significant budget cuts in various sectors, including infrastructure investment, as part of its efforts to achieve fiscal consolidation and reduce the budget deficit. This has led to a substantial decline in infrastructure investments during the first five months of 2023, according to data released by Mexico’s Secretaría de Hacienda y Crédito Público (SHCP).
Key Figures and Context
The SHCP’s Public Finance and Public Debt Report up to May 2023 revealed that the government spent 347,615 million pesos on physical infrastructure investments. This represents a 29.1% decrease compared to the same period in the previous year.
In May alone, the government invested 64,107 million pesos in infrastructure, which is a 54.4% reduction from the same month in the previous year.
These cuts come as the government aims to lower its debt-to-GDP ratio from 5.7% in 2022 to 3.9% in 2023, following a historically high level of borrowing the previous year to complete key infrastructure projects initiated by President Andrés Manuel López Obrador.
Impact on Different Sectors
The Centro de Investigación Económica y Presupuestaria (CIEP) highlights the importance of infrastructure investments for both economic growth and social well-being.
According to the SHCP’s statistics, budget cuts have affected all three functions of infrastructure: social development, economic development, and governance.
- Governance: The governance function experienced the largest budget cut, with 8,283 million pesos allocated – a 66.4% decrease from the previous year.
- Economic Development: This function, which receives the most funding, saw a 32.7% decrease to 212,731 million pesos, primarily due to reduced investments in infrastructure for communications.
- Social Development: The social development function’s infrastructure investment dropped by 15.5% to 126,599 million pesos, with the most significant reduction occurring in environmental protection infrastructure (95% decrease).
Fuel and Energy Spending
The SHCP’s report indicates that, during this period, for every 100 pesos spent on infrastructure, 43 pesos went to physical investments in fuels and energy, totaling 151,037 million pesos. However, this amount reflects a 13% decrease compared to the previous year.
Petróleos Mexicanos (Pemex) and the Comisión Federal de Electricidad (CFE), both heavily indebted companies, are responsible for managing these investments. Jorge Cano, coordinator of the Public Spending and Accountability Program at Mexico Evalúa, notes that while strengthening these public entities is crucial, their investment levels remain well below the 2014-2016 peak.
Key Questions and Answers
- What is the main issue discussed in this article? The federal government of Mexico has drastically reduced its infrastructure investments by 29.1% in the first five months of 2023, as part of its fiscal consolidation efforts.
- Which sectors have been most affected by these budget cuts? All three functions of infrastructure – social development, economic development, and governance – have experienced budget cuts. The governance function saw the largest reduction, followed by economic development and social development.
- What is the target debt-to-GDP ratio for 2023? The Mexican government aims to lower its debt-to-GDP ratio from 5.7% in 2022 to 3.9% in 2023.
- Which companies are responsible for managing infrastructure investments in Mexico? Petróleos Mexicanos (Pemex) and the Comisión Federal de Electricidad (CFE) are in charge of these investments.
- How have fuel and energy spending fared compared to the previous year? For every 100 pesos spent on infrastructure, 43 pesos went to fuels and energy investments, representing a 13% decrease from the previous year.
