Background on the Mexican Secretary of Finance
The Secretaría de Hacienda y Crédito Público (SHCP), Mexico’s finance ministry, is led by Rodrigo Mariscal Paredes, the head of the Economic Planning Unit. Mariscal Paredes is a prominent economist in Mexico, often addressing financial matters and providing insights into the country’s fiscal health.
Interest Rate Expectations and Fiscal Space
During his participation in the SHCP-UNAM Cátedra, Mariscal Paredes expressed optimism regarding future interest rate reductions. He believes that lower interest rates will create more fiscal space for the Mexican government in both the short and medium terms.
“As interest rates adjust globally, including in Mexico, we anticipate further reductions in interest rates over the short and medium term. This will provide us with a broader fiscal space,” said Mariscal Paredes.
Current Financial Situation
According to the Report on Public Finances and Public Debt, the financial cost of debt was 161,559 million pesos in the first quarter of the year, marking a 6.8% annual growth. Although this amount is 25,633 million pesos below the projected figure, it still represents an increase.
The government’s expenditure on financial costs would entirely consume the revenue generated from the Special Production and Services Tax (IEPS), which yielded 118,134 million pesos during the same period.
The Pre Criterios Generales de Política Económica 2026 estimation suggests that the financial cost of debt will account for 3.9% of Mexico’s Gross Domestic Product (GDP) this year, a rate comparable to the fiscal deficit target that Hacienda aims to achieve after last year’s 5.7%.
Pressure on Fiscal Space
Despite the pressure from the financial cost of debt and other spending areas like pensions, there have been calls for fiscal reform to boost government income and address spending needs. However, the Mexican government has yet to implement any such reforms.
Healthy Public Finances in Mexico
Mariscal Paredes reaffirmed that Mexico’s public finances are “healthy,” especially when compared to similar economies.
“In primary balances, the key metric for assessing fiscal impulse and spending, Mexico has maintained relatively stable and near-zero deficits,” he explained.
During the pandemic, many countries offered stimulus packages that increased their debt levels. Mexico, however, chose not to accumulate more debt, resulting in favorable indicators today.
“This has kept Mexico’s debt relatively stable compared to other countries, a trend we project will continue in the medium and long term,” Mariscal Paredes added.
Key Questions and Answers
- What is the expectation regarding interest rates? The Mexican finance ministry, SHCP, expects interest rates to continue declining in the short and medium terms, providing more fiscal space.
- What is the current financial cost of debt in Mexico? The financial cost of debt was 161,559 million pesos in the first quarter of the year, representing a 6.8% annual growth.
- How does Mexico’s public finances compare to other economies? According to Rodrigo Mariscal Paredes, Mexico’s public finances are healthy, with stable primary deficits compared to similar economies.
- What is the projected fiscal deficit target for this year? The Pre Criterios Generales de Política Económica 2026 estimation suggests that the financial cost of debt will account for 3.9% of Mexico’s GDP this year.
- Why is there pressure on Mexico’s fiscal space? Pressure stems from the financial cost of debt and other spending areas like pensions, despite calls for fiscal reform to boost government income.
