Introduction
In this regime, subordination is the only valid approach. The National Electoral Institute narrowly avoided a sweeping reform due to the smooth transition in its leadership, aligning with governmental interests. However, the Supreme Court did not show the same subservience to the presidential power, resulting in a recent reform driven by resentment.
Financial Institutions and Their Autonomy
The Bank of Mexico has managed to avoid a reform that would strip it of its autonomy, largely due to its composition being favorable to governmental interests. This was reinforced by President Claudia Sheinbaum during her speech commemorating the 100th anniversary of the Bank of Mexico, stating, “Here, autonomy does not necessarily mean discoordination. Instead, there has been coordination between the Bank of Mexico and the Secretariat of Finance.”
The question remains whether this institutional coordination is customary or if there’s an alignment of a majority of the Governing Board members with a more lenient monetary policy to stimulate growth.
Although the Secretariat of Finance is part of the federal government, it should not be evident that public finances are managed from the presidential residence. During the previous six-year term, it was clear that public finances were managed by presidential illumination, driven by limited knowledge but high electoral calculation, leading to the squandering of public resources on useless infrastructure projects and excessive welfare spending, ultimately complicating the macroeconomic health.
The Role of Key Players in Financial Decisions
In this regime, there is a growing trust in financial experts. However, it raises concerns when the legal advisor to the presidency, Ernestina Godoy, anticipates fiscal topics to be included in the upcoming Economic Package. While her announcement of changes to the Special Tax on Sugary Drinks generates headlines, the significant fiscal and financial matter is her preview of alterations to the Customs Law.
By bypassing experts in public finances, the President’s legal counsel sends an ambiguous message to markets, who would prefer hearing financial experts explain the rationale behind any tax or import changes, whether it’s on sodas or Chinese products.
Increasing taxes on sugary drinks as a measure to curb consumption is questionable, especially considering more than half of the economy operates informally, and criminal organizations produce counterfeit beverages.
Imposing tariffs on Chinese imports will affect supply chains but seems necessary to maintain relations with the United States.
The crux of the matter is that methods matter. If the President’s legal counsel transfers instructions to a subordinate power like Congress without technical reasons from financial experts, it sends a negative signal to markets about the division between technicians and raw political power.
Key Questions and Answers
- What is the current situation regarding institutional autonomy in Mexico? The Bank of Mexico has managed to maintain its autonomy due to its composition being favorable to governmental interests. However, there are concerns about the lack of technical reasons behind fiscal and financial decisions.
- How have public finances been managed in the past? Previously, public finances were managed with limited knowledge but high electoral calculation, leading to the misuse of public resources.
- What are the implications of increasing taxes on sugary drinks? This measure is questionable, given the informal nature of a significant portion of the economy and the production of counterfeit beverages by criminal organizations.
- What are the potential consequences of imposing tariffs on Chinese imports? While it will affect supply chains, it seems necessary to maintain relations with the United States.
- Why is it important for markets to receive clear messages about fiscal and financial decisions? Ambiguous messages about the division between technicians and political power can negatively impact market confidence.
