Introduction
These bimonthly notes have predominantly criticized the policies of the Morena government, and this year is no exception. The review highlights that the identified problems persist over time with insufficient government action.
Economic Stagnation and Insufficient Growth Strategies
In January, the inconsistency and insufficiency of the México growth plan were pointed out. Despite recurring to agreements, announcements, and new plans, there has been no tangible progress.
The economy remains stagnant, with investment declining until September’s last reported figure. The sluggish economic activity has been repeatedly emphasized, with the country heading towards mediocrity amidst relocation opportunities, which is now barely acknowledged.
Morena’s economic policy has not changed despite the evident stagnation and continued decline in per capita income. Over seven years, the economy has grown less than during the previous five six-year terms and compared to most continental countries due to self-inflicted issues discouraging productive investment by creating uncertainty.
Public Finance and Social Sectors’ Neglect
Since March, concerns have been raised about the unsustainability of public finances due to insufficient attention on health, education, security, and public infrastructure while public debt accumulates significantly. In August, it was noted that poverty reduction came at the expense of investment in human capital and by taking on additional fiscal risks.
Regulatory Changes and Their Consequences
The new regulatory approach, prioritizing simplicity and digitalization over public utility, has been criticized since March. Transparency and citizen oversight have diminished, further weakening governmental checks and balances. The gentrification issue was addressed with populism, without tackling underlying problems or leveraging opportunities and advantages of the phenomenon.
Adverse Impact on Small and Medium Enterprises
Various measures of economic policy have negatively affected MiPyMES and their chances of maintaining or achieving formality, especially with the pronounced increase in labor costs. Notable examples include the minimum wage hike, extended vacations, higher social security contributions, and the upcoming reduction of the workweek to a maximum of 40 hours, which will increase formal labor costs despite being gradual.
Declining Formal Economy Contribution
The formal economy’s contribution to GDP has grown from 22.8% in 2018 to 25.4% by 2024, while informal employment has increased and formal employment has decreased since February last year.
Wage Increases and Productivity Concerns
Recently, the issue of wage increases by decree amidst falling productivity has been raised once more. Many argue that it’s politically correct to maintain that the minimum wage increase is a success while acknowledging the hope for improved productivity. However, this places the consequence before the cause.
Key Questions and Answers
- What are the main criticisms of Morena’s economic policies? – The policies have been criticized for inconsistency, insufficient growth strategies, and a lack of action addressing persistent economic issues.
- How has the Morena government handled public finances and social sectors? – Public finances are deemed unsustainable due to neglect of health, education, security, and public infrastructure while public debt accumulates. Poverty reduction has come at the expense of investing in human capital and taking on additional fiscal risks.
- What are the consequences of Morena’s regulatory changes? – The new approach prioritizes simplicity and digitalization, diminishing transparency and citizen oversight. Gentrification was addressed with populism without resolving underlying issues.
- How have Morena’s economic policies affected MiPyMES? – Pronounced labor cost increases, such as minimum wage hikes and extended vacations, have negatively impacted MiPyMES’ ability to maintain or achieve formality.
- What trends have been observed in the formal and informal economies? – The formal economy’s contribution to GDP has increased, but informal employment has risen while formal employment has decreased since February 2021.
- What are the concerns regarding wage increases by decree? – Falling productivity amidst wage increases by decree has raised concerns, with many arguing that placing the consequence before the cause is problematic.
