Reaction to the Loan

The Excélsior headline on the front page says the credit line is "just in case." According to the online poll at Imagen, almost two thirds of Mexicans are confident that this will help the government overcome the crisis, which is a strikingly optimistic number.

For some more expert analysis, here's Rogelio Ramírez de la O writing yesterday (before the IMF credit extension was official):

If the American economy recovers starting in the second semester of 2009, as many think it will, then the productive sector [in Mexico] can begin to bounce back before it is too late. This is the implicit gamble that the government is taking.

If, in contrast, the American crisis extends beyond 2009, around the middle of 2010 the economy would be in an unsustainable situation, but the government will have already spent all of its reserves and taken out loans to sustain the peso artificially. The crisis in the productive sector and in the population would be much deeper and the official gamble will have been incorrect.

Using today the international reserves and external loans without the support of the productive sector will reduce the space for maneuvering the country in near future. Not listing to the warnings that the private sector offers everyday about the deterioration of the productive base and the absence of public infrastructure spending is a mistake.