Saturday, August 13, 2011

El Universal on the Debt

From yesterday's editorial:
The exponential growth that the state debt has experienced in the country in recent years is an economic red flag. The so-called subnational debt could be a silent time bomb that, upon exploding, would take the entire country into a crisis that would impact the population's welfare. The issue must be addressed soon and, above all, without attempts to politicize it.

The numbers are overwhelming. According to document from the Finance Secretariat, the state debt grew by 172 percent in real terms from 2000 to 2010. Previous information from the Mexican Institute for Competitiveness (IMCO) warned that just from 2005 to 2005, the indebtedness in Chihuahua grew by 709 percent; in Tamaulipas 427 percent; Nayarit 407 percent and 248 percent in Coahuila.
Maybe the parties shouldn't politicize it, but I don't think there's anything wrong with me pointing out that all those states were governed by the PRI in the years mentioned. And Peña Nieto's profligacy with public money is well documented. The younger generation of the PRI may be a new breed in some sense --I don't think many of the wanton anti-democratic practices will return-- but there is not much reason to think that the economic instincts of the group likely to be running the country next year are much better than those of the PRI a generation ago. I don't imagine that argument is going to have much sway with the younger portion of the electorate that doesn't remember 1994, to say nothing of 1982, but it's worth mentioning and being worried about.

Also, El Universal reports today that the cash transfers from the federal government to the states increased by close to $3 billion in the first half of this year compared with the first half of 2010.

2 comments:

David said...

the free-market think tank IMCO has been on this issue for a while and troubling part, according to them, is that banks lend so heavily to state governments that it has a crowding out effect - there's not as much lending to businesses.

Of course, not everyone thinks this is a pending disaster. I posed this debt question to someone in the Banco de México, who figured the debt was well-collateralized and amounted to 3% of GDP.

What's never said is that state governments have some taxation powers, but prefer to have their hacks in Congress squeeze more money out of Hacienda (read: Pemex) instead of raising taxes.

pc said...

That's interesting, I think I'd trust Banxico more than IMCO. Also interesting on the tax issue. If IMCO is only worried about crowding out, then the issue isn't really the ability to raise taxes and the fiscal illness of the states, which makes this much less pressing even in the view of the group making the most of it. I mean it's not a case of disarming a fiscal time bomb (which is how it is presented in the media) so much as an issue of marginally improving public policy.

In any event, I'm not sure the mere power to raise taxes is really that big of a tool in the present context, in which everyone is cutting tenencia and no one is particularly interested in raising more revenue.