Pablo de la Peña: Our taxes and Public Expenditure

Pablo de la Peña Sánchez.Pablo de la Peña Sánchez Source: Courtesy

The INEGI recently published the Timely Indicator of Economic Activity for the month of January of this year. Compared with the data for 2020, the variation of this indicator is -4.4 percent.

Let’s remember that in the first quarter of 2020 we had a contraction in the Gross Domestic Product of 2.2 percent compared to the same quarter of 2019, despite the fact that the first quarter of 2020 was not as hit as the second quarter in which the economy was practically paralyzed by the pandemic. If this current trend continues, it will be very likely that by the end of this month of March 2021 we will add 7 consecutive quarters with negative annual growth rates, this is from the third quarter of 2019, all of 2020 and perhaps this first quarter of 2021.

If so, we will be experiencing, without a doubt, the worst economic crisis since the crisis of 82-83 in which we had six consecutive quarters with negative annual growth rates, the last two quarters of 1982 and all of 1983. As we have mentioned so many times here, the best strategy to start a process of economic recovery is to increase public and private investment in a coordinated manner.

The first is achieved by increasing public spending, either by reorienting federal government priorities towards projects that boost employment, the consumption of intermediate goods and capital in the country, and that strengthen the productive infrastructure for future years.

Private investment would be achieved through fiscal incentives that promote capital reinvestment and that generate sources of employment. We know this strategy as an expansionary fiscal policy. The faster it is implemented, the better. Of course, we still have to resolve the issue of the pandemic; This expansionary fiscal strategy would work under “normal” conditions, but of course we are far from still having normal conditions.

To get closer to normal conditions we need to speed up the vaccination process in order to reach the group immunity rate as quickly as possible. There are those who calculate that we would reach this rate when we reached 70 percent of the vaccinated population; that is, when we have around 88 million Mexicans vaccinated.

We have nearly one million one hundred thousand people vaccinated in almost two months of starting the process, in the best of cases we have an application rate of 15 thousand daily vaccines (strange because the daily figures that are announced are less than 10 thousand ). If these numbers are true – anyway – you can calculate how many days (or years) we need to reach the 88 million vaccinated Mexicans.

On April 5, 2020, President López Obrador announced from the National Palace, in what seemed a sublime government report, his economic recovery plan where 2 million jobs were to be created, loans were to be granted to micro-enterprises, distributable funds were to be increased in comprehensive welfare programs, and public investment was to be increased. With these measures, the president emphasized that the recovery of the economy would begin soon. I’m afraid we haven’t seen any of the above.

The only thing we have seen is that the priority megaprojects with doubtful capacity to increase the country’s productivity have been maintained. increased cash transfers for social projects that, although they may have a laudable objective, in electoral times also have a disastrous clientelistic purpose, because it creates in our young people a total dependence on the government, instead of promoting and encouraging the spirit of entrepreneurship and the creation of jobs.

And additionally, there is no clarity in the strategy to encourage the attraction of private investment, neither foreign nor domestic. It seems that those who make these decisions in the federal administration, as well as the legislators and unfortunately many people who receive these supports, forget that the resources that the Federal Government is using for these projects come mainly from the taxes that all those of us who work in the formal sector pay.

Tax revenue represents 80 percent of the Federal Government’s income it has to spend, so for every peso that the Federal Government uses for any program, 80 cents comes from our taxes. You tell me Do we agree on the way our money is being managed?

This is an opinion column. The expressions used here are the sole responsibility of the person signing them and do not necessarily reflect the editorial position of El Financiero.