Investments will suffer the worst decline since Zedillo in this six-year term: IMF

Considered the main ingredient for driving economic growth anywhere in the world, investment during this six-year term will see the biggest drop since Ernest Zedillo’s government, according to recent estimates by the International Monetary Fund (IMF).

Analysts associate this with the weakness shown at the beginning of the current administration and the lack of basic conditions that would make it attractive for private initiative investment.

Compared to the size of the Mexican economy, total investment, public and private, will fall from 22.7 percent to 21.2 percent in the six years of this government, according to the institution headed by Kristalina Georgieva.

In other words, investment will reduce 1.5 points of gross domestic product (GDP) in the six-year term of President Andrés Manuel López Obrador, after a drop of 1.2 points during Enrique Peña Nieto’s term, an increase of 1.1 points during Felipe Calderón’s term, a drop of 0.1 in Vicente Fox’s government and lose 2 units with Ernesto Zedilla.

In Chile, Peru and even Argentina, investment has a larger share of their economies than Mexico, according to the IMF.

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Anti-investment reforms

In an interview with EL UNIVERSAL, Grupo Financiero Base’s director of economic and financial analysis, Gabriela Siller, explained that investments in the country peaked in July 2018 and started to decrease since then, then plummeted with the pandemic. and then the process of its reactivation began.

“How can we read these data? Because they reveal that from 2018, investors and businessmen began to fear generating more investment, due to the initiatives and reforms that were promoted, which reduced the recovery of investment. “, he explained.

Some reforms, such as those in the Federal Labor Act, have caused higher labor and tax costs for businesses, he said.

For his part, it is urgently necessary to ensure greater certainty and fight against insecurity, because as long as there is no such thing, it will be difficult to attract more private initiative investments.

The Mexican Institute of Finance (IMEF) prepared a diagnosis that showed that public investment is a central component of economic expansion, while private capital is considered key to promoting sustainable growth.

Therefore, creating favorable conditions for private investment with a social approach is essential for the recovery of the production rhythm and the long-term sustainability of any initiative to reduce social and regional inequalities, he believes.

He pointed out that in production investments, the trend of gross investments in fixed capital is generally negative, both for the public and private sectors.

He specified that, on the public sector side, the redirection of public resources towards social programs and the real reduction of tax revenues prevented higher levels of productive investments.

While favorable conditions have not been created in the private sector to encourage productive investments that generate higher levels
growth.

He emphasized that, within gross fixed capital investment, companies generate more than 80% of this, reflecting their central importance to job creation and well-being in all regions of the country.

Among the main conditions that could promote greater private investment, the IMEF cited certainty regarding the future course of public policies, unlimited respect for the rule of law and a determined fight against public insecurity.

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