Mexico City. Mexico’s Finance Minister, Arturo Herrera, said Thursday that the federal government is in talks with the country’s regional authorities about their financial needs, which will help make a decision on whether there are conditions for implementing the country’s anticipated tax reform.
President Andres Manuel Lopez Obrador ruled out tax reform last year and resisted tax hikes despite the strong economic impact of the coronavirus pandemic, which pushed the Mexican economy last year into its worst crisis since the Great Depression.
The International Monetary Fund (IMF) has suggested that Mexico implement tax reform to support the country’s spending in the medium term and accelerate recovery. Analysts have estimated that the tax reform could leave the second largest economy in Latin America with three points of GDP in additional collection.
“We are already entering an electoral process that will be very competitive (…) and this will likely prevent us from having an open discussion of this process (of potential reform) in the coming months, instead we will have it,” Herrera said in an interview with Reuters.
Referring to the mid-term elections in June 2021, he added, “Immediately after the elections, we will have to assess what the context is and whether the circumstances allow us to propose any change to the country’s tax structure.”
In 2020 Mexico’s economy suffered its biggest collapse in nearly 100 years due to the effects of the epidemic. However, a faster recovery is expected in 2021.
Herrera, who has been in office since mid-2019, announced that the Finance Ministry will revise its growth forecast for GDP in April, which will be between 5% and 5.5%, from the current 4.6%.
The Organization for Economic Cooperation and Development (OECD) earlier this week improved the growth outlook for the Mexican economy to 4.5%.
Herrera also explained that the economic incentives approved in the United States – amounting to $ 1.9 trillion – will have “beneficial effects” on the economy of Mexico, a country that sends more than 80% of its exports to its northern neighbor.
The 54-year-old economist has spoken of the capital support the federal government will provide to the debt-ridden nation Pemex, a company that has been a priority for Lopez Obrador’s government since it took office at the end of 2018.
“Initial support this year is in the range of $ 1,300-16,600 million,” Herrera said, referring to transfers to the oil company.
Pemex, which has debt of $ 113.2 billion, incurs heavy labor liabilities, and last year it reported losses in the millions.