Local government spending continues to run amock
Almost three years ago MGR reported that "state indebtedness now equals about 70% of federal revenue sharing entitlements. Mexico's 32 states sustain themselves, in large part, with funds from the federal government (based upon population and other factors). Most of what they're entitled to is now pledged to banks, bondholders and investors as security for long term indebtedness, leaving little room for economic development." Increasing poverty and rising state debt result in poor economic report for Mexico (Feb. 10, 2012).
But the situation has gone from bad to worse, according to information released this month by the federal Secretaría de Hacienda, Mexico's Finance Ministry.
The states now owe almost 500 billion pesos on average to lenders and common creditors, which at today's exchange rate is over $34 billion USD each. That huge sum places in risk the economic viability of many jurisdictions according to some deputies in Mexico's federal congress, who recently approved a 2015 general federal operating budget of about 4.6 trillion pesos ($315 billion USD).
Individual Mexican state debt is so high that it exceeds the 2015 budget allotments for every single federal agency, with the sole exception of energy giant PEMEX (see chart below).
When compared to the power output of the entire Mexican economic engine in 2013, the numbers are even more striking. Mexico's GDP last year was about $1.26 trillion dollars. Collectively, Mexico's 32 entities owe almost 9% of that sum in long term debt - more than triple what they did in 2011.
Marcelo Torrres, the National Action Party's (PAN) coordinator in the House of Deputies, the lower legislative chamber, is proposing constitutional limitations on how much a state may borrow during any fiscal year. "This debt cannot be allowed to continue increasing on the backs of our citizens," he said last week. Torres and other congressional leaders insist huge sums are being wasted by and on "the upper bureaucracy" in out of control state ministries run by spendthrift officials, often in the form of luxurious food and transportation allowances, bonuses for "distinguished" service and other perks.
Ten Mexican states account for about half of the mounting debt, according to reform proponents. In Chihuahua, the state legislature and local governmental entities are borrowing to such an extent that the state's long term debt is increasing 10% annually - yet Chihuahua's gross domestic product grew a scant 2.47% in 2013.
Mexico's national economy may be lucky to grow even 2% in the year which will end on Dec. 31, and perhaps less. Mexican economic analysts again dispute official 2014 growth estimate, citing violence as principal concern.
Dec. 20 - Mexican minimum wage in 2015 will be $4.68 USD daily
Aug. 13 - Mexican economy remains stuck on a southbound train
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