Mexican president promises surplus in 2019 budget proposal

The 65-year-old leader roiled markets even before taking office by cancelling a partially-built Mexico City airport, sending the peso, stocks and bonds tumbling. (Bloomberg pic)

MEXICO CITY: Mexican President Andres Manuel Lopez Obrador on Saturday sent Congress his 2019 budget plan, which includes more spending on social programs and infrastructure, while still preserving the fiscal framework established by his predecessors.

Lopez Obrador, who took office on Dec. 1, proposed a primary surplus of 1% of gross domestic product for next year and his administration expects this year’s surplus to be about 0.8%, Finance Minister Carlos Urzua told lawmakers at the lower house. AMLO, as the president is known, has long promised to pay for increased spending on pensions, education and infrastructure by a cost-cutting campaign that many investors suspect is unfeasible.

The 65-year-old leader roiled markets even before taking office by cancelling a partially-built Mexico City airport, sending the peso, stocks and bonds tumbling. It will be important to monitor the government’s follow through on the budget commitments next year, because if faced with revenue that doesn’t meet his goals, Lopez Obrador may prioritize social spending and development plans over fiscal responsibility, said Alberto Ramos, an economist at Goldman Sachs Group Inc.

“The underlying macroeconomic assumptions seem reasonable,” Ramos said on Saturday. “I don’t see anything that comes across as utterly unrealistic at first glance. But the budget is just a piece of paper. The real question is ‘What’s the commitment to the target?”