EconomyWhat if there is an emergency? Mexico allocates only...

What if there is an emergency? Mexico allocates only 0.12% of its budget to face natural disasters

After suspending the Trust Fund for Natural Disasters (Fonden) in 2021, Mexico allocates only 0.12% of its public spending to attend to emergencies and reconstruction due to natural disasters such as earthquakes and hurricanes.

According to the Federation Expenditure Budget (PEF) this year, 9,054 million pesos (mp) were approved for the now Fonden budget program, out of a net budget of 7.1 billion pesos (bp).

“Right now we no longer have a trust, what we have is a budget program called Fonden, each year an amount is allocated, for 2022 money was budgeted to supposedly have it there if a disaster occurred,” explained Mariana Campos, coordinator of the Program. of Public Expenditure and Rendering of Accounts in Mexico Evalúa.

Unlike a budget program, a trust allows you to save the money that you did not use in a previous fiscal year, that is, you do not return it to the Treasury at the end of the year, it stays in a fund with the aim of saving and having resources when there are emergencies, he added.

For the following year, the Treasury proposes resources for 17,156 million pesos, which represents 0.20% of the net expenditure of the public sector.

One of the problems with the new scheme is that the public budget is a wish, a projection, it does not mean that you already have the money, because you depend on the liquidity of the public sector; “everything is at stake: oil may drop, there may be an economic crisis; when you have money saved, you already have the money in the account, it is available to use it”, explained Campos in an interview.

“The new scheme makes us depend on the government’s liquidity and it is just what remedies this when you have it saved, now it is a more primitive scheme, not very functional and that does not guarantee that the State will respond to the emergency,” added the specialist in public finance.

It was in July 2021 when the abrogation of the agreement to issue the general rules of the Fonden was published in the Official Gazette of the Federation. Until June 30, there were still 24 appeals pending to reconcile and to advance in the process of extinction of the trust.

In 2017, when the tremors of September 7 and 19 occurred, the Fonden had 9,000 million pesos and resources for 6,000 million (360 million dollars) were made effective by World Bank catastrophic bonds. The cost of reconstruction was estimated at 48,000 million pesos, by the then government led by Enrique Peña Nieto.

One of the main reasons why the government applied the extinction of this trust, and 43 more, was that behind them there were acts of corruption and diversion of resources.

However, the constant in all governments has been that there is no transparency and accountability policy to provide reports on the use and status of these resources, Campos explained.

In October 2020, the then Secretary of the Treasury, Arturo Herrera, informed the press that the Fonden had no resources. As of August 30, 2020, the fund had resources for more than 4,900 million pesos; however, due to hurricanes and earthquakes in 2017, it reported liabilities of more than 18,000 million pesos, the Fonden’s net position was -13,123 million pesos.

Mexico will have 1.29 billion pesos of income via debt in 2023

According to Gabriel Yorio, Undersecretary of Finance, the amount is in line with the goal of maintaining debt as a percentage of GDP in a constant and stable manner.

LAST MINUTE: Income and Rights laws for 2023 are approved in Congress

Without changes to the opinions sent by the Chamber of Deputies, the senators voted in favor of the Federation Income Law and the Federal Law of Rights, budget is missing.

LAST MINUTE: The Income Law and the Law of Rights 2023 pass to the...

The Treasury and Legislative Studies commissions voted in favor of the opinions of both laws to be discussed and voted on in the upper house on Tuesday.

LAST MINUTE: Treasury rules out a 20% depreciation of the peso against the dollar...

Undersecretary Gabriel Yorio considers that the consultant's estimate is "exaggerated" and that these levels would not be reached in one or two years.

Public savings run out

The Treasury has increasing difficulties in obtaining resources and the lifeline of public finances is beginning to run out.