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Mexico 2019 | ECONOMY | FOCUS

The 2019 budget has set out to plug the leaks of corruption, while earmarking a larger-than-usual share to empower the powerless and renovate infrastructure.

Andrés Manuel López Obrador was sworn in as Mexico's new president on December 1, 2018. He is by no means a newcomer to the political arena, having played various roles in the political scene for over two decades, during which time he has been associated both with left-wing and nationalist politics.

AMLO's rhetoric during his 2018 presidential campaign contained elements from both ends of the political spectrum, though he placed the greatest emphasis on programs of social uplift such as aid for students and pensioners. He also made quite a splash by championing a series of energy reforms, promising to bring the salaries of—largely unloved—politicians under control and canceling some ultra-expensive national projects, which he saw more as fashion statements than necessities. However, López Obrador won the hearts of voters mainly as a result of the public's disillusionment with the National Action Party (PAN) and the Institutional Revolutionary Party (PRI).

For all his faults, AMLO has built himself a reputation as a politician who delivers on his promises. This public image was constructed during his term as the mayor of Mexico City and was reflected in his steady approval rates that, unlike others, did not drop toward the end of his term in office. AMLO is keen to protect his reputation by proving himself a man of action, not disappointing the already disenchanted voters who are fed up with corruption among the political elite and economic dysfunction.

Sure enough, less than a fortnight after his inauguration, the president unveiled a budget proposal, which is supposed to be the first dose of antidote to the rampant inequality in the system. Quite unsurprisingly, the design of the budget is somewhat different from what was customary in previous administrations, but it is not—as some business leaders were fearing—unreasonable or unrealistic.

The president's objectives are clear, though the path toward achieving them is not. In keeping with his promises, the new president intends to empower the marginalized socio-classes such as the youth and the elderly, farmers, and indigenous groups who have been pushed to the side.

Meanwhile, he intends to redirect the budget to infrastructure projects such as railways, roads, and utility projects. Also on the list is the USD400-million Isthmus of Tehuantepec, which will increase the country's “interoceanic transportation options," according to AMLO. As the proposed isthmus will run through the indigenous communities that the new administration wants to protect, the president has promised that every development will be carried out with the consent of indigenous people without harming the region's ecosystem.

No matter how well-laid these plans seem, the fact remains that no new channel of revenue has opened up for Mexico to fund these developments. According to the president, the funds needed for these initiatives will come from austerity measures and putting a stop to overindulgences here and there.
Citigroup analysts called the budget a “positive surprise for the market," but also expressed doubts about the practicality of some of the cuts envisioned. Other analysts more or less agree that the redirection of public funds to social development programs has not gotten out of hand and that AMLO's budget proposal is largely in line with his promises.
The country's 2019 budget was approved by Congreso de la Unión almost a week after the MXN5.8-trillion spending plan was handed in. The National Regeneration Movement (MORENA), which the new president belongs to, has a strong presence in congress.

A further reassurance came in January 2019 when Carlos Urzua, the new administration's Secretary of Finance, paid a formal visit to the US and conveyed the message that the new establishment is driven more by principles of common-sense statesmanship than leftist revolutionary zeal. He also went to some length to convince Wall Street financiers that the new administration's economic policies would not be radical.
Although the government's prudent approach and its respect for Banco de México's independence has been lauded by many, some voters consider the president's strategy an instance of bait-and-switch. After all, it was this attitude of slow-but-sure progress that frustrated the public and resulted in AMLO's landslide victory.