Mexican President Andrés Manuel López Obrador said Sunday there will be no huge economic stimulus program as the country faces the threat of coronavirus-induced crisis almost certainly unlike any it has seen in the past century.
Instead, the administration will expand social programs, continue to prop up the heavily indebted state-owned oil company, deepen the government’s austerity campaign and do everything possible to avoid taking on more debt.
"There is a lesson that we have learned well and that we don’t forget," López Obrador said to an empty and echoing National Palace patio. "An economic model that only benefits minorities does not yield general well-being, but on the contrary engenders public misery and violence."
The economic reactivation plan remains consistent with his administration’s priority of helping Mexico’s most vulnerable through greater public spending on social welfare, keeping people employed and cutting costs in the sprawling government, he said.
As an example, he said the top level of government bureaucrats — from undersecretaries on up to him — will have their salaries reduced and give up their annual year-end bonuses.
López Obrador promised to create 2 million new jobs over the next nine months, a seemingly incredible goal in a stagnant economy, and he gave no details on how he would do it.
He emphasized his signature infrastructure projects of a Mexico City airport, a new oil refinery and a tourist train that will circle the Yucatan peninsula will continue. The last, which has yet to begin construction, promises to create 30,000 jobs for each of its seven segments, he has said.
Other government programs pay farmers to work their land or create construction jobs through urban renewal projects improving drainage and paving roads.
López Obrador quoted U.S. President Franklin D. Roosevelt, who he described as that country’s best president: "We have always known that heedless self interest was bad morals, we now know that it is bad economics."
Reaction from Mexico's private sector was swift.
Gustavo de Hoyos, president of Coparmex, an association of business owners, criticized the president’s plan immediately via Twitter: "It announced no relevant measure to confront the Covid-19 crisis. In the middle of an emergency he read a piece of ideological dissemination, attacking ghosts from the past and abandoning his duty as head of state to unite the nation."
Before the speech Sunday, another association of Mexican industries, Concamin, warned in a statement that the pandemic could cause Mexico’s worst recession in a century. It called for "support to businesses to avoid the temporary closure of hundreds of thousands of them."
Thus far, López Obrador has mostly talked about protecting the country’s poorest and placed special emphasis on those working in the informal half of Mexico’s economy. The industrial chamber made multiple references to the government’s support being widely inclusive.
López Obrador has praised billionaire Carlos Slim for his commitment to not laying off any workers during the crisis and urged other business owners to follow his example. The president has said that only workers in essential businesses should still be going to work and that those who stay at home should continue to be paid.
Coronavirus Pandemic Coverage
But he tried to appear open while not making any promises. Last week he received several of the country’s top businessmen and on Saturday he tweeted a photograph of a video call he had with BlackRock Chairman and CEO Larry Fink, during which they exchanged "opinions about the coronavirus and the deterioration of the global economy."
Still, it remained unclear how an already weak economy, suddenly paralyzed by the pandemic, would be able to restart after what could be months of social distancing restrictions. The federal government has urged "non-essential" business sectors to keep their workers at home hoping to slow the virus' spread to a level that won't overwhelm the deteriorated public health system.
Even before the pandemic, Mexico’s economy had already been in recession. Then last week, Mexico’s Treasury predicted the country’s economy will contract as much as 3.9% in 2020 because of the pandemic, and private analysts are making even direr predictions.
The Bank of America predicted Thursday that Mexico’s GDP could contract 8% this year. That would be a bigger downturn than during the 2009 global recession, complicated in Mexico by the H1N1 pandemic, when GDP decreased 6.5%. It would also be worse than the December 1994 peso crisis, following which the country’s GDP fell 6.2% in 1995.
A close economic partner of the United States, Mexico will expect to receive some benefit from the huge $2 trillion stimulus package approved there.
On Sunday, López Obrador continued to strike an optimistic tone.
"This crisis is passing, transitory," he said of the pandemic. "Soon normality will return. We will overcome the coronavirus. We will reactivate the economy and Mexico will continue standing showing the world its glory and its greatness."
Mexico has reported 94 deaths related to the virus and more than 2,100 confirmed infections.
For most people, the coronavirus results in mild or moderate symptoms, such as fever and cough that clear up in two to three weeks. But it can cause more several illness, including pneumonia and death, for some, especially older adults and people with existing health problems.
The new coronavirus has caused a global pandemic that has sickened at least 1.2 million, killed more than 69,000 worldwide, crippled economies and forced restrictions on the movement of millions of people in an effort to stop the virus from spreading and overwhelming health care systems.