MEXICO: Urgency in response to Covid-19 still lacking

The government yesterday, 24 March, moved to the second phase of its Covid-19 response plan. The progression reflects the fact that community transmission is now occurring. As of yesterday, there were 405 confirmed Covid-19 cases in the country, with five deaths. However, it appears that testing remains extremely low, so the true extent of transmission is likely to be higher. Overall, Mexico remains significantly behind most of the rest of the Latin American region when it comes to both containment measures and the economic response to the outbreak. Containment measures Phase two remains relatively mild, especially compared to other countries in Latin America. Educational closures are now formalized, though in practice most schools had already shuttered; gatherings of up to 100 people are still allowed; home-working is encouraged; and the over-65s are urged to avoid public spaces. These measures do not entail a significant shift because many states had already put in place similar (or more rigorous) measures. In parallel, the health system and armed forces will receive extra resources to help their preparedness for what health authorities acknowledge will be a much more serious situation in the months ahead. The health ministry – based on its current strategy – estimates that cases will peak in August. Doubts over the government’s approach remain profound. Health authorities are evasive about when testing started, while insisting they are fully prepared. However, this messaging is at odds with reports coming directly from frontline medical personnel, many of whom complain of a lack of equipment and medicine shortages. As previously discussed, President Andres Manuel Lopez Obrador (AMLO) himself continues to downplay the seriousness of the situation and contradict official health guidance. Economic response The government remains passive on the economic front too. Last week, Congress authorized the finance ministry (SHCP) to relax the government’s primary fiscal surplus target, set at 0.7% of GDP (around MXN 180bn), but there is no sign yet of a major economic stimulus package. Finance Minister Arturo Herrera failed to spell out any significant new spending plans yesterday, 24 March, but instead mainly reassigned existing resources. Also yesterday, AMLO insisted that his flagship infrastructure projects – including the Dos Bocas refinery and the Tren Maya – would all proceed. With Mexican crude hovering around the USD 16/b mark, Dos Bocas makes even less sense now than before. Advancing with the refinery puts state oil company Pemex under additional pressure of a ratings downgrade. Pemex’s financial health is intimately bound up with the sovereign, which faces higher borrowing costs if it continues to support Pemex at the expense of its own rating. Foreign investment veto Against this highly challenging backdrop, the recent cancelation of a major investment project by US company Constellation Brands in Mexicali (Baja California state) – together with the way the decision was reached – could not come at a worse time. The company had already spent USD 900mn on a major new brewery but a public consultation on 21-22 March in which turnout was under 37,000 (out of a population of 1mn in the city) delivered a veto to the project amid public concerns over the impact on local water supplies. The manner and outcome of the consultation sends deeply negative signals about contractual guarantees just as Mexico faces serious adversity on more than one front.

March 25, 2020

MEXICO: Urgency in response to Covid-19 still lacking

BY Nicholas Watson

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March 25, 2020

MEXICO: Urgency in response to Covid-19 still lacking

BY Nicholas Watson

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