Mexico's treasury secretary has announced plans to reduce federal budget deficits in the coming years following recent turmoil in the country's currency and stock markets. Finance Minister Rogelio Ramírez stated that the deficit, currently at almost 6% of GDP, will be lowered to around 3% in the near future.
This announcement comes in response to a sharp decline in the Mexican peso and stock exchange, with the peso dropping over 4% against the U.S. dollar and the stock market closing 6% lower. While markets showed signs of recovery early Tuesday, analysts remain skeptical about the feasibility of such rapid deficit reduction.
An analysis report from Banco Base warned that the deficit is likely to remain high next year, posing a risk of a downgrade in Mexico's sovereign debt rating if debt levels continue to rise. Ramírez also emphasized the government's commitment to improving the financial situation of the debt-laden state oil company, Petróleos Mexicanos.
Despite concerns over the economic outlook, Ramírez confirmed his intention to continue in his role as treasury secretary under the new administration led by Claudia Sheinbaum, the recently elected candidate of President Andrés Manuel López Obrador's Morena party. Sheinbaum's decisive victory and her party's apparent super-majority in Congress have raised fears of potential Constitutional changes that could impact democratic institutions and business interests.
Sheinbaum has pledged to maintain the populist policies of her predecessor, despite widespread dissatisfaction with ongoing cartel violence. The government's focus on fiscal responsibility and economic stability will be crucial in navigating the challenges ahead.
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