Mexico’s treasury secretary pledged Tuesday to bring down the federal budget deficits in coming years, after the country suffered a partial meltdown in the currency and stock markets.
Finance Minister Rogelio Ramírez said the federal deficit will be cut from this year’s level of almost 6% of gross domestic product, to around 3% in coming years.
The statement was an effort to calm markets after the Mexican peso dropped more than 4% on Monday against the U.S. dollar, and the Mexican stock exchange slid 6%.
The peso dropped almost another 1% on Tuesday to close around 17.86 to $1. The stock market appeared to be recovering about half of Monday's losses in early trading on Tuesday.
But analysts said it would be difficult to achieve such a quick reduction.
“It is very likely that the deficit will continue high next year, which increases the risk of a downgrade of Mexico's sovereign debt rating, if debt levels continue to grow,” according to a Banco Base analysis report.
Ramírez also said the government would work to improve the financial affairs of the debt-laden state oil company Petroleos Mexicanos.
Ramírez has said he will stay on in the treasury post with Claudia Sheinbaum, the candidate of President Andrés Manuel López Obrador's Morena party, who won Sunday's presidential election.
Sheinbaum’s convincing victory, along with an apparent supermajority in Congress for her Morena party, raised fears that her party will press forward with constitutional changes that would weaken democratic institutions and make an already hostile business environment in some sectors even worse.
Sheinbaum has promised to continue the political course set by her populist predecessor despite widespread discontent with persistent cartel violence.
