(Bloomberg) -- President Andres Manuel Lopez Obrador said the nation’s companies shouldn’t expect bailouts or tax amnesties and that Mexico won’t tap a standing credit line with the International Monetary Fund even as other economies take extraordinary measures to fight a slump in activity.
“No more bailouts in the style of the neoliberal period, which were given to banks, to large companies. No, don’t even think that there will be tax forgiveness or other mechanisms that were used before,” Lopez Obrador said Monday in his morning news conference.
Economists are quickly slashing their outlooks for Mexico and now expect Latin America’s second-largest economy to contract 3% this year due to the impact of coronavirus on the local economy and a likely recession in the U.S., Mexico’s top trading partner.
Mexican government health officials say the country is not yet seeing widespread community transmission and authorities have so far avoided some of the most drastic measures taken by other nations on fear of halting economic activity.
MEXICO INSIGHT: Already Weak Economy Vulnerable to Virus Shock
“Don’t stop going out, we are still in phase one. I will say when not to go out,” Lopez Obador said in a video filmed at a traditional Mexican restaurant in the state of Oaxaca and posted on his Facebook page this weekend. “Keep taking the family out to eat,” he said.
While the corporate tax amnesties mentioned by Lopez Obrador during his Monday news conference referred to previous governments, his comments aren’t a promising sign for companies that are currently lobbying for tax breaks to face the impact of the virus.
Business lobby groups including the country’s factory-for-export association. which comprises the top maquiladoras. wrote to Lopez Obrador and his top tax official last week to plead for the postponement of annual tax payments due at the end of March and other reliefs.
“International organizations, analysts and governments do not doubt that there will be a strong negative impact in global growth. Our country is not, and will not be, an exception,” Luis Aguirre, the head of the Index maquiladora lobby, said in the letter to the president.
The lack of counter-cyclical policies in Mexico contrast with the stimulus measures taken by the U.S. and even other Latin American countries. In the U.S., Treasury Secretary Steven Mnuchin announced Friday that U.S. taxpayers would get an extension until July 15 to file and pay taxes while Chile announced a major stimulus package last week that included tax deferrals for smaller companies.
Mexico’s tax agency was taken over at the start of the year by Raquel Buenrostro, a confidant of Lopez Obrador, and she launched a crackdown on evasion by top taxpayers.
In Novemeber, the IMF renewed Mexico’s flexible credit line for two more years while cutting it to $61 billion. The new facility, which serves as a precautionary instrument and has never been tapped by Mexico, is down from a previous $74 billion. Mexico first received such credit line in 2009 during the global financial crisis, and was initially set at $47 billion.
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