Mexican Ministry of Finance to implement stimulus package

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An MXN $485 billion stimulus package unveiled by Mexico on Monday should have an immediate impact, Finance Minister Arturo Herrera said, as Latin America’s second-largest economy teeters on the brink of a recession.

The package comes just days before Mexico’s national statistics agency publishes s econd-quarter growth figures and amid a discussion over whether the economy has slipped into recession .

Mexico is targeting a primary budget surplus of 1% of GDP and Herrera said at a press conference that the package would not affect the budget, since those resources were already in the National Infrastructure Fund . Herrera did not give projections of the impact of the package on economic growth.

“We have decided on actions that would mobilize MXN $485 billion that would allow us to boost the creation of infrastructure projects, incentivize infrastructure investment and private consumption ,” Herrera said.

Herrera detailed that the plan contemplates MXN $50 billion for infrastructure, MXN $320 billion channeled by a development bank, MXN $116 billion for anticipated tenders, and 1.2 million credits for consumer credit via Fonacot, with interest rates of 16-22% at an annual rate with terms up to 30 months .

For its part, the National Mortgage Society will give credit to workers for up to MXN $1.5 million , for which private bank HSBC will enter the program.

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Additionally, Nacional Financiera and Bancomext will give a bigger number of credits to impulse 130,000 small businesses and 370,000 microbusinesses.

Herrera said that the package would include credits, accelerating spending this year and bringing purchases of goods and services that had been scheduled for 2020 forward while also taping an infrastructure fund.

It was not clear how much of it, if any, was new funds.

“Mexico is not immune (to global headwinds) and because of this we have been thinking about starting a program that aims to help the economy ,” Herrera said. “This is a series of actions that will have an immediate impact on the economy.”

A recession would be a blow to President Andrés Manuel López Obrador , who has rejected the notion that the national economy is facing a deep contraction.

Herrera also said that senior official Gabriel Yorio would succeed him as deputy finance minister after he took over from Carlos Urzua , who unexpectedly resigned earlier this month over disagreements in policymaking.