Mexico New Budget Delay Shows AMLO’s Grip on Congress Slipping

(Bloomberg) --

Mexico’s congress delayed the government’s 2020 spending bill for a second time on Wednesday, violating a legal deadline and raising questions about the ruling party’s ability to govern.

The lower house wasn’t able to meet Wednesday due to protesting farmers blocking access to congress. It plans to vote on the spending portion of the 2020 budget on Friday.

This is the first time Mexico has missed the Nov. 15 deadline since it was introduced in 2004 to prevent budget debates from extending into the new year, according to Ernesto Revilla of Citigroup Inc, who was formerly chief economist at the Finance Ministry. Even though President Andres Manuel Lopez Obrador’s Morena party holds a majority in congress, it hasn’t been able to get the bill through the preliminary stages in which finance committees examine and vote on it.

“This highlights two things: a government that does not function very effectively, even though it has strong leadership and a clear majority,” said Daniel Kerner, a political analyst with Washington-based political risk consultancy Eurasia Group. “More importantly, the challenges of funding AMLO’s pet projects and maintaining a balanced budget without generating serious discontent.”

The marching farmers are demanding more financial support at a time when the government is struggling to rein in spending without sacrificing welfare programs, or aid to indebted state-oil company Pemex.

The senate and lower house approved the revenue portion of the budget in October. Lopez Obrador’s administration has proposed a primary surplus, which excludes debt interest payments, equivalent to 0.7% of gross domestic product, compared with the 1% expected for 2019. That’s the level that the government says is needed to prevent an increase in the nation’s debt relative to gross domestic product.

The government’s failure to meet the deadline sends “a negative signal,” said Revilla of Citi.

“It’s not so much that there are worries about the content of the budget, but rather that some legal dispositions seem not as binding anymore,” he said. “A weaker institutional framework hurts confidence and long run economic growth.”

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, ;Juan Pablo Spinetto at jspinetto@bloomberg.net, Matthew Bristow, Robert Jameson

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