The government of Andrés Manuel López Obrador acquired 7,021 million dollars of federal reserves from the Bank of Mexico in one week. The largest purchase of international reserves by the federal government since October 2008. The transaction caused a drop in international reserves that went from 205,559 million dollars to 198,537 million. This purchase of international reserves occurs a few weeks after Mexico received 12,117 million dollars from the International Monetary Fund (IMF) through Special Drawing Rights (SDR). The president of Mexico had previously expressed his intention to use these resources to pay the debt, however, as Mexican laws establish that reserve assets cannot be used for this purpose, he would have to buy international reserves directly from the central bank. The Ministry of Finance has not given details about the transaction or the use that will be made of these resources.
“The purchases of dollars by the Government from the Bank of Mexico are not strange, since the federal government has obligations in dollars and turns to the central bank to buy the foreign currency. However, this week the amount drew attention, causing a drop not seen in almost 13 years in international reserves. The purchase of dollars is not exaggerated, but it is striking that they did it in a single week and that the amount also coincides with the financial cost budgeted for Pemex for this year, ”said Gabriela Siller, director of economic analysis at Base Bank.
The federal government paid directly in pesos through exchange operations with the central bank and it is estimated that around 140,000 million pesos were used to buy these international reserves. Regarding the possibility that these dollars come from the Special Rights that the IMF gave to Mexico, the analyst commented that it is not relevant because they were already part of the international reserves of the Bank of Mexico. “The federal government did pay for those dollars, so whether or not they were Special Drawing Rights, it is already the same because they are not labeled in the same bag. The interesting thing about buying dollars will be to know the destination that the Government will give these resources and the origin of the pesos that were used to pay these dollars, ”he explained.
The possession of SDR is part of the reserve of international assets of the Bank of Mexico and its use is determined by the Law of the Bank of Mexico, which establishes that said reserve will have the sole purpose of contributing to the stability of the purchasing power of the Bank. national currency by compensating for imbalances between the country’s foreign exchange income and expenditures. The SDR is an international reserve asset created by the IMF in 1969 as a way to supplement the foreign exchange reserves of Fund member countries, allowing member countries to reduce their dependence on more expensive domestic or foreign debt.
Against this background, Siller pointed out that it is possible that the federal government’s decision had a political objective, rather than an economic objective. “If debt is being prepaid, there is a high opportunity cost for these federal resources that could be applied for the re-filing of highways or a countercyclical fiscal policy to generate employment, the truth is that if it is to prepay debt and in addition to Pemex, it is to continue putting money into it. to a bottomless barrel that will continue to put pressure on public finances ”.
Within these remarks, the analyst specified that at least with this purchase the Executive managed not to violate the autonomy of Banco de México and the purchase does not represent a risk for international reserves because the country still has a considerable amount of more than 198,000 million dollars.
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.