Inefficient public spending blamed for Mexico's economic slowdown

Mexico's economic slowdown is due to inefficient government spending which, despite one of the country's highest budgets in history, has seen record-low public investments, analysts said.

On Monday, experts from the Mexican economic observatory Como vamos held a press conference to share their view on why the country's gross domestic product (GDP) growth has been stagnating.

While individual areas such as private consumption or foreign investment have been showing signs of dynamism, they are not enough to overcome "mediocre growth" overall, said Valeria Moy, director general of Como vamos.

"The government's spending is not generating value. We are not growing as we should due to inefficiency," she said.

According to Moy, the government's target growth rate of 2.7 percent for 2016 seems "very far from reality." The national statistics bureau, INEGI, recently announced that Mexico's GDP contracted 0.2 percent in the second quarter and may only grow by 0.5 percent in the third quarter.

Manuel Molano, deputy director general of the Mexican Institute for Competitiveness, said that Mexico would need to grow 4.9 percent in the second half of the year to reach the 2.7-percent target.

Seeing this as highly unlikely, he said:" If all goes well, the country will close with growth similar to that registered over the last 20 years, around 2 percent."

For Francisco Lelo de Larrea, director of economic studies at the Center for Economic Studies of the Private Sector, a total structural reform of public spending at all government levels is needed to bring added value to the country.

"The lack of value creation is due to the government having reduced spending on investment and has increased spending on current expenditure. We now have the highest public spending in our history: 27 percent of GDP," he stressed.

This stagnation has impacted many sectors severely, including job creation. For example, Moy said, at the beginning of 2016, Como vamos had predicted the creation of 700,000 jobs by the end of July. In reality, only 464,098 new jobs were reported in that time frame.

To fix this, Moy said public spending should be directed to have a multiplying effect, with every dollar spent creating more dollars of value across the value chain.

"It is crucial to establish clear and daring goals so we can follow and evaluate the public policies put in place by the government," she said. Endi