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IMF directors urge tax reform in Mexico once economy stabilizes
MEXICO CITY, Nov 4 (Reuters) – Mexico should enact tax reform once a recovery from the COVID-19 pandemic has taken hold to boost the country’s ailing economy, according to recommendations outlined by International Monetary Fund (IMF) directors in a central bank statement on Wednesday.
The Washington-based IMF proposed a tax reform to support spending in the medium-term. Mexican President Andres Manuel Lopez Obrador has resisted raising taxes, although his administration has made efforts to increase tax collection and enforcement.
“Directors generally saw the need for announcement of a credible medium-term tax reform, to be implemented once the recovery is underway, to bolster the space for providing near-term support, close fiscal gaps, lower public debt and finance needed investment and social spending,” the IMF said.
Despite coming from the political left, Lopez Obrador has kept a tight lid on spending and borrowing during his two years in office.
The IMF pointed out that Mexico’s economy is expected to decline by 9% this year due to fallout from the pandemic.
IMF’s directors “recommended broadening the tax base, raising subnational taxes, and reducing VAT gaps while strengthening social safety nets.”
The government should also prioritize public spending to promote inclusive growth, the IMF said, in addition to making full use of an energy sector opening to private capital that Lopez Obrador has consistently resisted.
Some IMF directors said there may be scope for further monetary policy support by Mexico’s central bank, while safeguarding financial stability.
The Bank of Mexico has cut its benchmark interest rate for 11 consecutive monetary policy meetings since August 2019 in a bid to stimulate an economy that was already in recession before the pandemic. (Reporting by Anthony Esposito and Sharay Angulo; Editing by David Alire Garcia and Tom Brown)
Via Thomson Reuters
Mexico remittances continue record run in September
MEXICO CITY, Nov 3 (Reuters) – Remittances sent to Mexico, a major support for the economy and low-income families, rose in September to their third-highest level on record after hitting their second-highest level the prior month, central bank data showed on Tuesday.
Remittances to Mexico in September were $3.568 billion, from $3.574 billion in August and $3.101 billion in September 2019, as Latin America’s second-largest economy was reeling from the impact of the coronavirus pandemic.
Remittances have been on a record run this year.
They reached their all-time high since records began in 1995 in March of this year. The six best months for remittances were all logged in 2020.
Most of Mexico’s remittances are sent by the millions of Mexicans living in the United States and are a pillar of support for Latin America’s second-largest economy, which is on track for its steepest slump this year since the Great Depression of the 1930s.
“Solid workers’ remittance flows have been adding support to the current account and to private consumption, particularly for low-income families, who have a high propensity to consume and are the overwhelming recipients of such transfers,” said Goldman Sachs economist Alberto Ramos. (Reporting by Anthony Esposito; Editing by Lisa Shumaker)
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