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Mexico: More Unemployment, Taxes and Government Debt

December 26, 2009

PORTFOLIOS
* MEXICO SOCIALIZE NATIONAL SAVINGS
* STATE AND LOCAL GOVERNMENTS monopolize CREDIT
* Where will the money to pay the public debt?
OF JOSE A. PEREZ STUART
The Mexican newspaper Reforma reported Saturday 26 Dec Numbers impressive, which conclusively demonstrates the socialization of people’s savings, next to the impoverishment of the citizens’ income.
In effect, the newspaper explained in the main news of the day how the state and municipal governments in Mexico have taken over the savings bank, via loans contracted with banking institutions in the country, and how, in the same way, individuals and companies have seen reduce their access to finance.
Let’s say a Christian, to understand better:
1 .- As from 2010, as knowledge is widespread, more and pay higher taxes.
2 .- Because of this, we will reduce our purchasing power, our power and our power-saving investment. The capacity we had in those three different items, will be affected, reduced, limited, since by paying more and higher taxes, we will be less available to purchase goods and services, to save and to invest. We will have ceded a majority of the product of our work, the government.
3 .- Additionally, we – entrepreneurs, families, individuals, organizations -, reduced access to capital resources:
A) First, rising unemployment and the consequent fall in sales by companies, has decreased the financial capacity of companies and citizens to save.
B) Second, because the effect of the above, there is less availability of cash in the institutions responsible for financing from consumption to large industrial projects, and
C) Finally, as both the federal government and state governments are keeping banking resources available.
That is, the state apparatus is socializing national savings.
Just like old times to be called Legal Lace imposed on banks, now a substantial part of the resources saved by the public, goes to state coffers.
4 .- But the most unfortunate of all is that the money that the federal government and state governments are demanding … is an additional debt that are becoming all Mexicans. That is, someone will have to pay that money to banks. From somewhere to have to leave that money to cover the commitments made by governments with private financial institutions. Even beforehand, we know that money is for investment in productive works, cost effective, generating high economic benefits. So …?
The Mexican economy is being driven by a very dangerous path. Because sooner or later, when it comes to pay the banks, or be charged more taxes on the people to sovereign debtors have to pay, or be raised Mexico’s foreign debt , or issue money without backing. And any of all these cases, the people who will pay!
The leaders usually go, that is, end their mandates, but the population is what keeps the debt burden.
Moreover, if some predictions are met and output grows 5%, but inflation also rises 5% … you mean in real terms than in 2010 Mexico will not grow.

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