| | |  Business News | December 2008 
Mexico Will Speed Up Projects to Help Jobs, Ruiz Says
 Jens Erik Gould & Carlos M. Rodriguez - Bloomberg
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Mexico Economy Minister Gerardo Ruiz Mateos said the government will accelerate infrastructure projects in a bid to allay job losses caused by a global economic slump that has reduced demand for exports.
The government will spend $12.5 billion on roads, ports, railroads and other projects in the first quarter of next year after delays on infrastructure outlays in 2008, Ruiz Mateos, 43, said today in an interview with Bloomberg Television. Officials are also studying new programs to prevent layoffs in the manufacturing industry and to create temporary jobs, he said.
"In manufacturing we’ll suffer the most in terms of jobs because of lower demand for our exports," said Ruiz Mateos, who has a degree in industrial engineering. "I see a very high probability of a radical change in how the budget is applied in this country starting next year."
President Felipe Calderon is trying to alleviate the impact of the slowdown in the U.S., which buys 80 percent of Mexican exports, with a stimulus package worth 1 percent of gross domestic product that includes spending on infrastructure. Ruiz Mateos expects the economy to grow 1.5 percent to 1.8 percent next year, while a central bank survey of analysts reported a median estimate of 0.38 percent.
'Changing a Bureaucracy'
The gap between the government's forecast and economists' projections is due to uncertainty among analysts about officials' ability to avoid bottlenecks and delays that have often plagued public spending in Mexico, Ruiz Mateos said. Most projects slated for 2008 will begin by the end of the year, he said.
"Changing a bureaucracy that has been here for many years is difficult," said Ruiz Mateos, who replaced Eduardo Sojo as Economy Minister in August after serving as Calderon's chief of staff. "We are doing things so that the money is really put to use."
Calderon plans to direct 2.5 trillion pesos ($183.8 billion) in public and private funds to public building projects during his six-year term. The new infrastructure will also boost trade and private investment by increasing energy supplies, cutting transportation times and making ports more accessible, the government says.
Mexico may announce before the end of the year a program to help manufacturing companies avoid firing skilled workers, Ruiz Mateos said. The government is contemplating a separate measure that would create temporary jobs in areas such as road maintenance and school construction, he said.
Job Growth
Mexico's job growth will slow next year to less than 300,000, Ruiz Mateos said. The country added about 375,000 formal workers registered with the Social Security Institute in the first ten months of this year. Calderon aims to generate 800,000 new jobs a year by the end of his term in 2012.
Ruiz Mateos confirmed a projection by Deputy Finance Minister Alejandro Werner that foreign direct investment may fall 10 percent to 20 percent next year due to the global credit crisis.
Some companies including Fiat SpA, Italy's largest carmaker, have stopped or delayed Mexican projects this year, Ruiz Mateos said. Mexico may receive $18 billion to $19 billion in foreign direct investment in 2008, he said. The country took in $27 billion last year.
The 20 percent decline in the peso since Oct. 1 will have a "repercussion" on consumer prices because of the higher cost of imports, Ruiz Mateos said. Still, inflation will slow in 2009 since commodity prices have eased and the government expects electricity costs to fall in coming months, he said.
"If demand is limited, prices will have to be controlled," he said.
Deteriorating Security
Violence caused by organized crime and drug traffickers, which has led to more than 5,000 deaths this year, isn't a major deterrent for foreign investors, said Ruiz Mateos, who managed finances for Calderon's presidential campaign in 2006.
Finance Minister Agustin Carstens said in October that deteriorating security is reducing gross domestic product annually by 1 percent. GDP in 2007 totaled 10.5 trillion pesos.
"Evidently it's an issue, but it hasn't been a determining factor for investment flows," Ruiz Mateos said. "Investors see the seriousness with which the government confronts the problems."
Ruiz Mateos also said a proposal by lawmakers to expand the mandate of the central bank needs to be analyzed before the government gives a position on the matter. Gustavo Madero, Senate leader for Calderon's National Action Party, said lawmakers may submit a proposal next year to expand Banco de Mexico's mandate to include monitoring economic growth in addition to inflation, newspaper El Financiero reported yesterday.
To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9(at)bloomberg.net; Carlos M. Rodriguez in New York at carlosmr(at)bloomberg.net |
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