In an effort to sustain Mexico's economy, Lopez Obrador announced that 75 percent of the national budget that is allotted for general services would not be maximized this year.

Instead, the rest of the money will be directed to infrastructure and welfare projects like the expansion of Pemex and the construction of a railway system despite this frugal move. This decision will affect thousands of micro to medium-sized businesses. 

Over 17,000 small and medium-sized businesses, which provide goods and services to the government, are greatly affected by the austerity measure.


Government Support Needs to Be Diversified

In a report by La Jornada, a researcher at the National Autonomous University, Violeta Rodríguez del Villar, called the decision of the Lopez Obrador administration to redirect spending to various social programs and infrastructure projects "laudable."

She added that if the government wanted to boost the economy, then more financial support was necessary for these businesses. Rodriguez said financial assistance provided by authorities needed to be more "diversified."

The government support must not only provide aid sectors that included state-run petroleum. The national oil company, Pemex, continued to receive support from the federal government through tax breaks and cash injections.

Economic analysts and experts have expressed their concern and criticism over the federal government's failure to support local businesses as they still grapple with the economic shock caused by the pandemic.

CI Banco Analyst James Salazar believed that the new austerity measures were insufficient. "More targeted support measures are needed, considering there are sectors that are badly hit."


Check these out:


Added Austerity Measures Cut Back 75% of the Budget

In an announcement last Wednesday, Lopez Obrador said that he made additional austerity measures that would supposedly aid Mexico's economy this year. In the briefing, he explained that for the economic recovery plan to move forward, there would be a need to slash some spending. He said that 75 percent of the federal budget would not be used this 2020.

Economic analysts openly criticized Lopez Obrador for his economic recovery plan. Professor of political science at Autonomous Technological Institute of Mexico Federico Estevez likened Lopez Obrador to Mr. Scrooge. "His first instinct in a tight spot seems to be slash-spending."

In a national poll, it says the approval rating of the Lopez Obrador administration dropped to 47 percent. Compared to data from 2019, the difference is -17 points.

Earlier this month, Lopez Obrador was still keen to dismiss the seriousness of the pandemic, and its direct effects on healthcare and economic crises, which be believed were "transitory." If he considered essential assistance to Mexicans like business tax relief or rescue packages, he would have mitigated the impact of the crisis.