Politically and economically, Mexico returns to the past

Very bad economic news was released yesterday, June 23.

On the one hand, the Inegi released the National Consumer Price Index (INPC) for the first fortnight of the current month, which increased 0.49% compared to the previous fortnight, that is, the second of May. Thus, annual headline inflation reached 7.88%, while core inflation, which includes merchandise (processed food, beverages and tobacco, and non-food merchandise) and services (education, housing and other services) was 7.47 percent.

The worst of the bad news is that the non-core price index, which includes agricultural products (fruits, vegetables, meat, chicken and eggs, milk and others), energy and tariffs authorized by the government, reached 9.13 percent.

On the other hand, given that inflation does not yield, the governing board of the Bank of Mexico decided to raise its leading rate or overnight interbank interest rate to 7.75%, from the 7.00% it set on May 13, when it raised it of 6.50% that was in force since March 25.

Since February 11, the central bank has raised the rate from 5.50 to 7.75%, that is, by 2.25 percentage points, without stopping inflation. Having determined three increases of 0.50 points each since February instead of 0.75 as it was decided yesterday, was a weak response to an inflationary process that since then has been more aggressive than our central bankers and a good number of analysts believed.

Last January, annual general inflation was 7.07%, in February it was 7.28%, in March it was 7.45%, in April it was 7.68% and in May it was 7.65%. The 7.88% of the first half of June shows a strong increase compared to the previous month, similar to the increases observed in February, March and April.

As the panorama looks, the increase in prices and interest rates will continue to hit the already battered national economy and the increasingly empty wallets and bags of Mexicans.

Woe to those who owe large amounts relative to their income, especially to credit card issuers! If by itself most of them will have to tighten their belts and live or survive with less satisfaction, few are those who will be able to reduce or cancel the amount they owe to a station.

James Salazar, deputy director of analysis at CIBanco, interviewed in the newspaper La Jornada, assures that “currently, the average interest rate on credit cards is in a range of 33%, but if the central bank makes the decision to increase the rate constantly, card rates could increase to 37%, the highest level since 2011”.

I often say that the political system that President Andrés Manuel López Obrador intends to impose is similar to the one that prevailed in the period between 1938 and 1982, before the technocrats came to power. Now, I am afraid that the economic reality that we have to face is similar to the one that many of us lived between 1973 and 1999, when annual inflation reached two digits and, as in 1987 and 1988, even three.

We are living in Mexico a true return to the past, both politically and economically, and who knows how long it will take to get out of this dark stage.

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