Mexico to tap savings to make debt payments
April 6, 2020
AMLO says he opposes cancelling or postponing debt service payments
Mexico will dip into its savings to make upcoming debt payments, rather than look into opening new lines of credit, President Andrés Manuel López Obrador said during a press conference on Friday.
"What we have in savings will go to pay debt," said AMLO, as the president is know. "Debt service payment, that is untouchable," he added later in the press conference.
Mexico has about 20% of its debt in US dollars, but the Mexican peso has suffered a sharp drop in value in recent weeks, which has made debt payments more expensive for the government. But the government will not take out more debt to face the current crisis, AMLO said.
"There are those who say, 'There's no problem. You can raise [public debt levels], especially in a crisis situation, and once there is growth and a recovery, you can go back to where you were.' I am trying not to do that," AMLO said.
AMLO also said he is opposed to cancelling or postponing Mexico's debt external debt payments, although Mario Delgado, head of the president's party, Morena, in the Chamber of Deputies, recently sent a letter to international lenders and asked them for debt relief.
"We have the capacity to meet the commitments made, even when they left us with a lot of public debt," he said, adding that Mexico's debt stood around MXN10 trillion ($404 billion) when he took office in December 2018.
Mexico's public debt reached around MXN1.7 trillion in debt when Vicente Fox left office in 2006, but it rose to MXN5.2 trillion under Felipe Calderón before climbing to MXN10 trillion during the administration of Enrique Peña Nieto from 2012 to 2018, according to AMLO.
Mexico has gone to the international bond markets twice this year, printing $3.86 billion in dollar-denominated notes and €1.75 billion ($1.94 billion) in euros in January. It also sold $485 million worth of catastrophe bonds in a deal with the International Bank for Reconstruction and Development (IBRD), the lending arm of the World Bank, in March.
S&P Global Ratings downgraded Mexico to BBB from BBB+ after the coronavirus outbreak and a plunge in oil prices sent shock waves through the economy, worsening the outlook for growth and investments.