The Government of López Obrador makes the largest purchase of international reserves in the Bank of Mexico in 13 years: 7,021,000 | Economy

The government of Andrés Manuel López Obrador acquired in one week 7,021,000 dollars of federal reserves in the Bank of Mexico. The largest purchase of international reserves by the federal government since October 2008. The transaction caused a drop in international reserves from $ 205,559,000 to $ 198,537,000. This purchase of international reserves comes a few weeks after Mexico received $ 12,117,000 from the International Monetary Fund (IMF) through Special Drawing Rights (SDRs). The President of Mexico had previously stated his intention to use these resources for the payment of debt, however, as Mexican law states that reserve assets cannot be used for this purpose he should directly purchase international reserves at central bank. The Secretary of the Treasury has not given details about the transaction or the use that will be given to these resources.

“Government dollar purchases at the Bank of Mexico are not uncommon, as the federal government has dollar obligations and turns to the central bank to buy foreign exchange. However, this week it drew attention. the sum, which caused an unseen fall in international reserves in almost 13 years.The purchase of dollars is not exaggerated, but it is noteworthy that they have done so in a single week and that the sum also coincides with the cost budgeted by Pemex for this year, “said Gabriela Siller, director of economic analysis at Banco Base.

The federal government paid directly with pesos through foreign exchange transactions with the central bank and it is estimated that about 140 billion pesos were used to buy these international reserves. On the possibility that these dollars come from the Special Rights that the IMF gave to Mexico, the analyst has commented that it is not relevant because they were already part of the international reserves of the Bank of Mexico. “The federal government did pay for these dollars, so whether or not they were special drawing rights because it’s the same because they are not labeled in the same bag. The interesting thing about buying dollars will be to know the destination which will give the Government these resources and the origin of the pesos that was used to pay these dollars, ”he detailed.

The holding of SDRs is part of the Bank of Mexico’s international asset reserve and its use is determined by the Law of the Bank of Mexico, which states that the sole purpose of the reserve will be to assist the stability of the purchasing power of the national currency by compensating for imbalances between the income and expenditure of foreign exchange. The SDR is an international reserve asset created by the IMF in 1969 as a way to supplement the foreign exchange reserves of Fund member countries, allowing member countries to reduce their dependence on more expensive domestic or foreign debt.

Against this background, Siller noted that it is possible that the federal government’s decision had a political purpose, rather than an economic one. “If debt is being prepaid there is a high opportunity cost for these federal resources that could be applied to road repackaging or a countercyclical fiscal policy to generate employment, the truth is that if it is to prepay debt and more Pemex is continuing to throw money into a bottomless barrel that will continue to put pressure on public finances. “

Within these remarks, the analyst said that at least with this purchase the Executive managed not to violate the autonomy of the Bank of Mexico and the purchase does not pose a risk to international reserves because the country still it has a considerable sum of more than $ 198 billion.

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