They punish resources in trusts; Treasury report

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By Paulo Cantillo

The current six-year term will have been characterized by eliminating and reducing the balance in public trusts, despite the fact that, within them, there have been winning instruments.

Data from the Ministry of Finance show that, as of September 2023, there were 173 trusts, mandates and similar, up from a total of 335 at the beginning of the six-year term, which meant the net extinction of 162 of these instruments, before the recent disappearance of the 13 trusts of the Judicial Branch.

In terms of balance, the federal government went from managing one trillion 110 billion pesos at the end of 2018 to 536 thousand 334 million as of September 2023, a reduction of 51.7% in real terms.

But within the trusts, there have been winners and losers: while the stabilization funds or guards for public finances went from 503.4 thousand to 70.3 billion pesos in the six-year period, a reduction of 86% in real terms, the resources for the trust for military equipment went from 5 thousand to 35.9 billion pesos, that is, it multiplied by six in real terms so far in the six-year term.

Jorge Cano, researcher at the Public Expenditure Program of Mexico Evalúa, explained to Excélsior that the net reduction in the number and balance of trusts is evidence of the trend of centralization of spending, in such a way that resources now have to be managed from the federal executive and not from autonomous instruments that allow multi-year flexibility in spending, such as in the cases of science and technology, health or natural disasters.

The expert commented that an example of the discretionary use of trusts is reflected in the Health Fund for Wellbeing (Fonsabi), formerly the Seguro Popular Catastrophic Expense Fund.

He expressed that the outflows from the fund have been much greater than the inflows, and that more than 90% have been directed towards the Federation Treasury, which implies that it is not known if the resources are actually being used for the health sector, nor much less to cover high-cost diseases as it was before.

And another case is the Army trust, which has multiplied by six in the six-year term, and now the Secretary of the Navy manages trusts.

Jorge Cano commented that in the reduction of the balance in the trusts, there have been high opportunity costs, as is the case of the Income Stabilization Funds, both federal and federal entities.

He commented that the government made use of the resources in periods of low interest rates, particularly in 2020, which was the year of the pandemic, so a feasible period to acquire debt and meet spending commitments was wasted, with in order to leave intact the savings that could have been used for another situation.

And in the case of natural disasters, the complication is more evident: now leaving attention to climate catastrophes to the flows in the Budget, and not to a savings fund that, although imperfect, at least had rules for the delivery of resources to the federal entities, and did not leave the reconstruction work at the mercy of political negotiation.

Finally, Cano explained that the reduction of trusts has not been accompanied by greater transparency.

What are trusts?

  • Financial instruments to which the government transfers resources or assets to an institution, in order for them to be used for projects that seek to achieve specific public objectives.

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