Pay hikes at Mexico statistics agency trigger AMLO warning
With an air of defiance, the governing board of Mexican statistics agency (Inegi) has approved pay increases for its top officials that are clearly at odds with the incoming government's austerity initiative now working its way through congress.
The increases went into effect last week.
President-elect Andrés Manuel López Obrador (AMLO) does not takes office until December 1, but the political party backing the incoming leader, Morena, holds majorities in both houses and has already passed an austerity law in the lower house that establishes that no public official may make more than the president.
Outgoing President Enrique Peña Nieto currently makes 209,135 pesos (US$11,056) per month, but once in power, AMLO has promised to roughly halve that amount to between 108,000 and 109,000 pesos per month.
AMLO responded to the Inegi hikes at an event in Tlaxcala state (pictured), saying, "There will be no one who makes more than the president, because this is in the law and whoever fails to comply will be sanctioned, whoever that may be," as reported Wednesday by local daily El Universal.
Increasing on average 6.5% year-on-year, Inegi's wage hikes include an increase in the combined salary and benefits for the agency's president to 198,200 pesos per month from 185,900 pesos with other increases in monthly incomes for the vice president and other key members to between 157,600-189,700 pesos from 147,000-173,000 pesos, according to finance ministry data reported in El Universal.
The majority coordinator for the Morena party in the lower house, Mario Delgado, also responded to the controversial hikes, stressing that the increases will be temporary and will have to be "pushed back."
Senate president Martí Batres, of the same party, categorized the Inegi decision as "insensitive" amid legislative efforts to bring austerity to public spending.
While the final call on government salary cuts will likely not occur until the passage of the 2019 budget in December, the Morena-introduced law would come into effect in January, applying to all three branches of government, as well as decentralized government agencies and government-controlled funds.
Trouble brewing
The emerging showdown with Inegi comes as senior officials at other key agencies, including those at the finance ministry and the central bank, are already headed for the exits with due to the coming pay cuts.
According to a recent report by local media outlet El Financiero, about 200 employees, including more than 20 top managers, have informed the central bank of their intention to take early retirement or resign, citing anonymous sources within the bank. A separate report in Mexican news outlet La Silla Rota puts the total figure at 300.
Top salaries at the central bank are considerably higher than those at the statistics agency. The average monthly salary of the members of the bank's board of governors is 356,000 pesos per month. The head of financial stability earns 155,395 pesos, while the head of operations and payment systems earns 176,222 pesos, according to a breakdown reported by El Financiero.
Compensation in public posts, nevertheless, are already a fraction of what senior officials could earn in the private sector, and with the latest cuts bringing that fraction down to as low as 10%, the new salary levels have made it difficult to find replacements with the incoming administration.
According to La Silla Rota's report, the incoming undersecretary for public expenditures at the finance ministry, Gerardo Esquivel, has been unable to fill the key post overseeing development banks in the country due to "precarious labor conditions" in a nod to the wage austerity.
Could Urzuá pragmatism clash with AMLO ideology?
The developments lend weight to recent concerns being raised that the Mexican bureaucracy may be losing its best and brightest talents amid the push for austerity, and that this could eventually damage the management of public finances and the country's credibility.
While the president-elect and his economic team, led by the future finance minister, Carlos Urzúa, have denied that this will happen, they have yet to convince markets of how they intend to prevent the potential brain drain.
Resolving the issue may be one of the incoming administrations first real tests, pitting Urzúa's reputed macro pragmatism against AMLO's populism-infused ideology, to see how far AMLO is willing to go with austerity to carry out his expensive social and infrastructure projects, while seeking to maintain a macroeconomic balance.
"It is possible that there is more than one finance secretary in López Obrador's administration, not so much because of Urzúa's ineffectiveness, but because of the differences he may have with the president regarding social spending," said Raymundo Tenorio, an economist at Tecnológico de Monterrey, cited by local media outlet El Economista.
He added that Urzúa's agenda appears to be focused on containing spending, but at odds with this goal are the president-elect's plans of raising pensions for seniors and helping young adults who are not in school or the labor market.
AMLO has repeatedly said he would not raise taxes or public debt to finance his programs, relying instead on spending cuts and a crackdown on corruption, but it remains unclear how well this will work.
"Urzúa can handle the stubbornness of his boss (...) he is an intelligent person, but I don't think he'll make it half way through the six-year term," Tenorio said.
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