LatinFinance - March/April 2016 - 59

SCORECARD
FINANCE
MINISTRY

Finance ministries are taking bold action to strengthen their countries'
public finances at a time of severe stress. By Miluska Berrospi

Tough love

L

atin American economies were among the emerging markets that struggled to
maintain balance and achieve growth amid global volatility and domestic challenges this past
year.
The 2016 scorecard examines how finance ministries performed under especially difficult
circumstances, including China's slowdown, slumps in oil and commodities prices and sharp
currency moves. The ranking considers ministries' economic management, institutional
strength, transparency and advances in economic development and growth. Sovereign analysts, leading economists and other experts in the region are consulted as part of the selection
process to gain a nuanced understanding of economic performance in the preceding year.
Mexico's finance ministry leads the ranking in 2015, excelling in economic performance
and management, while Peru, Chile, Colombia and Panama round out the scorecard.
In check
The United Mexican States' solid macroeconomic fundamentals, the implementation of
structural reforms, and its integration with the US led many economists to consider the country's finance ministry, led by Luis Videgaray, as one of the most successful this year. 
"Disciplined and prudent," is how Videgaray characterizes Mexico's fiscal management. While the peso has plunged in the outset of 2016, to roughly 19 pesos per dollar in February, from roughly 14.9 pesos a year earlier, the ministry's 2015 achievements include hitting
a 2.13% inflation rate in October, Mexico's lowest rate in almost 50 years and below its
3% target.
"The most important challenge last year was how to deal with the oil shock, [and its impact
on] our public finance," Videgaray tells LatinFinance. "And I think we handled that in a way
the markets understood and reinforced the trust that the market has in Mexico's fiscal policy."
The decline in oil prices, however difficult, also highlights the success of wide-ranging tax
reforms passed in 2013 that aimed to increase Mexico's non-oil related revenues. The results
are clear, as oil comprised 19% of the sovereign's revenues in 2015, compared to 40% in previous years.
The finance ministry complemented this proactive approach by reducing government

spending by 124.3 billion pesos in the
beginning of 2015 and implementing an oil
hedge. The government spent around $773
million on put options in 2014 that granted
Mexico the right to sell 228 million barrels
of oil at about $76.40 per barrel.
"We base our policy on conservative
scenarios, so we'd rather be wrong on the
downside," says Videgaray, who announced
$7.25 billion in spending cuts in February
2016, amid a weakening peso and plummeting oil prices. "That's the reason why we cut
expenditure and we're prepared to do that
as many times as needed in order to keep
our fiscal balance in check."
Energy and telecom reforms, geared
towards garnering private investment,
began to show results last year and partially
spurred $22 billion in foreign direct investment.
In an industry heavily monopolized by
Carlos Slim's América Móvil, international
phone call charges have fallen by 40% and
average mobile phone rates decreased
by 18% as competition has increased and
consumers are more easily able to switch
between carriers. AT&T announced plans

Finance ministry scorecard, 2016
Mexican might
Rank

Country

Minister

1

Mexico

Luis Videgaray

2

Peru

Alonso Segura

3

Chile

Rodrigo Valdés Pulido

4

Colombia

Mauricio Cárdenas

5

Panama

Dulcidio De La Guardia

March/April 2016 - L ATINFINA NCE.COM 59
http://www.LATINFINANCE.COM
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