Austerity threatens Mexico with government shutdown

Sheinbaum is finding you can’t cut your way to economic growth.

The Big News Breakdown. Unpacking this week’s most important news.

Claudia Sheinbaum has been walking the thinnest of tightropes since she became President of Mexico. Her popular predecessor ensured that she would win with his blessing but left her a gaping fiscal deficit which she is now stuck with trying to reduce. She has opted to do so through austerity and a crackdown on tax evasion. A tax hike, her administration believes, would sap the private sector of any of it remaining appetite to invest.

The problem is that the private sector is still not investing. It is furious at the draconian methods through which Sheinbaum is charging back taxes to Mexico’s richest people and companies, going as far as to brand it “tributary terrorism.” Add to that worries around economic stability following a radical justice reform and Donald Trump and the main investment indicators have now sunk into negative territory.