Mexico’s challenging budget, G20 summit

The sharp reduction in the budget deficit envisaged in Mexico’s draft budget for 2025 will have been welcomed as a sign that the new Sheinbaum administration is taking fiscal discipline seriously. But meeting the fiscal targets will be a tall order – the budget is based on rosy growth assumptions and the planned spending cuts will be difficult to deliver. The upshot is that the public debt-to-GDP ratio is likely to remain on an upwards path and there’s a growing chance of a credit rating downgrade further ahead. Elsewhere, Brazil’s President Lula will be disappointed that there was little progress on his key priorities as he hosted the G20 Summit. He appears to have had a better time during bilateral talks with China’s President Xi and there are reasons to think that Brazil will be among those less willing to bow to demands from the incoming Trump administration to curb ties with China.