Mexico’s AMLO Proposes 81% Increase to Armed Forces’s Budget

(Bloomberg) -- Mexico’s armed forces are set to see an 81% increase under the Finance Ministry’s proposed budget for 2024.

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The largest increase will go to the Defense Ministry, with an allocation of 259.4 billion pesos ($15 billion) that more than doubles the 111.9 billion pesos that was approved for 2023 for the department. Next up is the Navy, with a 72% increase to its budget that takes it to 71.8 billion pesos ($4.2 billion), according to a draft submitted Friday and that is pending congressional approval.

The budget proposal is the latest indication of President Andres Manuel Lopez Obrador’s increasing reliance on armed forces to carry out large infrastructure works and also tasks that used to be run by civilians. The Defense Ministry’s proposed budget includes work on the Maya Train and operating Lopez Obrador’s new state-owned airline, Mexicana. It also includes operating the Felipe Angeles airport near Mexico City.

The Navy, now in charge of administering the country’s ports and customs, also operates Mexico City’s Benito Juarez airport. The National Guard, which is officially not part of the military but has been run by the Defense Ministry under this president, is set to receive 70.7 billion pesos ($4.1 billion), a 4.3% increase from the previous year. A large part of its budget has made its way to the Defense Ministry in past years.

On Monday, Mexican dollar bonds led losses in emerging markets, with an analyst saying the draft budget’s increased spending could in turn increase the risk premium in 2024.

Read More: Mexico Plans Biggest Budget Gap in 36 Years as AMLO Ends Term

The military is “much more rigorous in delivering results than civilian organizations in general,” said Finance Minister Rogelio Ramirez de la O on Monday. He estimated the military spends 70 pesos for every 100 that a private firm spends.

The president’s main infrastructure projects are a driving force behind the government’s plans to boost spending and widen the budget gap in 2024, consolidating his legacy before the next presidential election.

Billed as the government’s “priority project” for 2024, the Maya Train is set to receive 120 billion pesos in next year’s budget. Ramirez de la O said its final cost is set to reach about 500 billion pesos (about $29 billion) from an initial estimate of $7.2 billion. Part of the train is being built by the Defense Ministry.

Read More: AMLO’s Flagship Projects Drive Big Boost in Mexico’s 2024 Budget

--With assistance from Maya Averbuch.

(Updates with bond move in fifth paragraph. An earlier version corrected the headline to reflect budget increase is of 81%)

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