Banxico Has No Windfall for the Government After Late Peso Rally

(Bloomberg) --

Mexico’s central bank won’t send any surplus to the government from its 2020 results, squashing hopes of a big payout after a late comeback of the Mexican currency reduced profits from the institution’s dollar-denominated reserves.

Banxico, as the central bank is known, said it did not have any funds to transfer to the government after increasing capital reserves and accounting for prior losses. The central bank pointed to the peso’s rally late last year for eliminating any surplus.

The peso’s gains at the end of 2020 “reduced the local currency value of the assets items included in the Banco de México balance sheet, as well as that of a wide range of liabilities denominated in foreign currency, both of the public sector and private,” Banxico said in a statement Friday.

President Andres Manuel Lopez Obrador last year entertained the idea of receiving a much-needed windfall after the peso plunged to a record low in the depths of the panic over the coronavirus outbreak. Yet by early 2021, he had acknowledged that the strength of the Mexican peso had greatly reduced that surplus, known in Spanish as “remanente.”

“There were calculations that we may get as much as 1 trillion pesos from the Banxico surplus,” he told reporters on Jan. 6. “It’s estimated that this surplus will be very small given the stronger peso,” he said, adding that he was hoping instead for 300 billion pesos.

Mexican Deputy Finance Minister Gabriel Yorio said on April 12 that the central bank may have very little to transfer. The government is engaged in austerity measures and a crackdown on evasion to offset lower tax revenue after the economy sank into its deepest recession since the Great Depression last year.

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