Government Plans Anticrisis

Government Plans Anticrisis

With respect to policies or plans to cushion the effects of the financial crisis in 2008-2009 state governments, they reacted fiscal and public investment cut. For example, about 28 sub-national governments took actions to improve economic activity and employment during the most severe part of the crisis, which

A REVIEW OF SUB-NATIONAL GOVERNMENTS IN MEXICO 665

amounted on average to 2.6% of GDP and more than 12,400 million dollars. Next, the main policies are described (see Figure 15).

The Actions Undertaken by the States in Fiscal Policy Are Concentrated in Three Main Sections

A) Tax Incentives

B) Public expenditure and Infrastructure

C) Public sector Savings

Figure 15. Actions by the states in fiscal policy.

Tax incentives. Nine sub-national governments orchestrated some incentive type, exemption, or reduction of the payroll tax rate for companies complied with their payments, to retain or create new jobs or start-ups that are installed in the state. Entities include this support are: Baja California, Mexico City, State of Mexico, Guerrero, Hidalgo, Morelos, Nuevo Leon, Oaxaca, Yucatan and Zacatecas.

In another sense, there are 15 entities, Baja California Sur, Coahuila, Chiapas, Chihuahua, Durango, Guerrero, Jalisco, Michoacán, Querétaro, Quintana Roo, Sinaloa, Sonora, Tabasco, Yucatan and Zacatecas, fiscal stimulus implemented in other taxes and duties as well as the freezing of rates in various public services, incentives, subsidies, guarantee funds, interest-free loans and preferential rates, and to waive fines and surcharges in the payment of taxes and duties.

Public expenditure and infrastructure. In almost all sub-national governments, all executed actions to improve the allocation and efficiency of public spending and higher percentage of spending on infrastructure, promotion of employment and social programs that allowed lessen the effects of the financial crisis in their states.

(1) Support for micro, small, and medium enterprises. In almost all of the governments, there were designed training programs, and preservation of the production plant, lines of credit, financing at preferential rates, economic promotion and local products abroad, among other measures;

(2) Public spending on social programs and services for vulnerable groups. Include study grants and training subsidies to public transport, freezing of rates of some public services, reducing the cost of paying some procedures and services, access to health services, micro-credit support, etc.;

(3) Public spending on infrastructure. Priority in the states in order to lessen the effects of the crisis in order to multiply the effects of the spending in this area and also the regions are in a better competitive position in the medium and long term, the expansion of infrastructure basic and productive in times of economic boom.

A REVIEW OF SUB-NATIONAL GOVERNMENTS IN MEXICO Public sector savings. For the part of rationality and budgetary austerity, 17 states have established some

kind of programs in order to improve the efficiency, effectiveness, and targeting of public spending. The main actions are the reduction of current expenditure without affecting the operation of strategic areas, cost containment, reduction of work places, as well as reducing salaries of top officials of the local government, in some cases.

In conclusion, these actions related to plans and programs of fiscal austerity spending favored investment and social programs over the administrative expenditure, but the effects were not as strong had to slow the fall in tax revenue, they had to resort to borrowing to shore up public budgets.