©Reuters

José Antonio Meade, Mexico’s finance minister

José Antonio Meade, Mexico’s new finance minister, has ramped up the country’s two-year-old austerity drive in his 2017 budget, pledging spending cuts and a return to a primary surplus for the first time since 2008.

The 2017 cuts add up to almost 240bn pesos ($12.9bn), well above the 169bn pesos in belt-tightening already announced for this year, and cuts of 124bn pesos last year.

Mr Meade, who only took up the post on Wednesday after Luis Videgaray resigned over last week’s disastrous visit by Donald Trump, told reporters the spending cuts would come from state oil company Pemex, cuts in government personnel, and from slashing government operating costs by about a fifth.

A hefty burden — about 100bn pesos — of the cuts will come from Pemex. Mr Meade, who only had about 30 hours to digest the package before presenting it to Congress, said Mexico’s oil production is expected to be 1.9m barrels per day, its lowest level in nearly 40 years.

The budget forecast growth of between 2 and 3 per cent for next year. The government and central bank have repeatedly pared their forecasts after a collapse in oil prices, a slow economic pick-up in the US, with which the Mexican economy is closely entwined, and weakness in the industrial sector that contributed to Mexico’s economy contracting in the second quarter for the first time since 2013.

Mr Meade, a widely respected technocrat who held the finance portfolio in 2011-12, is tasked with boosting growth while taming worrying rises in Mexico’s debt — something that has prompted sovereign ratings downgrades.

He highlighted a planned primary surplus equivalent to 0.4 per cent of gross domestic product and a public sector borrowing requirement of 2.9 per cent of GDP, which he said was on the way to achieving an official goal of 2.5 per cent by the end of President Enrique Peña Nieto’s term in 2018.

“This is a responsible package that sends the signals that markets expect,” said Mr Meade, The budget also targets inflation of 3 per cent and an exchange rate of 18.2 to the dollar. The peso has slumped to historic lows in recent months, on uncertainty about timing of US rate increases and the US election, though the currency has since stabilised.

Mr Videgaray, the president’s closest aide, quit despite defending to the hilt the meeting he had engineered with the Republican candidate whose racist rhetoric and vow to build a border wall has outraged Mexicans. 

Mr Trump on Wednesday claimed Mr Videgaray’s scalp as a trophy that proved “how well we did” on the Mexico trip. By Thursday, he had made an abrupt about-face on Twitter, lauding the “brilliant finance minister and wonderful man” he said Mexico had lost. “With Luis, Mexico and the United States would have made wonderful deals together — where both Mexico and the US would have benefited,” he tweeted.