Mexico: Councils Have Little Margin for Investments

According to expert opinion, the Mexican economy will probably grow about 2.4 percent in 2016.

However, the Mexican crude oil‘s low price has caused the government to reduce their expenses. After the Senate and the House of Representatives had already adopted a lower budget for 2016, further cuts were made in February this year. A slight recovery of the oil prices and therefore higher public expenditure is not expected until 2017.

Another factor that influences the economic situation negatively is the weak development in the US, where about 80 percent of Mexican exports go to. In the first three months of this year the production in the US-industry declined by 1.6 percent, a minor improvement is expected in the course of the year. As a result, the Mexican total exports in 2016 will only increase by 1.8 percent. Furthermore, there are not expected  any impulses for the export economy from Europe and Asia either. According to information, the exchange rate poses the greatest danger to the trading partner Mexico. After the Mexican Peso, compared to the US-Dollar, had already lost value in 2015, prognoses stated that it would lose again one tenth of its value due to low oil prices.  This development was one of the reasons why the Mexican central bank increased the key interest rate by 50 points to 3.75 percent in February. This burdens the economy in the country.

Environmental technology

Water- and waste disposal specifically suffer from the reduced public expenditure. The entire environmental sector had to accept budget cuts of 7.4 percent. According to industry representatives, the responsible municipal councils have very little margin for investments. Impulses come primarily from the private sector, for water treatment for example from the beverage and food industry as well as the textile industry. The energetic use of domestic waste has been a central topic in Mexico for a longer period. So far this predominantly takes place in landfill gas plants. Other technologies like the anaerobic fermentation and thermal processes form the exception.

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In the last few years the amount of waste grew parallel to the population- and economic growth. According to a Mexican statistic in 2012, the Mexican waste generation amounted to 102,894 tons per day.

In the past year, experts expected that the gross domestic product and the private consumption would increase by three to four percent per year within the next five years. According to official prognoses from the Mexican population research institute Conapo (Consejo Nacional de Población), the population will grow from 120.3 million (early 2015) to 126.3 million until 2020, stated the Germany Trade & Invest, the business development agency of the Federal Republic of Germany in 2015. With growing income, the rise of packaging would increase disproportionately in a threshold country like Mexico. Households increasingly bought in formal retail trade and  fell back on convenience products more frequently.

According to information of the ministry of environment Semarnat (Secretaría de Medio Ambiente y Recursos Naturales), 30 percent of the waste was not disposed of correctly. This number resulted from 12 percent of waste generation, whose whereabouts are unknown, 16 percent disposed of on open landfills and another two percent that are rejected from landfills and whose whereabouts are also unknown. The share of waste that is being disposed of properly increased from about 50 percent in 2000 to 61 percent in 2013.

The waste collection in Mexico mainly takes place through informal collectors that are partly paid by the municipalities and equipped with garbage trucks and partly operate on the basis of tips. They carry out a first sorting of resalable materials. Moreover, informal waste sorters work on landfills and dumping grounds. These partly well-organized interest groups are opposed to a strong professionalization in recycling and can exacerbate the labor for private operators. In very few municipalities waste collection is performed by formal employees of municipal or private operating companies. The awarding of contracts to private operating companies is on the rise since the municipalities barely have financial resources apart from central and federal subsidies.

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