Why can’t international reserves be touched?

The deputy governor of the Bank of Mexico, Jonathan Heath, recently said that the federal government “understands perfectly” the importance they represent and the “danger that touching them would represent.”

Below we explain what international reserves are, who takes care of them and why they are important for the Mexican economy.

What are international reserves?

The Bank of Mexico (Banxico) says that international reserves are highly liquid investments in foreign currency. These resources come mainly from foreign currency obtained by Pemex, which by law must exchange them for Mexican pesos with the central bank.

What is the current level of international reserves?

As of October 25 of this year, international reserves totaled 229,753 million dollars.

What are international reserves for?

They function as an indicator that an economy is capable of meeting its commitments in foreign currency, which provides certainty to its creditors and helps the country have access to resources under better conditions.

They are an important indicator of the payment capacity that a country has to meet its commitments in foreign currency and of the solidity of the Central Bank, in addition to reinforcing the confidence of economic agents in the financial strength of the economy to cover debts. in foreign currency and facilitate the access of national private and public issuers to international capital markets under better conditions, says the Center for Public Finance Studies of the Chamber of Deputies.

Why aren’t reserves used to finance productive activity?

Given that reserves require financing, and therefore have a liability as counterpart, they should not be confused with equity that can be used discretionally. Furthermore, if they were used to finance productive activity, loans to the Government would be incurred, something that the Constitution expressly prohibits.