November 22, 2013
The Mexico Institute’s “Weekly News Summary,” released every Friday afternoon summarizes the week’s most prominent Mexico headlines published in the English-language press, as well as the most engaging opinion pieces by Mexican columnists.
What the English language press had to say…
This week’s press had interesting reports on the Mexican economy. The New York Times published an article describing how dozens of foreign companies are investing and filling in new industrial parks along central Mexico. As a result, middle-class housing is popping up and new universities are waving in classes of students eager to study engineering, aeronautics and biotechnology, signaling a growing confidence in Mexico’s economic future and what many see as the imported meritocracy of international business. On a similar note, the Wall Street Journal noted that even though Latin America has been a laggard among developing markets this year, some advisers are convinced the resource-rich region is poised for a turnaround. But instead of investing once again in Brazil, portfolio managers are finding smaller markets in Mexico and Chile as better bets to tap into Latin America’s long-term growth. Finally, the Economist claimed that to implement and to boost sustaining growth, a bold energy reform is needed. Without it, Mexico’s moment may prove to become fleeting one.
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November 21, 2013
The Wall Street Journal, 11/21/2013
Even though Latin America has been a laggard among developing markets this year, some advisers are convinced the resource-rich region is poised for a turnaround.
But instead of investing once again in Brazil–the 800-pound gorilla in the group–contrarian portfolio managers are finding smaller markets in Mexico and Chile as better bets to tap into Latin America’s long-term growth.
November 7, 2013
The Financial Times, 11/06/2013
The Mexican government is negotiating a more ambitious energy reform than previously expected with the main opposition party, opening up the prospect of market-friendly contracts that could attract billions of dollars into the sector, according to two senior officials familiar with the talks.
Under the discussions between the ruling Institutional Revolutionary Party (PRI) and the National Action Party (PAN), the state would be able to decide the terms of the contracts to be offered for each project, rather than the government’s initial plans for profit-sharing agreements, which had disappointed investors as too tame.
October 28, 2013
Financial Times, 10/27/2013
Mexico is poised to levy some of the world’s harshest royalties on mining companies potentially hurting its business-friendly image just as, paradoxically, it seeks to open its energy sector up to private investment.
The proposal before the Senate, which has a deadline for approval of October 31, would impose a 7.5 per cent flat tax on mining profits, levy an extra 0.5 per cent on profits from precious metals and stop exploration expenses from being immediately tax deductible.
October 28, 2013
Mexico is fast becoming a major player in the “nearshoring” sector for tech and business process exporting. During a recent trip to the city of Guadalajara I visited the Centro del Software, an incubation hub for start-up tech companies. In an article for Americas Quarterly called “Mexico’s Silicon Valley” I explained “Mexico is quietly emerging as a capital of Latin America’s growing information technology (IT) outsourcing industry.”
September 24, 2013
Despite its lackluster performer this year, Mexico is still a favorite investment for Latin America-bound emerging market fund managers. And on Monday, investors were given another reason to like this country.
Retail sales rose 1.3% year over year in July. The headline retail sales index posted a stronger expansion than consensus, which was 0.5%. In seasonally adjusted terms, Mexican retail sales rose 0.6% month over month, also above than consensus.
July 9, 2013
Financial Times, 6/27/2013
A few years ago, as Mexico reeled from one of the worst recessions in living memory, the future looked grim – if not just plain menacing. By regional standards, at least, the 2 per cent average annual growth rate in the years preceding the downturn appeared anaemic. Political stalemate in Congress had all but erased any hope of passing economic structural reforms. A violent war on organised crime had some voices in Washington suggesting that Mexico could even be heading down the path towards becoming a failed state.
Fast-forward to today and Mexico is one of the brightest prospects in Latin America. No longer in the shadow of Brazil, where growth has slowed dramatically, the region’s second-largest country suddenly appears strong and confident. The economy is likely to expand at more than 3 per cent this year after growing 3.9 per cent in 2012. International investors have rekindled their love for Mexico. Between the start of this year and May 8, the country received a net US$5.6bn in fixed-income and equity flows, three times the amount that went to Brazil. Before June’s generalised emerging markets sell-off, this new-found favour helped push Mexican sovereign borrowing costs to record lows, and the stock market to record highs.
June 27, 2013
Under the 1992 mining law, Mexico has granted around 31,000 concessions to some 300 companies for more than 800 mining projects on nearly 51 million hectares. Most of the companies involved are Canadian, according to the economy ministry’s most recent figures. ProMéxico, the government office dedicated to drawing in foreign investment, and the Economic Commission for Latin America and the Caribbean (ECLAC) report that Mexico is the world’s top producer of silver, in third place for bismuth, fifth for molybdenum and lead, and ninth for gold.
In 2012, the mining industry generated 300,000 direct jobs in Mexico, accounted for seven billion dollars in investment, and represented two percent of GDP, according to official figures. ProMéxico predicts that in 2014, the mining industry’s contribution to GDP will rise to four percent, and that in the next six years, the sector will bring in 35 billion dollars in investment, in a country where 70 percent of the territory has significant mineral deposits, according to official estimates. But local communities have clashed with the mining companies because of the deforestation, water pollution and dumping of toxic liquid waste.
June 27, 2013
General Motors Co outlined plans on Wednesday for investing $691 million to expand its Mexican operations, including the previously unannounced expansion of its Toluca engine plant. The plans include a new factory in Silao in central Mexico to build 8-speed transmissions and an upgrade to an existing factory in San Luis Potosi that will make next-generation transmissions, GM Mexico President Ernesto Hernandez said.
With numerous free trade agreements, a cheap, well-educated labor force, and proximity to the lucrative U.S. auto market, combined with growing demand in South America, automakers have been lining up for two years to set up shop or expand in a country that some analysts believe could eventually overtake Brazil as Latin America’s biggest economy. “The automotive sector is today one of the pillars of the national economy, representing more than 20 percent of manufacturing GDP and continues to be, for many reasons, a fundamental industry in attracting investments to productive sectors of the economy,” Hernandez said at a press conference in Mexico City with Mexico President Enrique Pena Nieto.