Mexican Central Bank Sees Incipient Economic Recovery

May 12, 2014

finance-market_dataThe Wall Street Journal, 5/9/14

Mexico’s central bank said Friday an incipient economic recovery is under way, citing an improvement in exports and government spending, although many economists remain skeptical whether Latin America’s second-largest economy is clearly picking up after more than a year of anemic economic growth.

Most of the five-member board agreed that the economy started to improve at the end of the first quarter and that the recovery will continue in the coming months, the minutes of its most recent policy meeting showed.

The central bank’s comments come as most economists, and independent bodies such as the Organization for Economic Cooperation and Development, have been lowering their growth forecasts for Mexico for this year. Some economists have been arguing that the Mexican economy has been in a recessive period over the last nine months, something the government denies.

Finance Minister Luis Videgaray has repeatedly said Mexico is growing and generating employment, although at a still unsatisfactory rate. The government, led by President Enrique Peña Nieto, is badly in need of results on the economic front: In its first year in office last year, the economy expanded 1.1%, much lower than the 3.5% growth initially expected. In the first two months of 2014, growth amounted to 1.4%.

The central bank appeared Friday to support the government’s view that the economy is picking up. It said auto industry exports, a main factor of the country’s export engine, rose in February. Most board members argued that private consumption likely improved gradually in the first quarter. Government spending is also seen gaining pace after last year’s delays.

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Mexico Housing Hits U.S. Investors as Plan Collapses

December 6, 2013

Bloomberg, 12/6/2013

Photo by Flikr user LyfetimeThree years into her home-ownership dream, Martha Orozco has had enough. Stuck in a government-sponsored complex called Parque San Mateo that’s two hours away from her $8,000-a-year job as a hospital secretary in Mexico City, Orozco sees only broken promises and blight all around her.

The program has been a disaster. Hundreds of thousands of homes are now derelict after buyers such as Orozco concluded they were located too far from city centers and moved out. Developers, their profits assured by government guarantees, built houses faster than municipalities could connect them to water systems and power grids.

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Mexico Sees Economic-Growth Boost From 2014 Budget

November 15, 2013

The Wall Street Journal, 11/14/2013

luis videgarayIn response to the economic slowdown this year, when gross domestic product is expected to grow just 1.2%, the Congress approved a fiscal deficit for next year equivalent to 3.5% of gross domestic product. This includes financed investment at state oil monopoly Petróleos Mexicanos for 2% of GDP. This year’s deficit is expected to be around 2.4% of GDP.

The infrastructure budget includes significant amounts for roads, ports, railways and water projects, as the government aims to give a boost to the struggling construction sector. Funds have also been earmarked for reconstruction, particularly in the southern state of Guerrero, which was hit hard by tropical storm Manuel in September.

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Mexico has scope for further fiscal reform -S&P

November 8, 2013

Reuters, 11/7/2013

luis videgarayMexico has room for further fiscal reform to improve its tax base because a bill passed by Congress last week still leaves it well behind countries with stronger revenues, credit ratings agency Standard & Poor’s said on Thursday. Mexico’s Congress approved a package of measures last week, including higher taxes for the rich and levies on junk food and stock market gains in a bid to increase the country’s paltry tax take, one of the weakest in the Americas.

Before the tax reform was presented in September, senior officials in President Enrique Pena Nieto’s Institutional Revolutionary Party (PRI) said the aim was to boost revenues by four percent of gross domestic product. But the bill that was eventually floated was less ambitious. And the reform approved is only expected to up the take by around 2.5 percent of GDP by 2018, the finance ministry said.

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Economists dial down projections for Mexico’s growth

October 2, 2013

Los Angeles Times, 10/1/2013

finance-market_dataStorms and insecurity are further eroding once-optimistic predictions for Mexico’s economic growth, analysts say. Mexico’s economy contracted in the second quarter for the first time in four years. The growth rate is more likely about 1.7%, the government says, or half the prediction of just 10 months ago — and a little less than half of last year’s pace. Some private economists put the current rate even lower.

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Mexico’s Pemex to pay income tax on exploration, drilling -minister

August 16, 2013

PENA NIETO-OSCAR NARANJOReuters, 8/15/2013

State oil monopoly Pemex would pay income tax on exploration and extraction of oil and gas under new fiscal rules in the government’s proposed energy sector overhaul, Finance Minister Luis Videgaray said in a newspaper column on Thursday.

The proposal unveiled by President Enrique Pena Nieto on Monday calls for the government to open the oil sector to allow private companies to share profits, but not have a stake in crude as many companies had hoped.

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Videgaray Says Mexico’s Growth to Quicken as Spending Rises

June 18, 2013

luis videgarayBloomberg, 6/17/2013

Mexico’s economic growth will quicken as the government increases spending in the second half of the year, Finance Minister Luis Videgaray said. The economy grew at the slowest pace in more than three years in the first quarter after spending was contained after a new government took over in December, Videgaray said in an interview in London. President Enrique Pena Nieto took office on Dec. 1.

Investor confidence in Mexico has waned after the economy expanded less than analysts expected in the first quarter and government plans to overhaul the state-controlled oil industry were held up. Capital flows also have slowed on signs the U.S. Federal Reserve could scale back asset purchases as economic growth strengthens. “We expect much more accelerated spending in the second semester,” Videgaray said. “The budget is there and the revenue is there.” Mexico’s government spending fell about 7 percent in real terms to 1.16 trillion pesos, or $90 billion, in the first four months of 2013 compared to the year-earlier period, according to data from the central bank.

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