The Wilson Center’s Mexico Institute has released a series of new essays covering a range of important bilateral issues. We kick off our companion video series, “Charting a New Course,” with a focus on economic interdependence. Mexico Institute Deputy Director, Chris Wilson provides an overview of the scope and depth of U.S.-Mexico economic cooperation and also talks about what can be done to make the alliance stronger. That’s the focus of this edition of Wilson Center NOW.
Mexico’s central bank chief, Agustin Carstens, will remain in office until the end of November, a spokesman for the president said on Monday, amid uncertainty about the impact of U.S. President Donald Trump’s policies on Latin America’s No. 2 economy.
Mexican President Enrique Pena Nieto asked Carstens to stay until Nov. 30, according to the spokesman at the president’s office, who asked not to be identified. Carstens was set to step down at the end of June to take the top post at the Bank for International Settlements in October.
A source at the central bank said Carstens had accepted, adding that the widely respected governor had offered to stay longer.
Mexico’s peso sank to a record low following the November election of Trump, who has threatened to slap tariffs on Mexican-made goods and renegotiate the North American Free Trade Agreement among the United States, Mexico and Canada.
Investors are picking up on the benefits for Mexican silver miners of one of the biggest foreign exchange stories since November’s U.S. election, with the slide in the peso pushing costs lower while silver prices are ramping up.
The peso hit a record low last month at 22.03 to the dollar, pressured by concern over a potential trade war between the United States and Mexico in the wake of Donald Trump’s U.S. election victory.
While some say the worst of the currency’s slide may be over, the peso is expected to remain weak throughout this year, a Reuters poll showed this month.
Between 60 percent and 70 percent of silver miners’ costs in Mexico — from labor to power — are priced in pesos, an industry analyst estimates. For a company that sells its output in dollars, that suggests a significant benefit to cost margins.
With the prospects for loan growth and asset quality less certain in 2017, Mexico’s banks need to make engaging their customers a priority. In fact, their future health may depend on it.
Gallup surveys of banking customers in Mexico in 2016 show they have a lot of work to do. For every one banking customer in Mexico who is fully engaged, another three are indifferent or disengaged — and potentially hurting a bank’s revenue.
Customers who are fully engaged bring 37% more annual revenue to their primary bank than customers who are disengaged do. They use more of the bank’s products and have higher deposit balances in their accounts.
However, Mexico’s banks have the power to change their engagement ratio — and help their bottom line — if they provide better customer service.
Mexico’s central bank is expected to raise interest rates on Thursday after a jump in inflation due to a double-digit gasoline price hike and a weak exchange rate.
The Banco de Mexico is likely to raise its benchmark interest rate on Thursday to 6.25 percent from the 5.75 percent rate it set in December’s meeting, according to 14 of 18 analysts polled last week by Reuters.
“Inflation expectations are clearly rising,” Nomura analyst Benito Berber wrote in a note on Wednesday, noting the central bank had consistently delivered 50 basis point hikes “when it was needed.”
Mexico’s annual inflation rate is expected to have shot up in January to 4.70 percent, which would be its fastest pace in over four years, driven by a 14 percent increase in regular gasoline prices at the start of the month.
An advisor on Donald Trump’s business council is voicing concerns with the President’s approach to Mexico.
Larry Fink, CEO of BlackRock (BLK, -0.62%), met with Trump last week as part of the President’s Strategic and Policy Forum, along with other members, including Tesla (TSLA, +3.70%) CEO Elon Musk and J.P. Morgan (JPM, -0.88%) CEO Jamie Dimon. Fink, who presides over BlackRock’s more than $5 trillion in assets under management, appears to have left the meeting with serious misgivings about the direction President Trump is headed.
Speaking at the Yahoo Finance All Markets Summit on Wednesday, Fink said he is worried that the Trump administration’s anti-globalization and protectionist policies could be dangerous to BlackRock, a global business with clients across more than 100 countries and offices in 30 of them, as well as to the overall stock market.
“For our business to succeed in Mexico, we have to be Mexican,” Fink said, explaining that BlackRock can’t operate simply as an American company if it expects to grow in foreign markets.
Moody’s rating agency, which has put Mexico on watch for a credit downgrade, on Monday said the Mexican government’s debt rose more than expected last year and weak growth could further pressure policymakers this year.
“Worse-than-expected fiscal performance is credit negative for Mexico and weighs on its creditworthiness amid muted economic activity and rising tensions with the United States, its main trade partner, following the U.S. presidential election,” Moody’s Mexico analyst Jaime Reusche wrote in a research note.
The report cited data from the country’s Ministry of Finance, showing the federal government deficit increasing to 2.9 percent of GDP in 2016, up from 2.8 percent in 2015.
The ratings service had expected fiscal consolidation and a deficit reduction to 2.5 percent of GDP for 2016, it said.