Citi to Invest $1 Billion in Mexico Operations, Renames Unit

10/04/16 The Wall Street Journal

citigroupCitigroup Inc. added its name to its closely watched Mexico unit and announced plans to upgrade its retail business in the country with an investment of more than $1 billion by 2020.

The bank said Tuesday the unit, previously called Banco Nacional de México or Banamex, would now be known as Citibanamex. The change ties the Mexican unit, which ran into problems while operating relatively independently a few years ago, more closely to its U.S. parent.

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Bank of Mexico Sticks to 2016 Growth Outlook, Trims 2017 Forecast

5/26/16 Wall Street Journal 

Agustin_Carstens

MEXICO CITY—The Bank of Mexico said Wednesday that it still expects the country’s economy to grow between 2% and 3% this year, but lowered its growth forecast slightly for 2017.

In its quarterly inflation report, the central bank forecast gross domestic product would expand between 2.3% and 3.3% in 2017, less than its previous estimate of 2.5% to 3.5%. The economy grew 2.5% in 2015 and expanded 2.6% in the first quarter of this year.

The main reason for the 2017 change is the lower outlook for U.S. industrial production, which is a driver of Mexican output, Bank of Mexico Gov. Agustín Carstens said at a news conference.

Growth could be better if private consumption in Mexico continues to gain strength, or the economy sees favorable effects from overhauls in areas such as energy, telecommunications and the financial sector. On the other hand, a slowdown in the global economy, and particularly the U.S., and more complex international financial conditions restricting investment could lead to lower growth than expected, the bank said.

The central bank still expects the inflation rate, currently at 2.5%, to remain below its 3% target in coming months, possibly rising temporarily above that level toward the end of the year.

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Mexico GDP Beats Forecasts on Consumer Spending; Peso Rises

4/29/16 Bloomberg Business

pesoMexico’s economy expanded more than analysts forecast for the third time in four quarters as strength in domestic consumption offset weak exports and a drop in oil output. The peso extended its gain, rallying to the strongest level in more than four months.

Gross domestic product rose 2.7 percent in the first quarter from a year earlier, according to preliminary figures released by the national statistics institute Friday. That compared with the 2.4 percent median forecast of 19 economists surveyed by Bloomberg. From the previous quarter, GDP expanded 0.8 percent. The institute will release final GDP figures May 20.

Mexican consumers are spending more as inflation holds near a record low and remittances rise amid weakness in the peso. The country has been a bright spot for growth compared with some Latin American economies such as Brazil, and in an interview last week, central bank Governor Agustin Carstens said it may get even better as factors that have held back the expansion, such as weak exports, begin supporting growth.

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Mexico Has $13.6 Billion Surplus to Pay Debt, Boost Oil Fund

4/12/16 Bloomberg

Oil barrelsMexico will use $13.6 billion from a central bank surplus to pay down debt and boost its rainy day fund, shoring up finances as it prepares a support plan for the beleaguered state oil company Petroleos Mexicanos.

The Finance Ministry will spend 167 billion pesos ($9.5 billion) of the transfer to buy back debt and reduce bond issuance this year, while 70 billion pesos will go to boost the nation’s budget revenue stabilization fund. A plan to help Pemex will be released in coming days, the ministry said in a statement released after the central bank disclosed the surplus.

The government’s response comes after Pemex reported a record $32 billion-loss for 2015, which prompted Moody’s Investors Service to cut its credit rating two notches in March. Finance Ministry officials have repeatedly said that they could give Pemex a capital injection once the company presents a credible business plan.

“What is important is not the funds that you transfer to Pemex, but the quid pro quo for receiving those funds,” said  Alberto Ramos, the chief Latin America economist at Goldman  Sachs Group Inc., in a telephone interview. “If that leads to a leaner and meaner company, I think that’s understandable. Pemex needs to adjust to the new oil price reality and to the more competitive sector.”

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BofA Calls Out Aggressive Swaps Traders as Mexico Growth Slows

4/8/16 Bloomberg

bank of americaTo Bank of America Corp., traders speculating on the direction of interest rates in Mexico may be underestimating the worsening outlook for the economy.

That’s why Ezequiel Aguirre, a strategist at the Charlotte, North Carolina-based bank, is telling clients to bet against them in the swaps market. He says the central bank will only raise borrowing costs by a quarter-point by year-end, half the increase predicted by traders.

Just last week, Mexico cut its growth forecast for 2017 and announced plans to slash spending by an estimated 175 billion pesos ($9.79 billion) after manufacturing exports slowed and lower oil prices crimped revenue. The central bank, led by Governor Agustin Carstens, unexpectedly lifted the key rate by 0.5 percentage point to 3.75 percent in February as part of coordinated government moves aimed at shoring up the peso. The currency has rebounded 6.5 percent since then, easing concern that a weak peso will fan inflation in Latin America’s second-biggest economy.

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UPDATE 1-Mexico central bank unanimous in rate hold, flags risk of peso slump

4/1/16 Reuters

mexican pesosMexico’s central bank was unanimous in its decision to keep interest rates on hold last month, but most board members flagged the risk of a disorderly slump in the peso, which could hit inflation, meeting minutes showed on Friday.

At their March 18 meeting, policymakers voted 5 to 0 to keep their benchmark interest rate at 3.75 percent after a surprise 50-basis-point hike in February to shore up the peso, which has fallen sharply against the dollar since late 2014.

The Mexican currency, which has been battered by tumbling oil prices, however, hit its highest level in 2016 this week after U.S. Federal Reserve President Janet Yellen said the Fed should be cautious in hiking rates.

Fears of a Fed hike spurring capital flight from emerging markets prompted Mexico to raise interest rates in lock step with the U.S. central bank in December.

Some policymakers said Mexico’s bank could adjust interest rates independently of the Fed if inflation expectations diverge from the central bank’s 3 percent target or if faced with further episodes of market volatility.

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Mexican central bank holds rates steady, cites peso rally

3/18/16 Reuters

banco de mexicoMexico’s central bank held borrowing costs steady on Friday, noting that measures taken by financial authorities had helped spur a peso rally.

The Banco de Mexico left its key rate at 3.75 percent, as expected by all 15 analysts surveyed by Reuters this week. In February, the central bank surprised markets with a rate hike aimed at supporting the battered Mexican currency.

The peso has gained about 9 percent since the central bank announced its half-percentage-point hike on Feb. 17 and intervened directly in the foreign exchange market for the first time since 2009.

The central bank said actions by financial authorities had “broken a negative trend in the price of the national currency, which had displayed an overreaction to an adverse external environment” early this year.

A global rally in riskier assets had also helped lift the peso against the U.S. dollar, the central bank said.

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