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

5/26/16 Wall Street Journal 


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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Mexican economic growth hits five-month high in January

3/30/16 Reuters

mexican pesosMexico’s economy grew by 0.6 percent in January from December in seasonally adjusted terms, the fastest pace in five months, figures from the national statistics agency showed on Tuesday.

Growth was driven by a pickup in industrial activity, which advanced by 1.2 percent from the previous month, while the service sector expanded by 0.2 percent, the figures showed.

Compared with the same month a year earlier, Latin America’s second biggest economy grew by 2.3 percent, in unadjusted terms. That was a tenth of a point faster than the same month in 2015.

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Nafta May Have Saved Many Autoworkers’ Jobs

3/29/16 New York Times

TLC_mapWhen Donald Trump threatened to “break” the North American Free Trade Agreement, auto industry workers offered up some of the loudest cheers.

Mr. Trump easily won the Republican primary in Michigan this month. The state, home base for the American auto industry, also delivered an upset victory to Bernie Sanders, the Democratic anti-Nafta standard-bearer.

But the autoworkers’ animosity is aiming at the wrong target. There are still more than 800,000 jobs in the American auto sector. And there is a good case to be made that without Nafta, there might not be much left of Detroit at all.

“Without the ability to move lower wage jobs to Mexico we would have lost the whole industry,” said Gordon Hanson of the University of California, San Diego, who has been studying the impact of Nafta on industries and workers since its inception more than two decades ago.

Even in the narrowest sense — to protect jobs in car assembly plants — a wall of tariffs against America’s southern neighbor would probably do more harm than good.

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Mexico’s Busiest M&A Suitor Has a Billion Euros for Fresh Deals

3/22/16 Bloomberg 

Coca-Cola_Femsa_LogoFomento Economico Mexicano SAB bought more companies than any other in Mexico last year while expanding its burgeoning pharmacy business. Now it’s got a billion euros ($1.1 billion) of fresh ammunition.

That’s likely to translate into new acquisitions as the company looks to replicate its success in building Latin America’s largest convenience-store chain and biggest Coca-Cola bottler, according to Corp. Actinver SAB. One possible target: some of Mexico’s 11,000 gas stations. Femsa’s already adding service stations and the industry is on the verge of transformation since the nation junked a state oil monopoly dating back to 1938.

Femsa and its bottling unit, Coca-Cola Femsa SAB, have completed 19 deals worth a total $6.2 billion in the last five years, the most in Latin America among convenience-store, pharmacy or non-alcoholic beverage companies. Femsa’s sale of euro-denominated debt last week reloads the war chest after it bought drug-store chains last year, including Chile’s Farmacias Cruz Verde SA.

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Mexico Central Bank Cuts Growth Forecast as U.S. Industry Stalls

3/3/16 Bloomberg 

Mexico’s central bank cut its 2016 growth forecast for the third time, saying slower U.S. industrial activity will hurt demand for the nation’s goods.

Gross domestic product will increase 2 percent to 3 percent this year, compared with the previous estimate of 2.5 percent to 3.5 percent, the bank said in its quarterly inflation report published Thursday on its website. Inflation will quicken to slightly above the 3 percent target in the second and third quarters before ending 2016 near 3 percent, policy makers said.

The central bank, led by Governor Agustin Carstens, surprised investors on Feb. 17 by raising the nation’s key interest rate half a point to 3.75 percent and introducing discretionary dollar sales in an effort to head off a rise in inflation expectations stemming from a weak peso. Since the measures were announced, the peso has appreciated the most among major currencies from a record low as economists expect the benchmark rate to rise even further this year.

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Will Mexico’s Economy Finally Start To Grow In 2016?

2/29/2016 Forbes

A few weeks ago I walked with Carlos Salcido, a 50-year-old executive at luxury retailer Palacio de Hierro through the company’s flagship department store in Polanco, one of Mexico City’s wealthiest neighborhoods. Salcido strolled passed well dressed parents and younger customers in private school uniforms and pointed out the in-store boutiques from brands such as Hermes and Tiffany. “Polanco isn’t just the heart of Mexico City, it’s the heart of Mexico. Many brands will have their flagship Mexico or Latin American store here,” he told me. Palacio de Hierro recently made a $300 million investment in its Polanco store and is betting big on Mexico’s luxury market. “In the last 20 years, we’ve had double digit growth every year. We can see luxury growing and growing,” Salcido told me. Overall, despite concerns about a drop in the peso’s value and rock bottom oil prices, Salcido is optimistic about Mexico’s economy. “The top [income bracket] is growing but you have a middle class that is earning more and starting to come in,” he explained.

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Fixing Both Sides of the U.S.-Mexico Border

2/25/2016 The National Interest

By Earl Anthony Wayne, Wilson Center Public Policy Fellow

Vice President Biden and a team of senior U.S. officials travel to Mexico City February 24–25 for a High Level Economic Dialogue (HLED). Why? We trade over a million dollars a minute with Mexico. It is our second-largest export market in the world. Over thirty-five million U.S. and Mexican tourists legally visited one another’s countries last year. Over thirty-four million American citizens are of Mexican heritage.

The criticism that we hear about Mexico too often misses the depth, breadth and strategic importance of the relationship with our southern neighbor and our essential interest in Mexico’s success. Certainly, we must tackle ongoing problems: criminal networks operate on both sides of the border, soaring drug demand in the United States wounds communities with drugs from Mexico and, fueled by drug sales, cartel violence and corruption wounds Mexican communities. Illegal immigration strains systems and worries citizens in both countries.

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