Ford to More Than Double Mexico Production Capacity in 2018

2000px-Ford_Motor_Company_Logo.svg2/8/2016 The Wall Street Journal

Ford Motor Co. will build a new assembly plant in Mexico and sharply increase factory output from that country, representing the latest shift of investment abroad by a Detroit auto maker following the signing of a costly new labor deal.

The No. 2 light-vehicle seller in the U.S. plans to add 500,000 units of annual Mexican capacity starting in 2018, more than double what it built in 2015, according to people briefed on the plan. The plan mirrors General Motors Co.’s $5 billion investment to double Mexican capacity by 2018.

Ford will build a new assembly complex in San Luis Potosí, and expand an existing factory near Mexico City. The moves will make room for several models, including a yet-to-be-disclosed hybrid vehicle that is described as a Toyota “Prius fighter,” and will allow Ford to focus its U.S. factories on higher-profit trucks and sport-utility vehicles.

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Mexico’s oil industry now has an organized crime problem

energy - oil_rig2/6/2016 Business Insider

Mexican oil prices fell after a brief rally earlier this week, slipping to $24.47 a barrel on Tuesday and prolonging the slide of one of the country’s most lucrative exports.

In addition to the continuing downstream pain — or the brutally low prices oil is being sold for on the market — Mexico’s oil industry is dealing with a severe theft problem preventing an increasing amount of its production from ever getting to market.

Pipeline theft in Mexico rose 52% in 2015 according to an Associated Press report, a spike that comes after a 43.7% annual increase recorded in 2014.

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Is Mexico’s soda tax working?

114450483_87ef30b539_m2/8/2016 Christian Science Monitor

Mexico has the highest rate of overweight or obese adults in the world, and an estimated 10 million Mexicans have diabetes, doctors say. The country also happens to have the highest per capita consumption of soda, amounting to 70 percent of the total added sugars consumed by the average Mexican, according to a report in The New York Times. Recent research reveals that the Soda Tax passed into law in 2014, may reduce the consumption of sugar-sweetened beverages in the country.

Mexico’s “soda tax” was passed in 2014 as part of a larger effort to lower the rate of obesity and the occurrence of diabetes in the country. Under the legislation, sugar-sweetened beverages (except milk and yogurt) are subject to a tax of 1 peso per liter.

Researchers from the University of North Carolina at Chapel Hill and the Mexican National Institute of Public Health looked at purchasing patterns in more than 6,000 households in 53 large cities, publishing their findings earlier this month in the journalBMJ. Researchers identified a 6 percent decrease in the sale of sugary beverages in 2014, which gradually climbed to 12 percent by December 2014. Lower socio-economic groups showed the highest decrease in consumption, at 17 percent, but purchases went down among all socio-economic groups. There was also a 4 percent increase in bottled water sales.

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Headlines from Mexico

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  1. Francisco Javier Hernandez Garcia, the alleged leader of Beltran Leyva cartel has been detained. Featured on the Mexican government’s list of 122 most-wanted drug traffickers, Hernandez Garcia was arrested with another man when they were found with weapons and suspected drugs in Sinaloa state.

    Read more: El Universal, Jornada, Milenio, Reuters México, Univision

  2. In the continuing case involving Joaquín ‘El Chapo’ Guzmán, this week actress Kate del Castillo is being pursued by Mexican authorities for her involvement with the former cartel leader. The Mexican Attorney General issued a subpoena in January for her to discuss her possible business relationship with El Chapo, and she did not respond.

    Read more: El Universal, Excelsior, Milenio, Jornada, CNN Expansión

  3. The Zika virus is rapidly spreading and Mexico is not being excluded. There are now 37 reports within the country, with four in Nuevo León, a state on the U.S. border, and 4 in the southern state of Oaxaca. The Secretary of Health reported that three of the total 37 cases were imported, one of these from Colombia, and the other 34 became sick while in Mexico.

    Read more: Excelsior, El Universal, CNN Expansión, Milenio

  4. The Congress of the Union met this week to begin the second ordinary period of the 63 legislature. They plan to discuss and vote on laws against corruption and promoting transparency, including reforms in regards to public security. Of the 500 federal delegates, 372 were present, as well as 76 of the 128 senators.

    Read more: Excelsior, Milenio, El Universal

  5. The Mexican peso fell today responding to an employment report released by the U.S. Additionally, the Mexican Stock Exchange also fell slightly after the publication of data from the U.S. showing low job creation.

    Read more: El Universal, CNN Expansión, El Financiero 

Top Mexico forecaster sees growth near 3 percent through 2017: Reuters poll

Pesos by Flickr user Aleiex

2/5/2016 Reuters

Mexico’s economy is expected to gradually gain traction to grow nearly 3 percent this year and next, buoyed by strong services expansion, according to the most accurate Reuters poll forecaster for the country.

JPMorgan economist Gabriel Lozano also expects inflation to rise only modestly from last year’s record annual low of 2.1 percent, paving the way for the central bank to raise interest rates twice this year.

Low inflation and steady growth turned Mexico into Latin America’s bright spot, partly because of its relatively low dependence on commodities coupled with government efforts to boost competition and foster private investments.

However, despite President Peña Nieto’s agenda of pro-market reforms, his government’s early hopes of fast growth close to 5 percent a year remain far from reality.

Mexico, which probably grew just 2.5 percent last year, is set to expand 2.8 percent in 2016 and 2.9 percent in 2017, slightly below consensus in a recent Reuters poll, according to Lozano’s forecasts.

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Publication | The Impact of Crime and Violence on Economic Sector Diversity

By Viridiana Rios, Mexico Institute Global Fellow
December 21, 2015, Harvard University


Literature has focused attention on identifying whether crime and violence impact growth via changes in economic factor accumulation, i.e. reducing labor supply or increasing capital costs. Yet, much little is known as to how crime and violence may affect how economic factors are allocated. Using a unique dataset created with a text-analysis algorithm of web content, this paper traces a decade of economic activity at the subnational level to show that increases in criminal presence and violent crime reduce economic diversification, increase sector concentration, and diminish economic complexity. An increase of 9.8% in the number of criminal organizations is enough to eliminate one economic sector. Similar effects can be felt if homicides rates increase by more than 22.5%, or if gang-related violence increases by 5.4%. By addressing the impact that crime has on the diversification of production factors, this paper takes current literature one step forward: It goes from exploring the effects of crime in the demand/supply of production factors, to analyzing its effects on economic composition.

Download the paper here.

New Publication: Now for Public Debt in Mexico: Policy Lessons for the Effective Oversight of State and Municipal Government Finances

mexican pesosBy Heidi Jane M. Smith

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While Mexico has a very low debt-to-GDP ratio that is slightly above forty percent, its state and municipal portion hovers around 2.5% (IMF, World Economic Outlook Databases, 2012). Subnational governments have consistently been accused of taking on too much debt, allowing irresponsible repayment plans and consenting to outright political corruption. Especially since 2001, the first full year since the country revised its laws governing subnational borrowing rights, Mexico has experienced a significant rise in the indebtedness of its states and municipalities. During the past decade, total subnational debt went from $990 pesos per capita in 2001 to $3,450 pesos per capita in 2011 (ASF 2011). Although Mexico’s overall subnational debt is still at reasonable levels compared to other countries, this nation’s high vertical fiscal imbalances and de facto soft subnational budget constraints could continue to fuel observed trends unless national legislation governing the rights and responsibilities of subnational governments are made. One can argue that the pace of increasing debt has been constant, but it accelerated during the 2009 economic crisis when National GDP decreased substantially (around -6%). Actual proposals to harmonizing accounting standards among state and local governments, increase transparency and improve reporting requirements by the Mexican Ministry of Finance (Secretaría de Hacienda y Crédito Público, SHCP) are only a few steps towards improving fiscal policy at the local level. Reviewing policies to understand debt sources and improving bankruptcy laws to cope with moral hazard issues will help to maintain strong sustainable fiscal balances into the future.

This policy paper argues that alternative revenue sources are necessary for economic growth at the local level, but continued soft budget constraints and lax regulatory environments may also put Mexico’s future into jeopardy. Lessons learned from the United States’ state and municipal financing could provide valuable policy options for Mexico–thus, the paper provides policy recommendations for future public financial management considerations.

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