Mexico Economy Expanded 2.5% in Fourth Quarter on Consumption

2/23/16 Bloomberg

Mexico’s economy in the fourth quarter expanded in line with a preliminary report published last month as domestic consumption rebounded amid record-low inflation.

Gross domestic product rose 2.5 percent from a year earlier, according to final figures released by the national statistics institute Tuesday. From the previous quarter, GDP advanced 0.5 percent. Full year growth accelerated to 2.5 percent from 2.3 percent in 2014.

Mexicans had more money in their pockets last year after the inflation rate fell to the lowest in almost half a century. As a result, consumer spending remained resilient amid falling oil prices and stagnant manufacturing expansion in the U.S., the nation’s main trade partner. Mexico has been a bright spot for growth compared with much of Latin America, with GDP forecast to expand 2.6 percent this year, according to analysts polled by Bloomberg, compared with an estimate for a 0.6 percent contraction in the region.

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Mexico to Keep Credit Rating as Pemex’s Losses Mount, S&P Says

2/16/16 Bloomberg

pemex2Mexico’s efforts to reduce energy subsidies and broaden its tax base is helping to insulate its credit rating as state-controlled oil producer Petroleos Mexicanos confronts a plunge in crude prices, according to Standard & Poor’s.

The fiscal changes enacted in 2014 have helped cushion the blow from a drop in revenue from Pemex, which has accounted for about 20 percent of the national budget, according to Victor Herrera, the managing director for Latin America at S&P in Mexico City. He cited measures including the end of a gasoline subsidy and efforts to bring more workers into the formal economic system.

“We don’t see pressure now as the government has so far reacted to contain this blow,” Herrera said in a telephone interview. “Everyone was criticizing the fiscal reform a few years ago, but look at how it’s helped us cushion this drop.”

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pesos

Mexico Peso Tumbles After Government Signals Spending Cuts Loom

2/09/16 Bloomberg

Mexican pesoMexico’s peso fell to a record low after the government signaled more spending cuts, further damping the outlook for Latin America’s second-biggest economy.

The peso dropped 0.7 percent to 18.8029 per dollar as of 10 a.m. in Mexico City, the most among 16 major currencies tracked by Bloomberg. Its 8.5 percent slide since the end of December marks the worst start to any year since the 1993 redenomination.

Mexico has been caught up in a global currency rout as oil plunges and concerns over the health of the global economy deepen. The plunge in crude, which has already spurred a decline in public spending after revenue from state-owned Petroleos Mexicanos tumbled, also means that Mexico needs to prepare itself for preventative spending cuts for next year, Finance Minister Luis Videgaray said Monday in a radio interview. The oil company, known as Pemex, also needs to reduce spending, Videgaray told Radio Formula.

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Mexican Central Bank Sees Incipient Economic Recovery

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

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

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

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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