Mexican government sees gold, silver production down in 2016

4/8/16 Reuters

Gold_Bars
Mexico expects gold and silver production this year to drop while copper output will be flat as low prices continue to weigh on the sector, the government’s top mining official said in an interview.

Mario Cantu, the economy ministry’s general mining coordinator, said gold output this year is estimated to reach about 120,000 kilograms, or down nearly 4 percent compared to production of 124,581 kg in 2015.

Silver production is expected to fall in 2016 by more than 6 percent compared to last year, to reach 5,245 tonnes.

Meanwhile, copper output is seen flat this year at about 540,000 tonnes, compared to production of 540,468 tonnes in 2015. (Reporting by David Alire Garcia)

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How an Overlooked Impact of Mexico’s Drug Violence is Holding Back its Economy

3/19/16 Business Insider

The war on drugs that has raged across Mexico over the past decade has led to the deaths and disappearances of hundreds of thousands of people.

The human costs of the drug war and related violence are well known, but the chilling effect on Mexico’s economic vitality has been harder to measure.

Recent research has shown that high levels of violence in Mexico — like the 7.6% increase in homicide rate the country experienced in 2015 — not only have a negative impact on workers, but also prevent complex economic activities from starting and growing.

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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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Mexico Institute Resources on the U.S.-Mexico High Level Economic Dialogue

Vice President Joe Biden and several other high-level U.S. officials are traveling to Mexico for the third meeting of the U.S.-Mexico High Level Economic Dialogue, which will take place in Mexico City on February 25, 2016. The U.S.-Mexico High Level Economic Dialogue (HLED) was created by Presidents Barack Obama and Enrique Peña Nieto in May 2013, in order to advance strategic economic and commercial priorities that are central to promoting regional economic growth, job creation, and global competitiveness for Mexico and the United States. The HLED meets annually at the cabinet level, and builds on and promotes sustained progress in a range of existing successful bilateral dialogues and working groups.

In a recent interview on NPR’s Marketplace, Director Duncan Wood suggested the meeting would address the Trans Pacific Partnership, including its potential impact on will U.S.-Mexico trade, and how lower energy prices are affecting the economies and competitiveness of the region. The Mexico Institute is pleased to share with you several recent articles regarding U.S.-Mexico economic relations published ahead of the HLED.

Related Material

The United States and Mexico: Building and Designing Things Together
In this article on Forbes.com, former U.S. Ambassador to Mexico and current Wilson Center Public Policy Fellow E. Anthony Wayne joins former Under Secretary for North America of Mexico’s Foreign Ministry and current UNAM Professor Sergio Alcocer to write about U.S.-Mexico trade and the agenda items for the High Level Economic Dialogue.

Depressed Energy Prices Cause Decline in U.S.-Mexico Trade
Deputy Director Christopher Wilson writes about the impact of low energy prices on U.S.-Mexico trade in this post on the Mexico Institute Forbes blog.

The “Bridge to Nowhere” Now Connects the United States and Mexico
On February 4, 2016, Mexican President Enrique Peña Nieto and U.S. Secretaries of Homeland Security and Commerce inaugurated a new border crossing just south of El Paso, Texas and Ciudad Juárez, Chihuahua. Ambassador E. Anthony Wayne and Deputy Director Christopher Wilson discuss this in their op-ed on Forbes.com.

North American Needs to Pivot…to North America
In this U.S. election year, it is important to shift the conversation to the importance of U.S. relations with Mexico and Canada. This column, by the former Canadian ambassador to the U.S., the former Mexican ambassador to the U.S., and the former U.S. ambassador to Mexico, suggests that all three nations increase their focus on advancing trilateral economic relations and improve collaboration on major security issues including illegal trafficking, extremism, and terrorism. This article appeared in The World Post, The Globe and Mail, and El Universal.

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

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

Abstract:

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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