riesgo_pais_mexico_banderaECONOMIC CONTEXT

Mexico is among the 20 largest economies in the world and is the second largest economy in Latin America, next we will assess the Country Mexico Risk. In 2014 its economy grew by 2.4%, without forgetting that it depends highly on the health of the American economy. It maintained a similar rhythm of growth in 2015 (2.3%) although it is true that since 2012, the Mexican peso has fallen against the US dollar, the Chinese yuan and the pound sterling. The economy has benefited greatly from the fact that in 2014 it became the largest producer in the subcontinent steadily growing remittances from Mexicans living in the United States. On the other hand, Foreign Direct Investment (FDI) decreased in 2014 but rebounded strongly the following year. Mexico experienced a 38% drop in revenues during most of the year with the drop in the price of oil in 2015, which was, along with a drop in production and a notable reduction in exports, a Mexican trade deficit . Mexico had to increase its deficit and that is why the budget for 2016 had cuts valued at 5.35 billion euros. Mexico continues to suffer from the climate of violence and unemployment also fell to 4.3% in 2015.

MAIN ECONOMIC INDICATORS TO BE TAKEN INTO ACCOUNT

 

COUNTRY RISK MEXICO

 

COMPARATIVE: STRENGTHS AND WEAKNESSES OF THE COUNTRY

country risk mexico

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UNCERTAINTY ABOUT THE FUTURE US TRADE POLICY IS HOLDING BACK GROWTH.

The main engine for the Mexican economy to take off and grow in 2016 was domestic demand. Thanks to easier access to credit and increased remittances from overseas workers.

Exports, for their part, did not benefit from the depreciation of the peso against the dollar due to the slowdown in activity in the United States that is its main customer.

What is expected in 2017?

Growth is expected to remain very weak due to uncertainties surrounding possible trade-related measures with the United States.
It is expected, as the new president-elect Donald Trump commented, the imposition of a 35% tax on Mexican exports to the United States market, something that threatens Mexican industry, since almost 80% of its Exports go there.
Public investment for the reduction of oil and gas revenues, despite the gradual but gradual increase in prices.
With regard to consumption in households, it can be said that the benefits of the expected increase in remittances of Mexican workers living in the United States are not noticeable. (3-4%) established by the Central Bank.

THEY HAVE A “PRUDENT” ECONOMIC POLICY

In 2017, Mexico is expected to follow a prudent fiscal policy due to the reduction in the level of revenues from the energy sector, a weight of the gradual recovery of oil prices so that the government hopes to compensate for the Decrease In public investment spending through the increase of public-private partnerships, as evidenced by the opening of the capital of PEMEX, the national oil and gas company that will bear the burden of investment cuts.

It is true that it is studying the implementation of a new law of fiscal responsibility in the local States. This new law will be a limitation for the issuance of debt (it will only be possible to allow public investment and refinancing of debt).

Regarding monetary policy, the uncertainties caused by Donald Trump and his claims in the reforms, feeding the Mexican peso in 2017 can be very volatile.

Finally, Mexico can use the flexible credit facility for a period of two years by the IMF in May 2016 (8% of GDP) in case of extreme need.

Foreign policy will remain the priority for president Peña Nieto in 2017

It is likely that during 2017, the Mexican government will focus on negotiations with the United States and reign the conditions of the North American Free Trade Agreement (FTA) and to increase the rate of expulsion of Mexican citizens living illegally in U.S. Mexico has no choice but to accept most of the conditions imposed by the United States and that in terms of trade (80% of its exports) is thanks to the United States.

Mexico also relies on the United States for military aid and needs them to obtain information and power faced the fight against drug cartels as organized crime, corruption and violence continue to have an impact on the business climate .

Finally, it is good to note that the energy market reform has proved to be more promising. He also asks that they cover the oil and gas blocks: deep water is likely to take place during the year.

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