Country Risk Service Mexico Updater
The Economist Intelligence Unit, April 2013, Pages: 19
After the approval of important labour and education reforms in late 2012, the agenda of the newly appointed president, Enrique Peña Nieto of the Partido Revolucionario Institucional (PRI), is likely to focus this year on energy, telecommunications, the fiscal sector and security. However, the success of the above will depend on the PRI's ability to negotiate with the opposition, and to challenge the country's powerful entrenched interests. After expanding by 3.9% in 2012, the Economist Intelligence Unit expects GDP to grow by an average of 3.8% in 2013-14, provided that US demand does not falter. As a result of a still uncertain global outlook, we expect the Banco de México (Banxico, the central bank) to hold rates at 4% even if inflation occasionally breaches the target (2-4%). The government will continue to run a modest fiscal deficit without materially impairing creditworthiness in the short term, but will require a comprehensive fiscal reform in order to finance its ambitious agenda. The peso will remain relatively weak, but further currency volatility is possible and some pressure from strengthening could come from the surge in portfolio flows seen since 2012. From 0.8% of GDP in 2012, the current-account deficit will widen modestly in 2013-14 as import demand grows while foreign direct investment (FDI) will increase from its recent low in 2012.
Mr Peña Nieto's six-year presidential term got off to a roaring start with the approval of numerous key structural reforms in his first 100 days, but major challenges lie ahead and drug-related violence remains a concern.
The minutes from Banxico's March 8th meeting (in which the policy rate was cut to 4%) highlight concerns over growth as well as a strengthening peso.
Country Risk Service Mexico Updater
Mexico at a glance: 2013-17
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Rating definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk
Central scenario for 2013-17: Political stability
Central scenario for 2013-17: Election watch
Central scenario for 2013-17: International relations
Central scenario for 2013-17: Policy trends
Central scenario for 2013-17: Fiscal policy
Central scenario for 2013-17: Monetary policy
Central scenario for 2013-17: Economic growth
Central scenario for 2013-17: Inflation
Central scenario for 2013-17: Exchange rates
Central scenario for 2013-17: External sector
Key risk indicators
Ratings summary
Quarterly indicators
International assumptions summary
Economic structure
Public finances
Exchange rates, interest rates and prices
Financial sector
Current account
International liquidity
Foreign payment and liquidity indicators
External trade
External financing requirement
External debt stock
External debt service
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