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Country Risk Service Mexico October 2012 Updater

  • Publication Date:October 2012
  • Publisher:EIU
  • Product Type: Report
  • Pages:20

Country Risk Service Mexico October 2012 Updater

Overview

Enrique Peña Nieto, of the Partido Revolucionario Institucional (PRI), and the winner of the July 1st election, will start his term in December by pushing forward an agenda of structural reform. For the reform agenda to succeed, much will depend on his party's ability to negotiate with the opposition, as well as a willingness to challenge the country's powerful entrenched interests The Economist Intelligence Unit expects GDP growth of 3.9% in 2012, owing to solid domestic activity, but downside risks in the short term remain as Mexico's economy remains vulnerable to external headwinds, including another potential US mid-year slowdown. In addition, above-target inflation in recent months could erode the dovish stance of the monetary authorities, although we expect the policy rate to be held at 4.5% throughout 2012-13. Policymakers will continue to run a modest fiscal deficit without materially impairing creditworthiness in the short term, but the incoming government is likely to be less fiscally hawkish than its predecessor. The peso will remain weak and further currency volatility is likely as investors remain wary of riskier asset classes such as emerging-market currencies, but we do not expect the same extent of weakening as in 2008-09, owing to stronger capital inflows.

Key changes from last month

Political outlook

The electoral tribunal dismissed the Partido de la Revolución Democrática's allegations of fraud, paving the way for the PRI to assume the presidency.

Economic policy outlook

The outgoing president's final state of the nation report underlined common ground with the PRI and proposed an ambitious labour-market reform that seeks to add flexibility while eroding unions' power.

Economic forecast

Mexican foreign direct investment outflows outstripped inflows during January-June amid efforts by domestic champions to expand in the US and Latin American markets.

Please Note: Due to the Nature of This Report The Toc is Not Available

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