Mexico Business Forecast Q1 2007

Content

• Chapter 1: Political Outlook
  • BMI Core Scenario
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Domestic Political Outlook
  • Caldern Victory: The Implications
  • With Caldern's victory confirmed, relative calm will return to Mexico for now We believe that the business
  • environment will remain supportive to investment, although AMLO and his supporters will continue to attempt to undermine Caldern's ability to enact vital reforms
  • Table: Cabinet List Mexico
  • Foreign Policy
  • No Thaw In Sight
  • Recent bouts of gamesmanship between outgoing President Vicente Fox and Venezuelan leader Hugo Chvez
  • point towards a prolonged period of political animosity between the two regional powers, which in our view,
  • could have significant repercussions further afield
• Chapter 2: Economic Outlook
  • BMI Core Scenario
  • SWOT Analysis
  • BMI Economic Risk Ratings
  • Economic Activity
  • Solid Platform For Sustainable Growth
  • The upturn in economic expansion in 2006 underlined the recovery made by the export sector, which has faced
  • increased competition from East Asia in recent years We are relatively sanguine going forward, and believe that
  • Mexico's solid macroeconomic fundamentals should increase the prospects of sustainable economic growth
  • over the forecast period
  • Table: Economic Activity Indicators
  • Fiscal Policy
  • Fiscal Improvement Masks Underlying Risks
  • The fiscal accounts still look relatively healthy, and the government should achieve a virtually balanced budget
  • in 2006 While this is encouraging, we are concerned by the vulnerability of fiscal revenue to commodity market
  • volatility and a downturn in Mexican crude oil production As such, we forecast that the fiscal deficit will worsen
  • over the forecast period
  • Table: Fiscal Indicators
  • Balance Of Payments
  • Current Account Set To Weaken?
  • Mexico's external position is still favourable, but as global oil prices recede and external demand slows down,
  • we expect the trade deficit to deteriorate over the forecast period We forecast a trade shortfall of US$547bn
  • in 2006, widening to US$845bn in 2007, and US$1444bn by 2010
  • Table: Balance of Payments Indicators
  • Monetary Policy
  • Ready, Steady, Cut?
  • While an uptick in consumer inflation in H206 has given Banxico some food for thought, we still believe that there
  • is scope for the easing cycle to be resumed in 2007 Much will depend on the US Federal Reserves' own policy
  • decisions, which could ultimately force Banxico's hand
  • Table: Monetary Policy And Exchange Rate Indicators
  • Debt Policy
  • The Debt Reprofiling Continues
  • Over the past few years, Mexico's Finance Ministry (Hacienda) has set out to reprofile the government's debt
  • load, in order to reduce borrowing costs and protect the country against external shocks Overall, the Mexican
  • authorities have employed a solid debt restructuring strategy, by shifting liabilities away from foreign currency,
  • and into the peso Looking forward, we are confident that these measures will help develop and diversify the
  • local debt market, while improving the creditworthiness of the government in the medium term
  • Table: Foreign Debt And Investment Indicators
• Chapter 3: Special Report
  • BMI Sovereign Risk Ratings
  • What And Where Are The Risks?
  • Table: BMI Sovereign RIsk Ratings
  • Latin America
  • Seeing Off The Challenges
  • Table: Latin America Sovereign Ratings - Evolution of Willingness to Pay
  • Table: Latin America Sovereign Ratings - Evolution of Ability to Pay
• Chapter 4: Business Environment
  • BMI Core Scenario
  • SWOT Analysis
  • BMI Business Environment Risk Ratings
  • Legal Framework
  • Labour Force
  • Table: Demographic Indicators (2005)
  • Table: Employment Indicators
  • Foreign Investment Policy
  • Table: Mexico, Annual FDI Inflows
  • Table: Latin America, Annual FDI Inflows
  • Foreign Trade Regime
  • Table: Top Export Destinations, US$mn
  • Table: Breakdown of exports, US$mn / % share
  • Tax Regime
• Chapter 5: Key Sectors
  • Pharmaceuticals
  • Market Summary
  • Drug market growth has been strong in Mexico in recent years Over the next five years, this steady growth
  • pattern should see the Mexican drug market vie for pole position in Latin America with Brazil With the
  • modernisation of the healthcare sector, drug spending is likely to reach around US$163bn at consumer
  • prices in 2010
  • Table: Prescription Market Forecasts
  • Information Technology
  • Market Overview
  • With the increased buying power of domestic consumers supporting growth over the forecast period, BMI expects
  • that the total value of the IT market will increase from US$82bn in 2005 to around US$118bn in 2010
  • Table: Mexico IT Industry Indicators