Mexico Business Forecast Report Q3 2008

Publication Date	May 2008
Publisher	Business Monitor
Product Type	Report
Pages	62
ISBN Number	1744-8891
Product Code	BMI02070

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Summary

Energising Reform A Step in The Right Direction Since assuming leadership in December 006, President Felipe Caldern has led a renaissance in Mexico's reform drive. The latest (and potentially most crucial) package, currently under congressional inspection, concerns energy reform. We believe that there is a growing realisation that the inefficiently-run public energy sector needs restructuring in order to stem dwindling production.

While a wholesale privatisation is not on the agenda, we could see opportunities for private-public partnerships - an encouraging if not overdue step in the right direction, in our view. Meanwhile, the economy is showing a remarkable resilience to a US economic downturn, on the back of firm domestic demand and solid export growth. While we expect real GDP growth to fall to .6% this year (from . % in 007), we expect that the economy will bounce back to .9% by 010.

As pointed out above, Caldern has already managed to inject new life into the reform agenda - a feat that his predecessor Vicente Fox failed to achieve during his entire presidency. This success has led to a marked improvement in Caldern's approval rating (the president's margin of victory in the 006 election was a tortilla-thin 0. % of the vote.) On the security front, a series of explosions on strategic oil and gas pipelines in late 007, which were allegedly carried out by the leftist rebel group, Ejrcito Popular Revolucionario, were a timely reminder that the government still has work to do in order to reduce regional inequalities.

We expect real GDP growth to slow to .6% this year, as the economy cannot wholly escape the likely economic recession north of the border. However, we are increasingly encouraged by the local demand story, diversification of the export base and the accumulation of a sizeable external cushion - all factors that have inspired a level of economic autonomy that Mexico has lacked in previous US downturns. From a medium-term standpoint, the economy remains on the right road to achieving sustainable growth, with long-term inflation expectations well anchored. The vulnerability of the external and fiscal accounts to a drop in international energy prices and the anticipated decline in domestic oil production are both key risks.

The government's ambitious infrastructure development plan is yet further evidence to support the heightened reform drive and improving business environment fostered under the Caldern presidency. The stimulus to local companies and the investment climate could help boost Mexico's overall score in our business environment ratings (currently at .8) over the medium term.

There are significant shortcomings, however, largely focussed within the 'institutions' category.

For instance, the process of opening and closing businesses in Mexico remains time consuming and bogged down in red tape.

Content

Executive Summary
- Energising Reform A Step in The Right Direction
Chapter 1: Political Outlook
- SWOT Analysis
- Bmi Political Risk Ratings
- Domestic Politics
- New Opposition Leader Could Slow Oil Reform
- after A Close Competition That Resulted in A Recount, Alejandro Encinas, A Former Mayor of Mexico City, Won The
- Battle for The Leadership of The Opposition Partido De La Revolucin Democrtica (Prd)
List of Tables
- Table: Cabinet List Mexico: Last Updated 17/04/08
- Table: Mexico - Political Overview
Chapter 2: Economic Outlook
- SWOT Analysis
- Bmi Economic Risk Ratings
- Economic Activity
- Economy Could Surprise in 2008
- with Recent Consumption Activity and Industrial Output Data Posting Faster-than-Anticipated Rates of Expansion,
- We Believe That Mexican Real Gdp Growth May Surprise to The Upside in 2008
List of Tables
- Table: Economic Activity
- Balance of Payments
- Trade Deficit Continues to Widen
- We Continue to Warn of Mexico's Trade Deficit Widening Considerably This Year to The Tune of US$19.8bn, amid
- Provisional Figures of US$2.0bn for February, Far Exceeding Market Expectation
List of Tables
- Table: Balance of Payments
- Fiscal Policy
- Modest Impact of Fiscal Stimulus Package
- with The Release in Early March of A 10-Point Mxn60bn Fiscal Stimulus Programme, President Felipe Caldern
- Has Added to The Two Existing Programmes of The National Infrastructure Fund and Increased 2008 Fiscal Spending,
- to Help Support The Mexican Economy in The Face of An Economic Downturn in The US
List of Tables
- Table: Fiscal Policy
- External Debt
- Responsible Debt Policy Continues
- towards The End of Q108 The Secretara De Hacienda Y Crdito Pblico (Schp - Ministry of Finance and Public
- Credit) Undertook A Series of Buybacks and Cancellations of Global US Dollar-Denominated Bonds in The
- International Markets, to The Value of US$714mn
List of Tables
- Table: Foreign Debt
- Exchange Rate Policy
List of Tables
- Table: Exchange Rate Policy
- Investment Outlook
Chapter 3: Special Report
- Business Outlook for Global Frontier Markets
- Growing Fast on The New Frontier
- The 41 States That Bmi Examines in A New Report on Our Online Service May Make up Only A Small Slice of The
- World Economy, but They Possess Characteristics That Will See Them Gain Importance in The Eyes of Investors and
- Global Businesses over The Coming Years
List of Tables
- Table: Frontier Markets - Key Data and Projections for Top 10 Countries
- Frontier Investment
- Potential and Pitfalls
- The Spectacular Macroeconomic Performance of Frontier Markets in Recent Years Has Been Matched by Mildly
- Successful Efforts to Deepen Capital Markets
List of Tables
- Table: Gdp per Capita, US$ (in Order of % Increase)
- Table: Diversify through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market Indices
- Regional Overview
- Laos
- Neighbouring Economies The Key to Growth
- Laos's Gdp Growth Has Been Boosted in Recent Years as Neighbours China, Thailand and Vietnam Compete for
- Its Natural Resources. Gdp Expansion in 2007 Has Been Estimated at 7.6% and We See Annual Growth Remaining
- above 7% for Our Five-Year Forecast Period
- Yemen
- Huge Potential, but Don't Bank on Gcc Membership
- Markets Do Not Come Much More Frontier than Yemen, and, as Would Be Expected, There Is Huge Potential for
- Development, with The Prospect of Eventual Gcc Membership Likely to Act A Key Investment Pull
List of Tables
- Table: Yemen - Economic Activity
- Democratic Republic of The Congo
- Mining Industry to Drive Growth
- The Democratic Republic of The Congo's Mining Industry Will Be A Key Driver of Growth and Is Likely to Attract
- Significant Levels of Fdi, with Our Real Gdp Forecasts Standing at 8.3% and 7.9% in 2008 and 2009, Respectively
List of Tables
- Table: Democratic Republic of The Congo - Economic Activity
- Cuba
- Investment Prospects after Fidel
- The Accession of A New Leadership Structure in Cuba Has Sparked Excitement That The 45-Year-Old Trade Embargo
- with The US May Be Lifted and Cuba May Move toward Market Liberalisation
List of Tables
- Table: Cuba Macroeconomic Data and Forecasts
- Mongolia
- Minerals to Drive Economic Boom
- Mongolia Is in The Midst of A Massive Resource-LED Economic Boom That Should Lift Gdp Growth into The Double
- Digits and Underpin Robust Increases in Exports and Inflows of Foreign Investment Capital over The Long Term
List of Tables
- Table: Mongolia - Economic Activity
Chapter 4: Business Environment
- SWOT Analysis
- Bmi Business Environment Risk Ratings
- Business Environment Outlook
List of Tables
- Table: Bmi Business and Operational Risk Ratings
- Institutions
List of Tables
- Table: Bmi Legal Framework Ratings
- Infrastructure
List of Tables
- Table: Mexico, Annual Fdi Market Orientation
- Table: Bmi Trade Ratings
- Table: Top Export Destinations
- Operational Risk
Chapter 5: Key Sectors
- Food & Drink
List of Tables
- Table: Mexico Beverage Sectors Value/Volume Sales -- Historical Data & Forecasts
- Pharmaceuticals
List of Tables
- Table: Mexico's Medical Devices, 2006-2012 (US$Mn Unless Otherwise Stated)