Country Forecast Mexico August 2017

Country Forecast Mexico August 2017

  • August 2017 •
  • Report ID: 1698008 •
  • Format: PDF

Policy towards private enterprise and competition


2017-18: Enforcement of competition policy continues to face stumbling blocks in spite of new legislation.


2019-21: New government seeks to court business sector, but efforts to improve competition will face challenges.


Policy towards foreign investment


2017-18: Overhaul of Pemex, the state-owned oil company, and better terms offered to public-private partnerships. Profit-sharing contracts allowed in the energy sector and improved contract terms attract bids, despite low oil prices.


2019-21: Focus on promoting design in automotive, aerospace and other high value-added sectors. Stronger investment links with Asia and Latin America encourage diversification of foreign direct investment sources.


Foreign trade and exchange controls


2017-18: The US continues to dominate trade flows, despite some diversification of trade partners. North American Free-Trade Agreement (NAFTA) renegotiation carries risks but changes likely to be moderate and focused on regulatory updates. Peso remains volatile.


2019-21: Large network of free-trade agreements and greater investment by China facilitate more sustained export growth.


Taxes


2017-18: Limitations of fiscal reform and lower oil revenue compared with pre-2014 levels compel federal government to consider further fiscal measures. Some, as with petrol price increases in January 2017, will be strongly opposed.


2019-21: Government seeks to resume higher spending on infrastructure and social programmes, but funding is difficult in absence of further fiscal reforms. Possibility of cuts in personal income tax rates, as well as corporate taxes for small and medium-sized enterprises (SMEs).


Financing


2017-18: Access to financing for SMEs improves as banking sector reform expands financing and bank competition. However, lending to larger firms and government will continue to dominate.


2019-21: Market for debt and equity issues grows more strongly, owing to expansion of investment portfolios and as private pension funds exploit greater investment flexibility. Development bank sector expands, owing to banking reform.


The labour market


2017-18: Efforts to reduce labour informality largely fall flat over the remainder of the current government's term.


2019-21: The labour market continues to struggle as a result of low wages and poor worker protection. The new government will seek to roll back some of the flexibility-boosting measures of labour market reform in 2012.


Infrastructure


2017-18: Infrastructure upgrading curtailed in the short term as a result of government spending cuts.


2019-21: Private-sector participation in the energy sector begins to materialise. New government will be keen to boost infrastructure investment but will struggle, owing to fiscal constraints.



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