Highlights:
GDP Growth and Inflation Expectations: Our projections point to lower growth and inflation;
Monetary Policy: There is ample room to continue with interest rate reductions;
AMLOnomics = Redistribution and no growth. Main Policy Instruments include minimum wage, changes to labor legislation, pensions, and social programs. There is a need to rebalance the model towards more Business-friendly policies to make it sustainable;
Markets indicate that there is a risk that Mexico will lose investment-grade status because of fiscal, institutional, and growth concerns;
Public finances are sustainable if a credible fiscal consolidation is implemented: need to announce a fiscal plan that brings the deficit to 3% of GDP in two years;
The substantial increase in remittances over the last six years has supported the external balance. When remittances stabilize, the external accounts will be challenged. An agenda focused on increasing productivity would minimize these concerns;
The energy sector is an important constraint to growth and public finances: Pemex’s financial weakness can spill over to the sovereign, and electricity supply is a bottleneck for investment and growth;
The Mexico-US relationship is another critical source of risk.
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