Reuters – Mexico has received $2.65 billion from its oil hedging program, the country’s Finance Ministry said on Wednesday, in what is considered to be the world’s biggest sovereign derivatives trade.
NYT -The governor of Mexico’s central bank, Agustín Carstens, will leave his position next July, adding to the uncertainty that has rattled the country’s economy since the election of Donald J. Trump. Carstens, 58, a well-regarded economist, will leave the Bank of Mexico, where he has been governor for seven years, to lead the Bank for International Settlements, a financial institution based in Basel, Switzerland, that acts as a bank for central banks.
By Elisabeth Malkin / New York Times
The town that oil built is emptying out.
“For Sale” signs are plastered on concrete-block houses and sun-bleached bungalows alike. The idled oil workers who used to cluster in the main square, hoping to pick up odd jobs, have moved on.
In Ciudad del Carmen, on the gulf coast of Mexico, even the ironclad union positions are slipping away. Some roughnecks on the offshore rigs of the national oil company, Pemex, have not worked in months, and their voices are filled with anxiety.
“What do you think is going to happen?” some ask.
Pemex has been limping along for years, bleeding billions of dollars annually, saddled with debt and struggling to maintain production as its giant oil fields in the Gulf of Mexico run dry. Next year, it will pump less than two million barrels a day, the lowest output since 1980.
Fixing the oil company was already at the top of Mexico’s list of priorities, the focus of a long debate over the fate of one of its most important — and troubled — national institutions.
Now, that mammoth undertaking has become all the more critical with the United States’ election of Donald J. Trump. As Mexicans steel themselves for an American president who made upending his nation’s relationship with Mexico a cornerstone of his campaign, officials on this side of the border have hastened to reassure the country that Mexico’s economy is sound.
Economist – Almost 25 years ago a Mexican president, Carlos Salinas, took a historic decision. He decreed that his country’s future lay in setting aside its fear and resentment of its mighty neighbour to the north and embracing economic integration with the United States through the North American Free-Trade Agreement (NAFTA). The agreement underpinned the modernisation of part of Mexico’s economy. So the imminent arrival in the White House of Donald Trump, a critic of NAFTA who threatens to build a migrant-blocking wall between the two countries, looks like a disaster for Mexico.
Bloomberg – Mexico is set to earn about $2.9 billion from its oil hedges for 2016, reaping a windfall from plummeting crude prices for a second straight year, according to the International Monetary Fund.
Reuters – Mexico is facing risks to its growth from trade protectionism, the International Monetary Fund said on Tuesday, as it cut its growth forecast for the coming years for Latin America’s No. 2 economy. The IMF revised its forecast for Mexican gross domestic product growth for 2016 to 2.1 percent from a 2.5 percent rate seen in July, according to its annual Article IV report on the country. It cut its 2017 growth forecast to 2.2 percent from 2.6 percent.
Last week, Mexico’s central bank pulled the trigger on a “contingency plan” to weather a Trump presidency. Agustin Carstens, head of the Bank of Mexico, is on high alert. It’s his job to protect his country if Trump acts on what he calls “hurricane” level anti-Mexico campaign promises. For now, he hopes that’s not going to happen.
Reuters – Mexico has an array of tools to face down financial volatility in the wake of the U.S. presidential election, Finance Minister Jose Antonio Meade said on Monday, after Donald Trump’s victory sent the peso into a tailspin.
CNN Money – The Mexican economy posted its worst quarterly growth in two years. Mexico only grew 2 percent between July and September, compared to the same time a year ago. Mexico is losing its step this year for a variety of reasons. The government has cut spending, manufacturing production has been weak and consumer confidence has declined, all holding down overall growth.
Reuters – Mexico’s annual inflation quickened more than expected in September, to close to the central bank’s target rate of 3 percent, just days after its governor warned that if inflation “takes off” beyond that goal, it could entail higher interest rates.
Reuters – Ratings agency Fitch downgraded its growth forecast for Mexico, lowering estimates for the expansion of Latin America’s second-largest economy in both 2016 and 2017. Fitch expects 2016 growth to reach 2.0 percent, from an earlier forecast of 2.4 percent, and sees 2017 growth at 2.6 percent, from a previous estimate of 2.8 percent.
AP – U.S. Treasury Secretary Jacob Lew made a strong pitch for the Trans-Pacific Partnership trade pact during a visit to Mexico on Thursday. Lew strongly defended globalization, but acknowledged that “some industries, towns, and workers” in both the U.S. and Mexico “are feeling the stress of this change.”
AFR – Mexico’s central bank raised its benchmark rate 50 basis points to 4.75 per cent on Thursday, hoping to stem risks that a weak peso could fan inflation after a sell-off in the currency sparked by fears Donald Trump could win the White House.
Xinhua – As the model of building Special Economic Zones (SEZs) has been successful internationally, especially in China, Mexico has decided to develop its own SEZs to boost its development. The goal is to attract investment and generate well-paid jobs across Mexico, said Gerardo Gutierrez Candiani, head of the Federal Authority for the Development of Special Economic Zones (AFDZE).
Reuters – Mexico’s government on Thursday set out plans for a bigger-than-anticipated cut in public spending in 2017, with struggling state oil company Pemex earmarked for a 100 billion peso ($5.36 billion) reduction in funding. New Finance Minister Jose Antonio Meade said the budget foresaw planned spending cuts of 239.7 billion pesos ($12.83 billion), targeting a primary surplus of 0.4 percent of gross domestic product in 2017. It would be the first such surplus since 2008.
Financial Times – Mexico, that most stable and reliable of emerging markets, may be sliding towards a credit rating downgrade. Last week S&P Global Ratings revised its outlook to negative from stable and warned it saw a one-in-three chance of a ratings cut in the next two years due to substandard growth and rising sovereign borrowings.
That caught up with Moody’s, which had lowered its own outlook back in March. And while Fitch, the third of the big three rating agencies, still sees Mexico’s rating as stable, it too warned in July of risks regarding the economy and fiscal consolidation. The problem is the pernicious interplay between growth and debt.
Financial Times – Mexico has spent more than $1 billion to lock in prices for oil exports next year to help protect public finances as its underperforming economy faces intensifying international headwinds, including the timing of a US rate rise and the US elections. The government’s annual hedging program seals in a price of $42 a barrel for 2017.
Financial Times – Protectionist trends in leading economies are threatening the world’s already laggardly growth potential, the head of Mexico’s central bank has warned. Agustín Carstens, the governor of the Bank of Mexico, said that anti-globalisation demands were not confined to the US, where Donald Trump has been vowing to rip up trade deals, but were visible across a range of G20 countries.
TeleSur – A new academic study revealed that only 25 percent of Mexico’s senior population counts on a retirement pension, with the remainder continuing to work or relying on family or community support to survive.
By Sebastian Boyd / Bloomberg
Mexican President Enrique Pena Nieto’s track record of winning ratings upgrades is in serious jeopardy.
On Tuesday, S&P Global Ratings revised the country’s outlook to negative and said there’s at least a one-in-three chance of a downgrade in the next two years if Mexico’s debt increases more than forecast.
It marked the second time in the past five months that a major ratings company lowered the nation’s outlook. The trend has been mirrored in the swaps market, where Mexico is seen as less creditworthy than peer Peru, as well as lower-rated Panama.
The negative outlooks represent a reversal for Mexico, which won upgrades from all three large rating companies as Pena Nieto pushed through historic overhauls of the nation’s energy, telecommunications and banking industries between 2012 and 2014.
But the changes have failed to spark the economic boom that Pena Nieto promised. Instead, his government has repeatedly slashed its growth forecasts amid low oil prices and a sluggish expansion in the U.S., Mexico’s biggest trading partner.
“The economy’s tanking,” said Luis Maizel, co-founder of LM Capital Group. “How many times have they reduced growth expectations? How many times can you use the same excuse: that the U.S. economy is slowing so the Mexican economy is slowing down?”