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Pena Nieto growth malaise ending spurs bets on interest rate hike

By Eric Martin


After Mexico’s economy failed to gain much traction during President Enrique Pena Nieto’s first two years in office, growth is finally starting to pick up. That’s prompted traders to predict the first interest-rate increase since 2008.

The odds that Banco de Mexico will lift its benchmark rate in the next year have jumped to 32 percent, from zero two weeks ago, after an Aug. 21 report showed the economy grew faster than analysts’ estimates in the second quarter. 

The central bank has reduced rates 1.5 percentage points in the past 17 months to 3 percent, the lowest in Latin America.

With the economy topping forecasts for the first time in six months, traders are wagering that Governor Agustin Carstens will look to reverse the rate cuts to guard against a rise in inflation. 

While Pena Nieto has pushed through sweeping changes to the nation’s oil laws that are poised to fuel foreign investment in Mexico and propel growth, the economy last year posted its weakest expansion since 2009 and disappointed analysts earlier this year, hurt by tax increases and a slump in the U.S.


“The strong recent data, in particular the second-quarter GDP report, creates more certainty that the next move in Mexico will be a rate hike and not a cut,” Bill Adams, senior international economist at PNC Financial Services Group Inc. said.

Mexico's elite paid hefty price to hear Bill Clinton

           By Dolia Estevez / Forbes

At least 10 top Mexican business groups and corporations, both public and private, paid millions of dollars for Bill Clinton to speak at their events between 2002 and 2012, according to a review of the family’s federal financial disclosures published by The Washington Post in June.

Over more than a decade, Clinton delivered 14 speeches to 11 different Mexican sponsors. He was paid $3.2 million. 

Clinton’s frequent trips to Mexico since he left the Oval Office come as a sharp contrast to the scant two times he visited the country when he was in office.

Mexico clamps down on migrants riding "La Bestia"

           By Liz Diaz / Reuters

Mexico said on Monday it would use satellite imagery to monitor key railway lines running toward the U.S. border to ensure the safety of the tracks and to help stem the flow of illegal immigrants heading north for the United States.

A top interior ministry official said a dozen satellite-monitored vehicles are to be deployed ahead of cargo trains near Mexico's southern border with Guatemala that Central American migrants often jump on as they journey north.

The vehicles will be charged with monitoring the tracks, relaying real-time data on damage as well as on migrants seeking to climb on the trains.

Reports predict Mexico's energy reform will boost production, creating an "energy renaissance"

By Michael Casey


Mexico’s energy reform will bring the country “enormous benefits” and will be a “game changer” for the nation’s role in the global economy, according to report released Monday.

The report, by the Atlantic Council, a Washington, D.C., -based think tank specializing in foreign policy, predicts that energy reforms that open the country’s oil to foreign investors, among other changes, will accelerate foreign investment and generally “improve the lives of its people.” 

“Mexico is poised for an energy renaissance,” the report predicts.

“It has ample reserves of oil and natural gas, experience in energy production, promising economic fundamentals, and industrial expertise,” the report said. 

“The fundamental obstacle to Mexican energy development was mustering the political will to allow the country access to the expertise, technology, and capital needed to open new energy frontiers. Mexico’s leaders have now decisively found the will to reform and passed a set of laws that can transform Mexico into a major energy and industrial power.”

The report came out the same day as the U.S. Energy Information Agency predicted the energy reforms in Mexico could increase long-term oil production by 75 percent. 

Last year, the International Energy Outlook projected that Mexico’s production would continue to decline from 3.0 million barrels per day in 2010 to 1.8 million barrels per day in 2025. 

The forthcoming Outlook, which assumes some success in implementing the new reforms, projects that Mexico’s production could stabilize at 2.9 million barrels per day through 2020 and then rise to 3.7 million barrels per day by 2040.

Mexico unveils new police force to protect key parts of the economy

By Dudley Althaus and Jose de Cordoba

Wall Street Journal

Mexico's President Enrique Peña Nieto inaugurated a new unit of the federal police force—a scaled-down version of what was initially planned as a larger, independent gendarmerie—that aims to protect key parts of the economy, like mining operations and farms, from drug gangs.

The new 5,000-strong force, modeled after similar units in France, Spain, Chile and elsewhere, was a key element of Peña Nieto's public security strategy during his 2012 presidential campaign. 

Having criticized former President Felipe Calderón's use of the army and navy to take on drug gangs, Peña Nieto and his team envisioned a new 40,000-strong force, with recruits drawn largely from the military, which would answer to civilian authorities and allow the army to return to the barracks.

The smaller force will instead be another unit of the Federal Police. Critics said the new force was too small and would leave the bulk of the fight against the cartels to Mexico's army and navy.

The original plan for the gendarmerie was opposed by the military, which spearheaded the bloody, unresolved campaign against organized crime, according to some analysts. Tens of thousands of Mexican troops still patrol the country's hot spots, including many of the states just south of the U.S. border.

"It was planned to be a very ambitious police force, separate from the federal police as well as the army. But there was a lot of infighting between the army, the navy and the federal police," said Raúl Benítez, a security expert at the National Autonomous University of Mexico.

Mexico's inflation holds above ceiling in early August; jobless rate increases

By Alexandra Alper


Mexican annual inflation remained above the central bank's tolerance ceiling in early August but eased slightly versus late July, boding for steady borrowing costs ahead.

Inflation for the 12 months through the first half of August cooled to 4.07 percent from 4.14 percent during the same period through the second half of July, national statistics institute data showed on Friday.

The figure was above expectations for a 4.03 percent rise and unchanged from the 4.07 percent rate in the year through the full month of July.

The spike last month brought inflation above the central bank's 4 percent ceiling but policymakers expect the pace of consumer price gains to cool by the end of the year. The rate is seen falling to near 3 percent at the start of 2015.

A separate report on Friday showed the jobless rate when adjusted for seasonal swings rose to a four-month high of 5.19 percent last month, from an upwardly revised 4.89 percent rate in June.

The unadjusted jobless rate stood at 5.47 percent in July, well above the 4.8 percent rate the prior month and marking the highest percentage since September 2011.

Mexico's central bank is expected to hold its benchmark interest rate at a record low of 3 percent on Sept. 5 after policymakers last week trimmed their 2014 growth forecast to between 2.0 and 2.8 percent.

Mexico plays the heavy on food ads

           By Amy Guthrie / Wall Street Journal

Mexican authorities are restricting food marketing to children on television and in movie theaters, part of an attack plan against rising health problems as Mexicans get fatter.

The new limits, which became effective in mid-July, go far beyond any measures taken in the U.S. to restrict food advertising. With a third of children in Mexico overweight, and the country's entire population struggling with a high rate of Type 2 diabetes, the government pitched the restrictions as a tough follow-on to the adoption this year of special taxes on sugary beverages and calorie-dense snacks.

"We're pioneers in Mexico when it comes to restrictions on publicity," said Álvaro Pérez, a commissioner at Mexican health protection agency Cofepris who helped establish the advertising parameters. "What we're looking for is an incentive for companies to reformulate their products so that they're healthier."

Mexico's economy grows more than forecast in 2nd quarter as exports pick up

By Eric Martin and Brendan Case


Mexico’s economy expanded more than forecast in the second quarter as a rebound in the U.S. boosted demand for exports, after growth in Latin America’s second-largest economy disappointed in the previous six months.

Gross domestic product climbed 1 percent from the previous quarter, when it expanded a revised 0.4 percent, the national statistics institute said today. 

The median estimate of 14 economists surveyed by Bloomberg was for growth of 0.8 percent. From a year earlier, GDP grew 1.6 percent, compared with 1.9 percent in the first quarter, as Easter fell in April this year and March in 2013. First-quarter growth was revised up.

Exports are bolstering the economy as indicators of domestic demand such as consumer confidence remain weak, central bank Governor Agustin Carstens said last week. Growth is forecast to accelerate in the second half of the year after the government boosted public spending and Banco de Mexico cut interest rates to a record-low 3 percent.

“This print will put an end to the series of forecast downgrades for GDP growth in Mexico,” Carlos Capistran, the chief economist for Mexico at Bank of America Corp., said. “This is good news and is consistent with our view that the economy is in recovery mode.”

Pena Nieto reforms impressive but not so much at home

           Financial Times

Few world leaders can truly claim to be a radical reformer. Enrique Peña Nieto, the Mexican president, is one of the few who might. 

Since assuming office 20 months ago, the telegenic former state governor has led a legislative blitzkrieg of reforms. His onslaught culminated on Aug. 7 when Congress approved a groundbreaking energy law. 

Yet while financial markets have cheered on Peña Nieto’s reform drive, most Mexicans remain unimpressed. One recent poll showed that 45 per cent disapprove of his presidency, while almost half think the country is going in the wrong direction.

In Mexico, street vendors trump retailers in tough times

By Patricia Laya 


As crowds of people make their way through the twisting aisles of one of Mexico City’s largest street markets on a Sunday morning, customers fight for room to peruse everything from blenders to mobile phones to jeans.

These shoppers are choosing cheaper, tax-free, used or contraband merchandise over visiting shopping malls or department stores like Sears, owned in Mexico by billionaire Carlos Slim’s Grupo Sanborns. 

Competition from so-called informal vendors is part of the reason Mexico’s retail association reported an increase of only 0.7 percent in same-store sales in July, missing the 1 percent average increase estimate of analysts compiled by Bloomberg.

Retailers are seeing growth slacken as Latin America’s largest economy after Brazil struggles to pull consumer sentiment and spending out of the doldrums. 

Gross domestic product will rise as much as 2.8 percent this year, down from a previous forecast of 3.3 percent, the central bank said last week. This means retailers are unlikely to see a significant pickup in annual sales growth until next year, when confidence improves, said Banco Ve Por Mas analyst Juan Elizalde.

“The informal economy is one of the main competitors to these department stores,” Elizalde said in a phone interview. “The clients are evaluating the new reality of their pockets, and it’s much cheaper to buy used appliances at a market, if it’s good quality, than pay it by installments in Elektra or Famsa,” he said.

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