By MCT Information Services
Barely a quarter-century ago, Mexico’s all-powerful presidents could run any of the nation’s 31 governors out of office at will. Then the pendulum began to swing. In the last decade, the power of governors grew to such levels that they became known by the moniker “little viceroys.”
Now the pendulum is swinging again, with Mexican President Enrique Pena Nieto and his political party, the Institutional Revolutionary Party, or PRI, pressing several initiatives designed to cut the power of governors.
One, adopted in November, forces state and municipal governments to reveal more details of how they spend their money.
A second initiative, under discussion this week, would affect state elections, which historically have been manipulated by governors who control the voting apparatus in each state. Under the proposal, state elections would be run by the federal electoral institute, not the states.
“The president has the governors on the run,” said Joy Langston Hawkes, a political scientist at the Centre for Research and Teaching of Economics, a Mexico City think tank.
Currently, state governors enjoy little oversight and torrents of money from Mexico City. They control state health and educational services, run state elections, operate state police, play a huge role in the federal Congress through their hand-picked candidates, finance state judiciaries and wield power over the state media through the purchase of advertising. Many grow inexplicably rich in office.
Ironically, Pena Nieto is a former governor, who ruled the state of Mexico during the height of the buildup in governors’ power.
Reuters and TNW
Yahoo Inc. said on Thursday that a Mexican appellate court had thrown out a $2.75 billion ruling by a lower court against Yahoo and Yahoo Mexico in a contractual dispute with two Mexican firms.
The Superior Court of Justice for the Federal District in Mexico agreed to overturn all monetary awards against Yahoo and reduced the monetary award against Yahoo Mexico to $172,500.
It was not immediately clear when the court issued its ruling.
The original ruling late last year was equal to an estimated 40 percent of Yahoo's 2012 cash balance, and its scope and size perplexed the tech world.
The non-final judgment was made in favor of Worldwide Directories, a holding company of Ideas Interactivas, against Yahoo in Mexico with regards to yellow pages listings. Ideas Interactivas is the publisher of Yahoo! Páginas Útiles, a printed and online phone book for Mexico with business listings, similar to the yellow pages.
It’s still unclear what went wrong between the two companies, but it’s been over nine years since the original deal was struck.
A Yahoo spokeswoman said in a statement that the company would not be commenting further on the case.
http://www.reuters.com/article/2013/05/16/us-yahoo-mexico-idUSBRE94F18D2... http://thenextweb.com/insider/2013/05/16/court-grants-yahoos-appeal-and-reverses-ruling-for-2-7-billion-mexican-yellow-pages-breach-of-contract/"> http://www.reuters.com/article/2013/05/16/us-yahoo-mexico-idUSBRE94F18D2... http://thenextweb.com/insider/2013/05/16/court-grants-yahoos-appeal-and-reverses-ruling-for-2-7-billion-mexican-yellow-pages-breach-of-contract/
Seismic activity is continuing at the Popocatepetl volcano near Mexico City and authorities say they have readied shelters and identified evacuation routes in case they should be needed.
Mexico's National Disaster Prevention Center says there were two explosions at the white-capped volcano between Tuesday night and Wednesday morning. The center says the volcano spewed a plume of steam about a mile (1.5 kilometer) into the sky.
Authorities continue to monitor the volcano's activity but have not ordered any evacuations. Rain has been forecast for the area, however, and authorities say towns nearby could be flooded with ash mud.
Popocatepetl has put out small eruptions of ash almost daily since a round of activity began in 1994. The eruptions started strengthening two weeks ago and increased even more this weekend.
(The volcano is one of the most active volcanoes in Mexico, having had more than 15 major eruptions since the arrival of the Spanish in 1519. A major eruption occurred in 1947.
Popocatepetl is 70 kilometers (43 miles) southeast of Mexico City, from where it can be seen regularly, depending on atmospheric conditions. At 5,426 meters (17,802 feet) it is the second highest peak in Mexico, after the Pico de Orizaba at 5,636 meters (18,491 feet).
By Elinor Comlay
The family that founded Homex, Mexico's second-biggest homebuilder, has cut its stake in the company by more than a third in a month, according to a regulatory filing on Tuesday.
The filing, which comes as Homex is facing lawsuits in New York for failing to meet payments related to derivatives, shows the family is selling shares to meet loan obligations.
A spokeswoman for Homex last week told Reuters that the stock sales are for margin calls related to loans made to the de Nicolas family and they are not a matter for the company.
Sales of homes built by Homex, like those built by its larger rival Geo and smaller peer Urbi, have slumped and the three companies are facing heavy debt payments.
Tuesday's filing shows the de Nicolas family's Homex stake was trimmed to 19.23 percent on Tuesday from about 33 percent on April 14, by selling about $43.5 million in Homex's U.S. listed shares HMX.N.
The spokeswoman declined to comment on the latest filing.
The filing shows that a trust for five members of the family, including Chief Executive Gerardo de Nicolas and Chairman Eustaquio de Nicolas, sold 1.7 million U.S. listed shares, equivalent to 11.2 million Mexican-listed shares, or 3.35 percent of its total stock outstanding, over seven days this month.
By Richard Fausset and Cecilia Sanchez
Los Angeles Times
Mexico's giant Popocatepetl volcano might generate lava flows, explosions of "growing intensity" and ash that could reach miles away, the National Center for Disaster Prevention said Monday.
Officials were preparing evacuation routes and shelters for thousands of people who live in the shadow of Popocatepetl, located 40 miles southeast of Mexico City. Officials have created a 7.5-mile restricted zone around the cone of the volcano.
Popo, as the volcano is known, has displayed a "notable increase in activity levels" in the last few days, including tremors and explosive eruptions, according to a statement from the federal government. The 17,887-foot volcano has been disgorging large towers of steam and ash since mid-April, but officials have become more concerned in recent days as activity has intensified.
Webcams have shown large chunks of molten rock spewing from the crater, and ash has rained down on the nearby city of Puebla. On Sunday, the National Center for Disaster Prevention elevated its warning level to Yellow Phase 3, the fifth stage of a seven-stage warning scale.
At the next stage, Red Phase 1, a voluntary evacuation order would be issued for residents of nearby villages. Then, in a familiar ritual, bells would ring in town squares, residents would gather with their identification papers in plastic bags, and police and soldiers would offer to move them to safety.
Popocatepetl, which means "smoking mountain" in the Aztec language Nahuatl, dominates much of the landscape in central Mexico, along with its nearby "twin" volcano, the dormant Iztaccihuatl. Popo was dormant for decades until 1994, when it began to stir.
There have been moderate outbursts from Popo in recent years, forcing the government to evacuate as many as 75,000 people at a time.
Many of last year's best-performing emerging markets have continued their stellar performance in 2013. Mexico is a notable exception.
Last year, the Mexican Stock Exchange IPC index rose 18 percent, beating the MSCI Emerging Markets index's 14 percent gain. This year, however, the IPC index has dropped 4.6 percent, lagging behind the MSCI EM's 0.6 percent rise.
And Mexico's struggles continued last week, as the IPC dropped nearly 2 percent, despite having its credit rating lifted to triple-B-plus by Fitch Ratings on Wednesday.
Mexico's struggles are all the more surprising considering that U.S. stocks are hitting record highs, with the Standard & Poor's 500 index up 14 percent this year. In the past, Mexico would have followed its lead. Over the past 10 years, Mexico has finished up every year the S&P 500 was in the black, and dropped when the S&P 500 has fallen.
What's got Mexico down?
It doesn't help that the country began the year looking pricey, compared with its historic valuation and other stock markets. By the end of January, the IPC index was trading at 17 times the prior 12 months of earnings, versus its five-year average of 14.7 times, and 14.5 times for the S&P 500.
"The Mexican stock market should be flying high," says Rodolfo Martell, portfolio manager of the BlackRock Emerging Markets Long/Short Equity fund. "Part of the reason you're not seeing that is because it was already expensive."
Its stock market is also getting hit by Mexican President Enrique Peña Nieto's attempts to reform the economy. He has teamed up with opposition parties on a reform platform known as the Pact for Mexico, which sets out the mutual steps that will be taken to open up communication and energy sectors to competition, update the tax code, and spur economic growth. And unlike past efforts, these have a good chance of succeeding, despite a recent vote-buying scandal that has hit Nieto's Institutional Revolutionary Party.
By Eric Martin & Nacha Cattan
Mexico’s industrial production fell three times more than analysts forecast in March, reinforcing expectations that the central bank will cut interest rates for the second time since 2009 later this year.
Output slid 4.9 percent from a year earlier, the biggest decline since the end of the 2009 recession and more than the 1.4 percent median estimate of 16 economists surveyed by Bloomberg.
Manufacturing contracted 5.8 percent and construction fell 5.2 percent, the national statistics institute said on its website today.
Mexico’s industrial activity fell 0.3 percent in March from the previous month, compared with the 0.1 percent median decline estimated by seven economists surveyed by Bloomberg.
The central bank unexpectedly cut its benchmark interest rate by half a point to a record low 4 percent on March 8 as growth slowed.
In April, policy makers left the rate unchanged after inflation exceeded the upper limit of their target range. Inflation will slow in the second half, the central bank said in the minutes of their April 26 meeting published today. Most board members said they expect U.S. growth to slow in the second quarter and a prolonged recession in Europe.
The industrial production figure is a “poor number, so it does support our rate cut view,” Gabriel Casillas, chief economist at Grupo Financiero Banorte in Mexico City, said in an e-mail. At the same time “the tone of the minutes is very dovish.”
By David Agren
Christian Science Monitor
Miguel Ángel Riva Palacio stuffs his savings in his sock drawer. He pays his bills and expenses with cash, doesn’t have a bank account, and never uses debit or credit cards – neither of which are accepted at the mom-and-pop dry cleaning shop he’s worked at for the past 43 years.
“It’s something that has never interested me,” he says of opening a bank account.
Riva Palacio is among the millions of Mexicans operating outside of a banking system that has produced robust profits in recent years, but has failed to embrace customers among the unbanked or extend credit to entrepreneurs. Mexico has one of the lowest rates of commercial lending in Latin America, which has been blamed for stunting economic growth.
But a series of banking reforms introduced Wednesday by a coalition of political parties aims to change that. The legislation aims to encourage competition among banks and increase the accessibility and accountability of financial institutions. It also intends to create incentives for lending to both individuals and the private sector.
“It is a reform that will encourage banks … to lend more and for lower rates,” President Enrique Peña Nieto said in announcing the reform proposals.
The Mexican government projects an economic expansion of 3.5 percent in 2013 and President Peña Nieto is promoting a series of economic reforms in areas such as energy and taxation, which he says will tack an extra two percentage points annually on to the country’s GDP growth in future years.
But banking has long been a sore spot in an otherwise optimistic economic outlook, especially since Mexican financial institutions lend little in comparison to their counterparts in other emerging markets. What credit is extended often goes to state governments, whose debts have swelled, or is lent at high interest rates. Many credit cards carry interest rates often topping 40 percent.
“Mexico has ... a solid banking sector. However, it’s a banking sector that lends little,” Finance Minister Luis Videgaray Caso said at the unveiling of the reforms.
By Michael O'Boyle and Krista Hughes
Fitch Ratings upgraded Mexico's sovereign foreign currency credit rating by one notch to BBB-plus on Wednesday, pointing to the country's solid economic foundations and welcome progress on reforms.
The surprise move will help reduce Mexico's already low borrowing costs. It boosted the peso, which firmed past the 12-per-dollar level for the first time in nearly two years.
Mexico's first ratings upgrade since 2007 came amid optimism about a reform agenda which has already made changes in telecommunications, labor and education laws. Plans for banking reform were announced just hours earlier.
"The reform momentum has surpassed our expectations and we have seen structural reforms that we think would enhance confidence in Mexico as well as investment and growth dynamics in the medium term," Fitch senior ratings analyst Shelly Shetty said.
Shetty also cited surprisingly strong growth in Mexico amid a sluggish global economy and stabilization in oil production in recent years.
Finance Minister Luis Videgaray welcomed the announcement.
"It's good news, but there's no doubt it's something that draws more capital to Mexico," he told Mexican radio.
Mexico has attracted large inflows of capital in recent months, and companies are wary that if the peso appreciates too quickly, it could crimp exports.
By Alexandra Alper and Dave Graham
Mexico's main opposition parties said on Tuesday they would resume talks on sweeping reforms with the government, lifting a cloud over a cross-party pact that is the axis of President Enrique Pena Nieto's economic agenda.
Opposition leaders said they had agreed on new measures with President Enrique Pena Nieto's ruling Institutional Revolutionary Party (PRI) to preserve the pact, which is aimed at fueling growth in Latin America's No. 2 economy.
"Contrary to doubts, the Pact for Mexico is in effect and is being maintained. Work is resuming," Pena Nieto said.
Traders said the peso firmed on optimism about the rapprochement, and Finance Minister Luis Videgaray said via Twitter that Pena Nieto would present on Wednesday a financial proposal that was derailed by the spat.
Talks had stalled between the parties after a dispute in April over leaked video recordings showing members of the PRI advocating the use of Social Development Ministry funds to buy votes in the Gulf state of Veracruz.
The conservative National Action Party's (PAN) chairman, Gustavo Madero, said leaders had agreed on an "addendum" to the pact aimed at boosting transparency and limiting corruption. He said his party would denounce any anti-democratic acts by the government.
"The PAN is conscious of its responsibility to take part in the Pact for Mexico because its reform agenda will benefit Mexicans ... But it is also conscious of its responsibility to stop authoritarianism taking hold," said Madero.