lunes, 25 de octubre de 2010

The domestic economy...

The growth rate Hacienda is projecting for 2011 (3.8%; now, thanks to the Chamber of Deputies, 3.9%) is higher than the 3.6% consensus projection of the economists surveyed by the Banco de Mexico each month and the 3.5% I'm projecting. Why? Hacienda is assuming the domestic market will play a more important role in driving growth next year. How likely is it that the domestic market will step up to the plate?

Three factors are critical: 1) job creation; 2) real wage growth; and 3) the growth rate of bank lending to consumers. I'm not overly optimistic on any count. Job creation will continue to be inadequate. Real wage gains will be small. Bank lending to consumers will grow but at modest rates.

We'd better hope that US exports do well and American consumers become more animated.

jueves, 21 de octubre de 2010

An excellent review of recent publications on narco violence in Mexico

In "The Murders of Mexico", Alma Guillermoprieto reviews two recently published articles (in Spanish) and one book (in English) examining the narco-violence that's afflicted Mexico. You can find her article in the most recent issue of the New York Review of Books. Here's the link. It's well worth reading.

http://www.nybooks.com/articles/archives/2010/oct/28/murderers-mexico/

martes, 19 de octubre de 2010

Money is pouring into Mexico...

The US government is far from the only beneficiary of the money pouring into the bond markets. If there is a "bond bubble" being inflated, the "emerging markets" are part of it.

Mexico, like other "emerging markets" countries, is the recipient of portfolio investment inflows that are strengthening the currency. That demand for the one hundred bond Mexico placed on October 5 was 2.5 times the billion dollars raised says everything that needs to be said about investors' appetite for emerging market debt instruments.

The one-month Cete rate is posting new historical lows each week. In today's primary auction, the government's paid 4.03% for 28 day funding. Not only is that a new low, it is below the central bank's 4.50% reference rate.

lunes, 11 de octubre de 2010

Competitive devaluations?

Not for Mexico. Statements made by Banco de Mexico Governor Agustin Carstens (cited by Bloomberg) implicitly reaffirm the central bank's commitment to a floating exchange rate regime. It seems likely that the bank's Board of Governors will not raise the Mexican reference rate until the second half of 2011.

martes, 5 de octubre de 2010

Cooling off...

As expected, Mexico's recovery is cooling off. Leading indicators such as the Indicador IMEF show a consistent trend since the summer in which both the manufacturing and non-manufacturing sectors continue to expand but at less vigorous rates.

Will the domestic market be able to propel growth next year, as Hacienda is counting on? It would be nice.

viernes, 1 de octubre de 2010