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Mexico’s: A Leap Forward or A Reverse Trend?.
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Mexico’s: A Leap Forward or A Reverse Trend? Mauricio Gonzalez serves as LatinSource senior economic advisor and is a Partner and one of the co-founders of GEA Grupo de Economistas y Asociados, a political and economic consultancy firm based in Mexico City. He served as the General Director of GEA from 1995 to 2003 and worked with public utilities in analyzing their methodologies and assisting them in setting service rates. Mr. González was recently the Associate Director of Technical Assistance and Training at the North American Development Bank from 2003 to 2006. Prior to founding GEA, he was the Finance Coordinator of Banco Mexicano Somex from 1989 to 1990 and held several positions in the Finance Ministry, including Director of Economic Research, Director of Economic Policy, and Director of Financial Policy during 1983 to 1988. From 1979 to 1983, he worked as an economist at the Department of Economic Research at Banamex, and served as member of the Technical Advisory Council of the Center for Economic Studies of the Private Sector (CEESP). Mr. González served on the board of Banca Confía and the Common Fund of Nacional Financiera. He was also a member of the board of Afore Santander, Grupo Corvi, Seguros Tepeyac, Bancomext Risk Management Committee, and IXE Investment Committee, Banca Promex and Banca Confía. Veronica Ortiz serves as LatinSource political analyst Ms. Ortiz started her legal practice in Baker & McKenzie in 1989, and then joined the public service as Technical Director for Legal Council at the Office of the President (1990-1994); she was later appointed Director for Deregulation at the Ministry of Commerce and Industry (1994); and Director for Legislative Affairs at the Mexican Banking Commission (1995-1999). In 2001, she started working as an independent consultant in legislative projects, with specific emphasis in strategic and political analysis. On April 2007, she joined GEA, Grupo de Economistas y Asociados as a political consultant and public affairs specialist.
Outline • Economic growth outlook • Inflation: a central bank headache • Key prices misalignment: a growing risk • Macroeconomic outlook for 2009 • Public opinion appraisal on President Calderón • Electoral preferences towards mid-term election • Insecurity and fight against drug trafficking • Losing energy to pump and oil reform
Economic growth outlook • Overall deceleration risk has dissipated slightly • Growth enhancement factors are working as originally thought, although below expectations • Economic slowdown will last the rest of the year and first quarter of 2009 • Medium term economic growth perspectives are not favorable
Inflation: a central bank headache • Reduced central bank credibility due to increasing inflation • Interest rate not a powerful instrument to reduce inflation expectations • Wage-price escalation likely • Monetary policy may harden further
Inflation: consumer and core inflation Core inflation CPI
Key prices misalignment: a growing risk • Inflation, wage increases, interest rates and exchange rate misaligned • Banxico’s monetary policy cannot go against Federal Reserve’s • Exchange rate: escape valve for misalignment • Peso weakening fueled by growing external private deficit
Macroeconomic outlook 2009 • Moderate economic growth recovery • Structural changes needed for a leap forward on growth • Inflation pressures from energy subsidies reduction • Significant deterioration in external accounts
Public opinion appraisal on President Calderón • Presidential approval rate and physical health suffer an untimely fall • Good marks on specific government issues • General discouragement on economic and political prospects
Electoral preferences towards July 2009 mid term election • PAN and PRI nearly tied at the moment • PRD far behind in the public preference • Internal unrest in the three major parties
Insecurity and fight against drug trafficking • Drug cartels related violence hits sky rocket levels • Violence concentrated in northern states • Overwhelming public support for President Calderon’s war against drug trafficking
Losing energy to pump and oil reform • Reversal of public approval for the oil reform. • Public consensus on the need of reforms. • Economic impact of the oil reform.
