Mexico: well-positioned despite the extra region panorama.

Author:Agren, David
Position::LT CFO: MEXICO D.F. - Statistical data
 
FREE EXCERPT

[ILLUSTRATION OMITTED]

Latin America and Mexico are well-positioned heading into 2013, despite risks in China, Europe and the United States, which must contemplate its looming fiscal cliff, participants at the Latin Trade CFO Event in Mexico City were told.

The reasons for optimism include solid macroeconomic indicators, especially in Mexico, said Kathryn Rooney Vera, senior macroeconomic strategist at Bulltick Capital Markets in Miami. The average debt-to-GDP ratio is 30 percent in Latin America, compared to 80 percent in the developed world, to cite one metric. The region's banking system is better capitalized, too, and not over-leveraged.

Mexico shows especially positive signs, with its export oriented economy, solid currency and relatively low inflation, which, Vera said, should come in at 3.6 percent in 2013, alleviating pressure on the central bank to raise interest rates until at least the end of that year. The peso, meanwhile, "is the most undervalued currency in the region."

The United States, Mexico's main trading partner, raises concern with its "fiscal cliff," which, if unresolved, could cut 1.5 percent from GDP in the first half of 2013. Vera expects politicians to solve the problem, saying, "It doesn't benefit anyone not to do so." Longer term risks remain, such as debt and fiscal trends, and a need to fix entitlement programs. But in other areas, 2013 could be bright for the United States, producing favorable follow-on effects for Mexico. Vera forecasts US growth of 2.2 percent in 2013 and says it will be driven by housing and consumption. Housing, she says, "is a virtuous cycle," in which consumers feel better since their main asset is increasing in value. Boosting consumption means more manufacturing--much of it in Mexico, especially in the expanding automotive sector. The average age of a car in the United States is 11 years old, Vera said, explaining that consumers haven't been purchasing due to the downturn. That's something she expects to change, meaning "a boom for Mexico."

[ILLUSTRATION OMITTED]

[ILLUSTRATION OMITTED]

[ILLUSTRATION OMITTED]

[ILLUSTRATION OMITTED]

Vera shared her forecasts at a Nov. 15 event that Latin Trade organized for CFOs. The event acknowledged Victor Bravo Martin of Empresas ICA as "CFO of the Year."

[ILLUSTRATION OMITTED]

Bravo, CFO for one of Mexico's biggest...

To continue reading

FREE SIGN UP