Mexican Economy Continues Steady Recovery

The Mexican economy posted a 2% growth rate for the fourth quarter of 2009, which marked the third consecutive quarterly increase – another positive indicator of the country’s steady recovery. The Mexican government has revised growth figures in recent quarters to reflect these indicators of a solid economic rebound.

"These figures confirmed a robust economic recovery took place in the second half of 2009. We anticipate that this recovery will continue in 2010, although at a slower pace," said Edward Gonzalez, an economist at the National Bank of Mexico.

Mexico to Receive up to $20 Billion (USD) in Foreign investment

Gerardo Ruiz, Minister of the Economy, recently declared a “larger than expected” level of foreign investment in Mexico in 2010. While Mexico was hit hard by the financial crisis in the US, a larger flow of investment into the country is now expected, mainly in the manufacturing sector, due to improvements in the global economy.

"We have observed a rebound in competitiveness in Mexico," said Minister Ruiz in a speech at Reuters Forum on Investment in Latin America. "We are estimating between $17 billion and $20 billion (USD), depending on the behavior of financial flows.” According to Ruiz, Mexico has gained a larger presence in the US investment market during the last two years.

Japanese investment in Mexico Grows

With new agreements in place between the Mexican and Japanese governments, Mexico will soon receive the benefit of Japan’s energy expertise and new business investments.

According to Takao Nakahata, Head of Economic Exchange Promotion in Jetro, a forum is being organized to bring Japanese executives and technology experts from the renewable Aeolian energy sector to Mexico to speak about energy efficiency.

The forum, also being organized by the Private Sector Center for Economic Studies (Centro de Estudios Economicos del Sector Privado - CEESP), will include a roundtable for Japanese businessmen interested in investing in Mexico.

Bond Investors Opt for Mexico Over Greece

For the first time since the adoption of the euro in 1999, nations in the developed world are paying more for loans than nations in emerging markets. Mexico recently set 10-year bond yields at 5% and South Africa was able to entice investors with a rate of 5.8%, while Greece, a member of the euro area, had to pay 6.3% to sell its debt.

A new prevailing perception among investors is that, while many developed nations are still struggling to recover from the recession and credit crunch which resulted in huge debt and slow growth rates, developing nations that were less affected by these factors are recovering more rapidly – thereby, fueling the global economic recovery.

Some argue that investment in Mexico could be just as risky as Greece, given Mexico’s dependence on US consumers, declining oil revenues, and political challenges. However these issues have not deterred many investors, such as Sara Zervos, portfolio manager at Oppenheimer, who stated that the country's fundamentals are encouraging for the long-term, compared to the members of the euro area currently experiencing increasing signs of economic fragility.

Mexico’s major advantage over Greece is the country’s solid control over its monetary and fiscal policies. After a 6.5% contraction in 2009, Mexico is now expected to grow more than 5% this year, according to Morgan Stanley, which could be one of the most dramatic recoveries in the world.

American Chamber Members to Invest $2.5 Billion (USD) in Mexico

At a recent event organized by the American Chamber in Monterrey, Chairman Jose Zozaya forecasted that Chamber members will invest $2.5 billion (USD) in Mexico, mainly for expanding production. Zozaya indicated that this investment is only by the Chamber's members operating here in Mexico, and is due to recovering orders from the US market.

According to the US Ambassador in Mexico, Carlos Pascual, Mexico is still an attractive country for investing, in spite of safety concerns. Pascual indicated that several major companies with established businesses in Mexico will soon announce plans for significant expansions to their Mexico-based operations.

Mexican Space Agency Approved

The Mexican House of Representatives recently approved sending to the Senate a draft of an Act for creating the Mexican Space Agency, a new agency that will foster scientific and technological research and space-related studies, as well as encourage specialists training.

The budget for this project is $10 million (MXP). These funds will provide for Mexico's participation in national and international projects for the construction of spaceships, satellites and launching services, as well as the creation of high technology companies and additional research programs in Mexico’s universities and scientific institutions.

Televisa, Megacable and Telefonica Jointly Bid For CFE Fiber Optic System

Grupo Televisa, Mexico’s largest media company, will partner with Megacable Holdings, the country's largest cable television operator, and Telefonica Moviles Mexico, a subsidiary of the Spanish company Telefonica, to jointly participate in the bidding for a pair of dark fiber strands owned by the Commission Federal de Electricidad (CFE).

Currently, there are two fiber optic networks in Mexico with national coverage. One is owned by the CFE, the state electricity monopoly, the other by Telefonos de Mexico, the dominant fixed telephony in the country. If Grupo Televisa, Megacable and Telefonica win the bid, the three companies will own equal shares – 33.3% -- of the new consortium.

The bid winner will be poised to become the new rival power company for the transmission of voice, data and video in the country. Thus, authorities hope this will help to increase competition in the telecommunications industry to lower the cost of these services and increase the availability and use of new telecommunications technologies, such as broadband internet and video streaming, as well as improve the quality of the services being provided.

Sources of Information: In preparing this document, the following sources of information, among others, have been utilized: Sentido Común and Banco de México.

June 2010
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