Economists Predict Positive Growth for Mexico

| Jan. 7, 2011 |

Published by Minyanville

Mexico brought in the New Year with some positive hangovers from the last. The IPC index ended 2010 on a record high, after weeks of rises. Finishing off the year on 38,243 points—and rising still in 2011—the index has spurred many economists to predict positive growth in 2011.

Last week, it was reported that GDP was likely to grow 4.1% in 2011. Finance Minister Ernesto Cordero has since said that he expects this figure to rise when a review is conducted in the first weeks of this year.

The Minister told reporters that he expected the Mexican peso to be stable in 2011, fluctuating between 12.17 and 12.70 pesos per US dollar.

The peso gained almost 6% in 2010 against the dollar while Tuesday saw the peso close at its strongest level since November, with $1 buying 12.2340 pesos.

Cordero also insisted that 2010 saw a recovery from Mexico’s worst recession in nearly 80 years when the economy expanded more than 5%.

Drug violence has, however, sullied celebrations. News of foreign companies steering clear of the country spurred Enrique Peña Nieto, governor of the state of Mexico, to announce plans to implement a national strategy to bring down the number of murders, kidnappings and extortions significantly over the next five years.

The move will be welcomed by US companies keen to take advantage of cheap labor costs south of the border but worried by rising death tolls in the country’s battle with drug cartels.

After an explosion in a pipeline left 29 dead last month, state-owned oil company Pemex was forced to close three Gulf Oil terminals thanks to bad weather. Terminals at the ports of Cayo Arcas, Coatzacoalcos and Dos Bocas reopened during the week after being shut over the weekend. Last month’s blast was attributed to expanding cartel activity.

Cement manufacturer Cemex (CX) sold $1 billion worth of seven-year bonds this week, hoping it will help finance a large debt burden in 2012. The notes will yield 9.125%, much more that similar-maturity US Treasuries. The company is still battling with Spanish antitrust regulators, as it stands accused of illegally fixing cement prices in Europe. It has denied the allegations.

While shares dropped 0.4% as the formal complaint was received, they closed earlier this week at their highest level in six months. Manufacturing in the US expanded in December at its fastest pace in seven months, bolstering the idea of Cemex being a bellwether of the US economy.

In another mirror of US economic trends, Alfa shares rose 3.6% as General Motors (GM) and Ford (F) reported sales increases in December.

One of the most substantial factors in the Mexican economy is remittances coming into the country from citizens abroad, mostly in the US. Figures for remittances in November rose 8.6% from the same period the previous year, to $1.62 billion, bringing the year-to-date total to $19.51 billion. This compares healthily to $19.62 billion in the first 11 months of 2009.

The figure was lower in 2008 and 2009 as the US recession forced lower employment figures.

Supermarket chain Comerci saw shares surge to the highest price since October 2008. The chain’s shares jumped 7.2% on Monday, having seen gains every week since November.

A primary manufacturing indicator for Mexico, the Institute of Finance Executives (IMEF) index, fell three points from November to December, though it suggested output will still continue to expand in early 2011. The index was at 51.2 in December compared with 54.2 the previous month and 52.5 in December 2009. Readings of 50 and above suggest expansion of the sector.

The world’s richest man, Carlos Slim’s Grupo Carso saw shares of a number of spin-offs trade on Mexico City’s stock market for the first time this week. Results were mixed with mining spin-off Frisco seeing a rise of 26% while real-estate company Inmuebles Carso fell 16%.

Meanwhile, Slim’s America Movil (AMX) has found itself in the doghouse with animal rights activists PETA after offering to give away 200 puppies as prizes in a raffle for Colombian customers. Latin America’s largest wireless company is entering buyers of certain phones into a raffle with a chance to win pugs, beagles, boxers, shih tzus and Labradors, which it says will be healthy and immunized.

Slim’s America Movil, Grupo Carso and his bank Inbursa make up more than one-third of the value of Mexico’s stock exchange.