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Mexico & Nafta - September 2019

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Economic Highlights

Interest rate cut: On 15 August Mexico’s central bank (Banxico) reduced its benchmark interest rate to 8% from 8.25%. In a press release Banxico cited as factors that led to its decision: a deteriorating “balance of risks for global economic activity”; and the recent cut in interest rates by the US Federal Reserve and other central banks. Banxico also notes that inflation remained at “reduced levels”, with the annual rate coming in at 3.78% in July and 3.95% in June. This is the first time in over five years that Banxico has cut its benchmark interest rate. The consensus view by economists is that the interest rate cut was adequate, as it could help to boost domestic economic activity without generating any significant inflationary pressures.

FDI: On 20 August Mexico’s economy ministry released preliminary figures on foreign direct investment (FDI) which show FDI to Mexico was up 1.5% in the first six months of 2019 compared with the same period in 2018. According to the report by the economy ministry, FDI in the first six months of 2019 totalled US$18.1bn, up from US$17.8bn in the same period in 2018. The figures show that the FDI came from 3,104 companies with foreign capital, 1,558 trust fund contracts, and 18 foreign corporations, as well as through reinvestment of profits and new investments. In terms of the breakdown by sector, manufacturing accounted for 42.8% of FDI; trade, 12.9%; financial services & insurance, 9.9%; and mining, 5.9%. As regards sources of FDI, the US accounted for 37.9%, followed by Canada (15.4%), Spain (11.1%), and Germany (6.5%).

Poverty reduction: On 5 August Mexico’s national council for the evaluation of social development policy (Coneval) published its latest statistics on poverty, according to which 52.4m people lived in poverty in 2018 (41.9% of the total population), down from 53.4m recorded in 2016. The population living in extreme poverty in Mexico has also dropped, from 9.4m (7.6% of the total population) in 2016, to 9.3m in 2018 (7.4%). Despite the reduction in the last two years, Mexico’s population living below the poverty line in the last decade has increased from 49.5m in 2008 to 52.4m in 2018. However, due to population growth, the percentage of people living in poverty dropped from 44.4% of the total population in 2008 to 41.9% in 2018.

Mexico’s GPD
Percentage variation (year-on-year)

201909MexGDP

Mexico’s Inflation Rate
Percentage variation (year-on-year)

201909MexInflation

Mexico’s Unemployment Rate
Economically active population

201909MexUnemployment