Weekly Report - 6 April 2004

GROWTH OUTLOOK | Bank ratchets up the optimism. Central bank governor Guillermo Ortiz last week predicted that the economy could grow this year by 3.5% — slightly more than the 3.1% forecast by the government. This, he was careful to note, is not the bank's formal projection, which will only become available later this month. Ortiz told a senate committee that the outlook was `certainly better' than the performance of the past two years, but that the expected growth rate remains `insufficient'.

He issued a warning about the risk of the social security institute, ISS, collapsing as it becomes squeezed between a growing revenue shortfall and the high pensions it guarantees its affiliates.

FINANCE | Bank credit shrinking. One of the factors holding back economic growth is the paucity of bank lending to the private sector. In February it amounted to M$563.9bn (US$51.26bn), or 1.5% less than a year earlier. These figures actually understate the problem: consumer credit, at US$11.1bn, was up 40.6% in the year, while mortgage lending, a meagre US$5.4bn, was up only 1.8%, and lending to companies, at US$32bn, was down 11.1%.

MINING | Deceptive upswing. In January, Mexico's mining output was reportedly up by 12.1% year-on-year, and mostly in the products in which Mexico has substantial shares of the world market (gold, silver, copper, gypsum, lead, sulphur, iron ore and fluorite. Copper, buoyed by the rise in the world price, was up 41.8%; silver was up 17.8%. The impact of the news is somewhat deadened when it is taken into consideration that output in January was actually lower than in December (by 0.49%).