Afores’ Positive Performance Boosted By Global Economic Recovery

April 2020 registered maximum capital gains for Afores. However, this was also accompanied by maximum levels of withdrawals. Also, Banxico’s reduction of the country’s interest rate is still not enough and analysts expect more to come. The COVID-19 pandemic has increased financial threats and given the magnitude of the pandemic, countries have already launched a second wave of fiscal measures to protect the global economy.

In case you missed it, this is what made the headlines over the week!

• In April, Afores registered withdrawals of MX$1.59 billion (US$67.3 million), a 90 percent increase from what they had registered in April 2019. However, between January and April 2020, Afores registered a total withdrawal of MX$5.12 billion (US$216.9 million), representing a 46 percent annual increase compared to 2019. Afores’ performance in April was extremely positive. During April 2020, Afores registered capital gains of MX$144.44 billion (US$6.12 billion), one of the highest results registered since 1997 when the system was created.
• Luis Niño de Rivera, President of ABM, said that unlike previous economic crisis, where the banking sector had been one of the catalysts of the crisis, now it will be a key element to brave out the storm. “The banking sector in this occasion is part of the solution, unlike during difficult times we have experienced in the past like in 2008, 1994, 1987, 1982 and 1976, where the banking sector was part of the problem,” said Niño de Rivera.
• The COVID-19 pandemic has increased cyber-financial crimes. According to the cyber security firm Carbon Black, in March 2020 ransomware attacks increased 148 percent compared to February 2020, being the financial sector the primary target of these attacks.
• IMF estimates that in May alone, global fiscal support to face the economic effects of the COVID-19 pandemic has increased in US$1 trillion and now totals US$9 trillion. Out of this, US$4.4 trillion have been destined to direct budget support, while additional public sector loans, equity injections, guarantees and other “quasi-fiscal” operations account for US$4.6 trillion. IMF estimates that the G20 represent the bulk of the total fiscal relief measures that have been implemented in the world, with almost US$8 trillion. However, Mexico is the country in the G20 group that has destined the least amount for recovery measures. The lack of fiscal measures in the country threatens to generate a debt of historic proportions for the country, which can increase up to 15 percent in real terms.
• Banxico reduced the interbanking interest rate (TIIE) in 50 base points to reach a 5.5 percent level, by unanimous voting. It is the fourth time that Banxico reduces the interest rate in the year and experts believe that it will not be the last. The 5.5 percent rate is the lowest level since December 2016. Experts believe that the country’s interest rate will continue going downwards. A poll conducted by Citibanamex between economists expects 2020 to end with a 4.75 percent interest rate while analysts from BBVA expect 2020 to finish with a 3 percent rate, the lowest level since mid-2014.