Competition Increases, Reform Doubles Investment PotentialBy Peter Appleby | Thu, 09/10/2020 - 18:01
Fintech will bring competition to the financial sector and propel the government’s intentions to improve financial inclusion, while the pensions reform should give Mexico more capital for national development. Last but not least, a cautious federal budget was presented for what Finance Minister Arturo Herrera said would be an “unusual” year.
President of the National Banking and Securities Commission (CNBV) Juan Pablo Graf told the audience of the Sandbox Challenge, a financial innovation contest, that the “disruptive” edge that technology brings to Mexico’s financial market will drive innovation and competition in the sector.
The CNBV president explained that the commission was making progress in the application of 80+ fintech operations that must be approved by the commission. He also discussed the secure sharing of customer data so fintech companies will have the same advantages that traditional banking institutions enjoy. This way, there will be increased competition which will naturally lead to greater financial inclusion in the country, according to Graf.
Finance Minister Arturo Herrera said that investment funds from the pensions system will “more than double” in a few years with the application of the proposed pension reform.
With the greater obligatory contribution rising from 6.5 percent to 15 percent within eight years, split between employees, employers and the government, there would be significantly more capital available to help carry out essential development and infrastructure projects nationwide.
"As a result, savings of the pension system, which are those that go toward investments, will go from 17 percent to 40 percent of the GDP in a few years. It will more than double the funds available for investment in Mexico," he said.
Finance Minister Arturo Herrera presented the 2021 Federal Budget proposal this week ahead of what he warned would be an “unusual” economic year should no COVID-19 vaccine be created and distributed.
The proposal forecast what Herrera called a “responsible” GDP growth forecast of 4.6 percent for next year.
During the presentation, President Andrés Manuel López Obrador also spoke to say that the budget proposal is the roadmap for achieving priority objectives for national development. “What is required to end 2020 is guaranteed, and the budget for 2021 has already been presented”.
Minister Herrera said that Mexico would not see a large increase in national debt regardless of the pandemic and that the exchange rate between the peso and dollar was expected to remain stable.