IMF Rebuffed, Positive Reaction to Green Finance

An IMF report suggested the Mexican government to go against its austerity approach and deliver fiscal support valued at 3.5 percent of the country’s GDP into the economy this week. Meanwhile, BlackRock reported a strong and positive response to its green EFT and Mexico’s markets marked a fifth day of strong performance on Thursday.

All this and more in The Week in Finance!

IMF Calls on Mexican Government to Grant Fiscal Aid

IMF fell foul of the MORENA government this week after it released a report urging the government to rethink its austerity position and said that fiscal support worth 3.5 percent of the country’s GDP should be injected into the economy.

According to IMF, Mexico’s “working poverty” will rise from 36 percent of the population to 46 percent due to the heavy impact that COVID-19 has had on the country’s economy, including 12 million job losses. “To stem the decline in economic activity and rise in poverty, Mexico would benefit from higher temporary near-term fiscal support of 2.5 percent to 3.5 percent of GDP,” the report states.

However, the government said that its austerity-driven handling of the pandemic will not change and this week, President López Obrador told the IMF that international institutions no longer dictated Mexican policies.

BlackRock Reaps Benefits of ESG Attraction

US investment management company BlackRock has reported that its socially responsible EFT, iShares ESG MSCI Mexico, launched in Mexico in July, has been a huge success and generated revenue of some US$450 million.

The EFT option has seen massive interest from Mexico’s pension fund companies, which have themselves enjoyed increase income in recent months as people have chosen to funnel money into their retirement savings in light of the challenging economic future Mexico faces from COVID-19.

“The whole process of building this product in Mexico was working with MSCI and the retirement fund administrators to be able to introduce investment in ESG,” Armando Senra, head of iShares Americas, told Reuters.

The success of the BlackRock EFT, as well as the recent release of Mexico’s UN-goal-oriented sovereign bond suggests a positive future for so-called Green Finance in Mexico.

Roberto Ballinez, Senior Executive Director of Public Finances/Infrastructure at Mexican credit ratings agency HR Ratings, recently told Mexico Business News that ESG options were vital for Mexico in confronting the consequences of global warming for an agriculture and tourism-based economy.

The full interview with Robero Ballinez can be read here.

Mexican Marks on Strong Run

Mexican stock markets saw their fifth consecutive day of gains on Thursday with the benchmark S&P/BMV IPC index rising by 0.85 percent and the FTSE BIVA gaining 0.88 percent.

The rises are down to the increased global appetite toward risk as markets react to the renewed expectations of a fiscal stimulus plan in the US. Another positive sign that propelled strong market performance was INEGI’s inflation report, which showed that inflation has slowed, though at 4.01 percent for September it remains above Banxico’s target.