Mexican Economy, State Funding Contract: This Week in Finance

Mexico’s economy seems to be slowing down despite positive results in the first semester of 2023. Meanwhile, Mexican states may be receiving less funding, a problem that threatens to impact the implementation of their policies.

In other news, Peruvian startup Fiweex is looking for funding to expand to Mexico. 

Read more in this Weekly Roundup!

Mexico

Mexican Economy Could Slow Down in 2H23

Mexico's economic growth is slowing down as the country enters the second half of 2023, despite the promising start of the year. The potential contraction could be linked to increased import tariffs, a strong peso and the potential overestimation of nearshoring benefits. Despite President López Obrador's optimistic 4% growth projection for 2023, experts highlight a decline across sectors, with the recovery seen to date attributed mainly to the post-pandemic rebound. 

States Could Receive Less Federal Funds in 2H23

The Center for Economic and Budgetary Research (CIEP) warns that federal entities face resource constraints that could impact effective policy implementation in 2023, leading to a shortfall of almost MX$40 billion (US$2.4 billion) in federalized spending. The 5.2% revenue shortfall is primarily attributed to lower Value Added Tax (VAT) and oil revenues, affecting state governments' budgets and their ability to enact short-term public policies. 

Global News

Startup Fiweex Wants to Bring its SaaS to Mexico

Peruvian Fiweex aims to secure funding for its expansion to Mexico, offering SaaS solutions with free WiFi access and unified user registration. Seeking US$300,000 to US$500,000 in funding, the startup plans to tap into Mexico's rapidly growing fintech market, which has attracted substantial investment and presents an attractive opportunity for startups.

Expert Opinions 

How Higher Interest Rates Can Benefit The Economy

Following the 2007 financial crisis, central banks worldwide employed historically low-interest rates to stimulate growth and stabilize financial markets, writes Ana Sepúlveda. However, as the global economy recovers and inflation surges, there is a need to reevaluate these rates for sustainable growth. 

Nearshoring in Mexico Benefits Corporate Credit Quality

Nearshoring in Mexico is driving business growth, contributing to an 11% increase in manufactured goods exports in the past year and a potential US$50 billion in additional exports, writes Alberto Moreno, Senior Director, Fitch Ratings. Fitch-rated Mexican businesses are expected to maintain stable financial profiles, with improving profitability and benefits from nearshoring anticipated as investments and operations stabilize.