The Week in Business: Investment Despite Weak Economy

Even though according to INEGI, the Mexican economy is losing dynamism, experts say the country is not in economic crisis. Despite the uncertainty, the country has still received investment and according to BBVA there has not been an important loss of investment in the country.

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

• According to INEGI’s System of Cyclical Indicators, the Mexican economy remains weak. For the 15th consecutive month, the indicator fell and reached 99.23 points, which puts it at its worst level since September 2010. According to analysts, this fall confirms a loss in economic dynamism.
• Despite this situation and the reduction of the country’s growth expectations, experts say the country is not in an economic recession and that the use of resources from the Fund for the Stabilization of Budgetary Resources (FEIP) sends a negative signal regarding the uncertainty of the country’s public finances.
• Alfonso Romo acknowledged the existence of uncertainty and of almost no economic growth. Still, he says that considering the global economic juncture, Mexico’s positioning is fairly positive. Though Romo recognized that insecurity plays a key role in investment attraction, he mentioned that there have been no investment cancellations related to this. Similarly, BBVA announced it has not seen any major investors withdrawing their money from the country and looking for new investment locations.
• During the first nine months of 2019, the Mexican market registered the entrance of US$20.1 billion in portfolio investment, according to preliminary information from IIF. Despite the arrival of investments, what was registered in the first six months of 2019 is below what the country registered in the same period in 2018. August and September 2019 registered an important deceleration in the entrance of investment.
• Weakness in Mexican finances has started to take a toll on the resources destined for state governments. In September 2019, contributions registered a 1.9 percent year-on-year fall, making it the second month in a row with lower federal contributions and the third registered fall in the year. This is the result of a weak performance in private consumption, which has impacted directly governmental tax collection.
• In an environment marked by uncertainty and limited liquidity, Fitch Ratings improved the State of Mexico’s credit rate. According to the rating agency, the state shows solidity in its income, passives and liquidity, as well as adaptability in its expenses. The result of these conditions is an improvement from the AA-(mex) rate to AA(mex) with a stable future perspective.