The Week in Finance: Certainty Is Needed for Investment

Welcoming 2020 with increasing tensions between Iran and the US took a toll on global markets. However, the Mexican government successfully issued US$2.3 billion in debt in international markets. Within the country, financial services for the population will increase and the OECD asks Mexico to have clear and modern public policies for investment.

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

• Existing military tensions between the US and Iran led to an overall fall in stocks, particularly those of countries in the region. Wall Street also took a hit, reflecting investors’ aversion to risk. While Mexico has no conflict with Iran, experts believe that given the high stakes of the conflict, a challenge for Mexico is to avoid possible attempts of financing terrorist attacks in the US through Mexican institutions, as well as to prevent money laundering coming from terrorist activities.
• SHCP managed to issue debt worth US$2.3 billion expected to expire in 2030. The interest rate payed by the government will be of 3.31 percent, representing a historical minimum interest rate for any governmental debt issuance of the Mexican government in international markets.
• Despite the efforts done by the main banking institutions in the country, in Mexico 16 percent of the population (17.8 million people) does not have accessible financial services in a 2km radius. This means they lack access to bank branches, ATMs and point-of-sale terminals.
• Lack of access to financial services is partly the rationale behind President López Obrador’s plan to build 2,700 bank branches of the Wellbeing Bank (Banco del Bienestar). According to official estimates, 1,350 of these branches will be built in 2020 and will need an investment of MX$5 billion. These branches will be located in communities that lack access to traditional banks.
• According to José Angel Gurría, General Secretary of the OECD, Mexico needs modern and predictable public policies and legislation to generate confidence among international investors. For Gurría, the most important thing is for Mexico to be able to offer certainty in light of the international environment the world is experiencing.
• Specialists consulted by Citibanamex believe the Mexican economy will grow 1 percent in 2020, down 0.1 percent from previous estimations. It is also believed that Banxico will continue with a reduction in interest rates in its coming reunions.
• The US Senate’s Finances Committee approved USMCA, which will now go to the floor of the Senate to set a date for its final approval.