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Weekly Roundups

The Week in Finance: USMCA Will Not Be Enough

By Gabriela Mastache | Fri, 01/24/2020 - 15:13

President López Obrador is confident that UMSCA, together with a controlled inflation and less corruption, will boost economic growth in the country. Despite local optimism, the IMF says the 2 percent economic expansion will not be felt in the country even in 2021. Still, Banorte sees a better 2020 for the Mexican economy. Also, Mexico has been debunked from PwC’s Top 10 most attractive countries for investment.

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

  • President López Obrador says USMCA’s ratification, inflation control and full-frontal combat to corruption will allow the Mexican economy to grow in the next years.
  • Specialists from BNP Paribas and Ducker Frontier believe Mexico sent a clear signal regarding its openness to FDI by working alongside the private sector to present the National Infrastructure Plan and successfully complete the USMCA renegotiation. Despite this clear message, specialists believe the country’s growth expectations will not change for 2020.
  • IMF believes that Mexico will not experience a 2 percent economic growth, not even in 2021. For 2020, the international organization puts economic growth at 1 percent and for 2021 at 1.6 percent, which is 0.3 percent lower than what was expected in October 2019.
  • Despite this gloomy expectation, Banorte maintains a “documented optimism” and forecasts economic growth of 0.8 percent, ensuring that 2020 is bound to be a better performing year than 2019. Moreover, Marcos Ramírez Miguel, Director General of the group, said the bank is ready to finance all types of projects.
  • According to PwC’s annual survey, Mexico has left the list of the Top 10 investment destinations. In 2019, Mexico held the ninth position as one of the most attractive countries for investment. It is the second time that Mexico does not enter the list, being 2018 the first time.
  • According to CCE, USMCA is expected to increase trade in the region by 7 percent during its first year and has the potential of doubling trade volumes in just a decade. However, CCE believes the government needs to provide the much-needed certainty to create trust among investors. For Moises Kalach, while USMCA may be a cornerstone for investment certainty, the treaty alone will not do.
  • Graciela Márquez, Minister of Economy, announced in the Global Economic Forum at Davos that Mexico wants to increase its global trade but does not wish to rely on low wages to remain competitive. Márquez also announced that macroeconomic stability is not enough for social development if the government does not offer programs intended to relieve poverty and reduce social inequality.
Gabriela Mastache Gabriela Mastache Senior Journalist and Industry Analyst