Country Report Mexico April 2016

______________________________________________________________________________
Country Report
Mexico
Generated on April 24th 2016

Economist Intelligence Unit
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London E14 4QW
United Kingdom
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ISSN 2047-5349
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Mexico
Mexico
Forecast
Highlights
Outlook for 2016-20
3
Political stability
Election watch
International relations
Policy trends
Fiscal policy
Monetary policy
International assumptions
Economic growth
Inflation
Exchange rates
External sector
Forecast summary
10
Quarterly forecasts
Data and charts

11
Annual data and forecast
12
Quarterly data
12
Monthly data
14
Annual trends charts
15
Quarterly trends charts
16
Monthly trends charts
17
Comparative economic indicators
Summary
17
Basic data
19
Political structure
Recent analysis
Politics
21
Forecast updates
21
Analysis
Economy
26
Forecast updates
29
Analysis
Country Report April 2016
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EconomistIntelligenceUnitLimited2016
Mexico
Highlights
Editor:
Rodrigo Aguilera
Forecast Closing Date: March 23, 2016
Outlook for 2016-20

Thepresident,EnriquePeaNieto,willfocusontheimplementationofhis
structural reform agenda, but will struggle to recover credibility amid social
frustration over institutional deficiencies, notably corruption and crime.
The government faces the short-term challenge of boosting economic
growth, which has remained sluggish throughout its term. Drug-related
violence will continue to affect many states.
The economy will continue to grow moderately in 2016, at 2.4%, before
expanding by a more robust 3.1% in 2017-20 as confidence recovers and the
benefits of the structural reforms gradually materialise.
The government will adjust fiscal policy in the light of weaker oil prices, but
overall spending will remain high in comparison with fiscal revenue. This will
cause a deterioration in the debt stock.
Following recent historic lows as a result of the collapse of oil prices and
drop in telecommunication costs, inflation will largely remain below the 4%
target ceiling in 2016-20, despite occasional shocks.
After a sharp depreciation in January, the peso will continue to experience
short-term pressure, but will gradually regain some of its lost strength as
domestic and external conditions improve.
The current-account deficit will continue to widen in 2016, and will start to
ease thereafter, to 1.9% of GDP by 2020. However, it will remain largely
manageable and financed by foreign direct investment.
Review
A group of local non-governmental organisations (NGOs) and think-tanks
has succeeded in gathering the necessary amount of signatures to present
to Congress a proposed law that would force public officials to publish their
tax statements, wealth statements and conflicts of interest
Monthly inflation was 0.44% in February compared with January, and the
annual change was 2.9%. This was mainly driven by a sharp increase in nonprocessed agricultural prices and prices of tradeable goods.
The peso has gained considerable ground since the mid-February rate hike,
falling below the Ps18:US$1 threshold. Recent gains, however, have been in
line with trends in other emerging economies.
The current-account balance widened to 2.8% of GDP in 2015, mainly owing
to a sharp increase in the trade deficit that offset improvements in the
services deficit, as well as a rise in remittances from abroad.
Foreign direct investment inflows came in at US$28.4bn in 2015, among the
highest on record, but portfolio inflows more than halved to US$20.4bn.
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Mexico
Outlook for 2016-20

Political stability
Thepresident,EnriquePeaNietoofthePartidoRevolucionarioInstitucional(PRI),
will focus the second half of his six-year term (which ends in 2018) on ensuring the
successful implementation of the structural reforms that were passed in 2013-14. He
must do this while confronting the fallout from numerous corruption and crimerelated scandals over the past year and a half, involving both himself and his party.
The PRI and its allies will benefit from the party's majority in the Chamber of
Deputies (the lower house), as well as its control of over two-thirds of Mexico's 31
states.NeverthelessTheEconomistIntelligenceUnitbelievesthatMrPeaNieto
will face an uphill struggle to recover the credibility lost both at home and abroad as
a result of various scandals, and will also face an increasingly hostile opposition,
which will be a far cry from the broad collaboration that was achieved during his
first two years in office.
This crisis of confidence has not only affected the government, but the political
establishment as a whole, as all the main parties have been criticised for doing little
to address the country's rule of law deficiencies. Indeed, the inability of the
opposition to benefit from the PRI's woes stems mainly from an unwillingness to
challenge the status quo of the Mexico's highly entrenched political establishment
in a meaningful way. This has given a boost to anti-establishment parties such as
theradicalleftwingMovimientoRegeneracinNacional(Morena)andindependent
candidates. However, there appears to be little appetite for substantial efforts to
address corruption (particularly impunity), despite the passage of anti-corruption
laws in early 2015, the byelaws for which are in the process of being negotiated.
Civil society has responded by becoming more active in seeking to address these
issues, particularly by means of new instruments of direct democracy that were
permitted following the 2013-14 political-electoral reform. Most recently, a group of
think-tanks and non-governmental organisations (NGOs) launched a successful
citizen initiative, which has now been presented to Congress, to force improved
standards of transparency on public officials.
MrPeaNietospoliticalproblemswillbecomplicatedbysubpareconomicgrowth,
an uptick in poverty and fiscal constraints resulting from weak oil revenue.
Furthermore, despite various years of gradual improvement, the security situation
will continue to be a major challenge. Last year saw a spike in homicides (the first
suchriseinfouryears)andthenotoriousprisonescapeofJoaqun"ElChapo"
Guzmn,leaderoftheSinaloaCartel,inJuly(hewaslaterrecaptured).Withouta
clear change in security strategy or major efforts to reinforce institutions and tackle
corruption within the police and other security forces, drug-related violence will
remain a major challenge.
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Mexico
Election watch
Local elections will be held in 12 states in June, of which all but one will elect a new
governor.TheleftwingPartidodelaRevolucinDemocrtica(PRD)hasbeen
activelyseekingallianceswiththecentrerightPartidoAccinNacional(PAN),and
there are currently five states where such alliances have been successfully
negotiated. These are mainly in states where neither party seems likely to defeat the
PRI on their own. The next presidential election will be in 2018, and polls continue to
suggestthatAndrsManuelLpezObradorofMorenawillbeastrongcontender,
given his anti-establishment rhetoric. Early frontrunners include the current interior
minister, Miguel Osorio Chong, for the PRI, and Margarita Zavala, the wife of a
formerpresident,FelipeCaldern(200612),forthePAN.ThePRDislikelytolook
towardsMiguelngelMancera,mayorofthecapital,MexicoCity.However,Mr
Mancera has suggested that he may run as an independent owing to the party's
problems and internal factionalism. Numerous other independents are expected to
run, as this will be the first election in which they are able to do so.
International relations
RelationswiththeUS,Mexicosdominanttradeandinvestmentpartner,andhostto
morethan33mpeopleofMexicandescent,willremainMrPeaNietosoverriding
foreign-policy priority. Immigration reform in the US has been an important issue for
both governments, but progress will depend on the composition of US Congress
after the elections in November (there is strong aversion from the Republican Party).
However,closeco operationwiththeUSondrugpolicy(includingintelligence
sharing)willcontinue.Mexicoboastsoneoftheworldslargestnetworksoffree
trade agreements, linking it with more than 40 countries in three continents. Efforts
todiversifyeconomiclinkagesawayfromtheUSwhichstillaccountsforover
threequartersofallMexicanexportsandhalfofitsimportswillbemadethrough
theTransPacificPartnershipandtheAlianzadelPacfico(thePacificAlliance,
which comprises Chile, Peru, Colombia and Mexico). Efforts will also be made on a
bilateral basis with other key economies, such as China and Brazil, notwithstanding
occasional trade disputes with the latter. Relations with Canada are set to improve,
as that country's government has expressed an interest in removing visa
requirements for Mexicans.
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Mexico
Policy trends
During the second half of its term, the government will concentrate on the
implementation of the structural reforms passed in 2013-14 amid concerns about
institutional weaknesses that could dilute their impact. Some of the reforms have
had a disappointing start, particularly the education reform, which has been met
with protests and strikes (mainly in southern states). Others, such as the
telecommunications reform, have shown more promise in the form of visibly lower
tariffs and new entrants into the market. After a lacklustre initial phase of tenders,
the energy reform has shown more promise in its second and third phases, the latter
of which saw 100% of all blocs successfully auctioned, with royalties far exceeding
government minimum requirements. Tenders for the fourth round, which will include
the more attractive deepwater blocs, were announced in late 2015, with the date for
the auctions set no later than the third quarter of 2016. There are concerns, however,
that the glut in supply caused by a renewed slump in oil prices could possibly
dampen some interest.
Given that it will take years before the impact of most of the reforms is fully felt, the
country will continue to struggle in the short term with structural bottlenecks such
as poor education outcomes, low levels of lending by the banking system to small
and medium-sized enterprises (SMEs), weak competition in certain key domestic
sectors, and a high level of informal employment, which hampers productivity
growth. Nevertheless, Mexico will benefit from a relatively stable macroeconomic
and monetary policy environment, ample international reserves, and a two-year IMF
flexible credit line of US$70bn, although fiscal slippage is a cause for concern in the
light of the rising debt stock.
Fiscal policy
The fiscal outlook will be complicated by low oil prices (we forecast an average price
for the dated Brent blend of US$40.3/barrel in 2016), given the large share of oil in
overall revenue. Fiscal performance deteriorated in 2015, leading to a deficit of 3.5%
of GDP (the highest result since the 1980s). On the positive side, the government
has benefited from a rise in tax intake as a result of the 2014 fiscal reform. This has
helped to make up for some of the loss in oil revenue, which fell by one-third last
year. The government will try to keep its vow of not enacting new taxes or raising
existing ones over the remainder of its term. As a result, adjustments to the deficit
will fall mainly on the spending side. Already, the loss of oil revenue has forced an
austere 2016 budget and the cancellation of key infrastructure projects.
We estimate that the fiscal deficit will ease slightly in 2016, to 3% of GDP, owing to
the government's austerity measures and higher non-oil tax intake as a result of the
fiscal reform and relatively strong consumer spending. Additional budget cuts were
announced by the Ministry of Finance in mid-February, and most will be focused on
PetrleosMexicanos(Pemex,thestateownedoilfirm).Thefiscaldeficitwillthenfall
gradually, to 2.2% of GDP by 2020, as economic conditions improve and oil prices
recover. At the same time, the public debt stock will rise, from 46.5% of GDP in 2015
(the highest level since 1995) to 55.5% of GDP by 2020, which is still a manageable
level.
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Mexico
Monetary policy
TheBancodeMxico(Banxico,thecentralbank)announcedasurprisinglystrong
rate hike in mid-February of 50 basis points, taking the rate to 3.75%. The move sent
a strong signal that the monetary authorities were prepared to defend the peso,
which had depreciated strongly in January-February but has since regained
strength. The move also made it clear that monetary policy will not necessarily be
synchronised with that of the Federal Reserve (Fed, the US central bank). Our
baseline forecast envisages further gradual tightening throughout 2016-17, in line
with that of the US in order to disincentivise capital outflows that could further
weaken the peso. On the banking side, overall private credit penetration remains low
(24.3% of GDP in 2015). This situation will improve gradually over the forecast
period, owing to a banking reform that seeks to spur lending and more competitive
interest rates through greater competition in the financial system. Private credit
growth picked up to 15.1% at end-2015, its highest level since early 2012.
International assumptions
Economic growth (%)
US GDP
OECD GDP
World GDP
World trade
Inflation indicators (% unless otherwise indicated)
US CPI
OECD CPI
Manufactures (measured in US$)
Oil (Brent; US$/b)
Non-oil commodities (measured in US$)
Financial variables
US$ 3-month commercial paper rate (av; %)
Exchangerate::US$(av)
Exchangerate:US$:(av)
2015
2016
2017
2018
2019
2020
2.4
1.9
2.4
2.5
2.0
1.7
2.3
2.9
2.3
1.9
2.6
3.8
2.3
2.0
2.8
4.0
1.0
1.5
2.3
3.1
2.2
2.0
2.7
3.7
0.1
0.5
-4.9
52.4
-17.3
1.3
1.2
-2.6
40.3
-6.8
2.0
1.8
4.1
55.5
8.4
2.4
2.0
4.2
67.5
7.6
1.5
1.7
3.5
62.8
-2.5
1.8
1.8
3.5
61.8
-0.6
0.2
121.0
1.11
0.6
115.0
1.10
1.4
114.5
1.09
2.1
113.9
1.11
2.3
112.5
1.15
2.0
110.9
1.18
Economic growth
GDP slowed in the fourth quarter of 2015 to 0.5%, compared with the third quarter,
bringing the full-year expansion to 2.5%. Given further budget cuts and adverse
global headwinds, we now expect that GDP growth will ease slightly in 2016, to
2.4%, before rebounding to 3% in 2017 (still below the country's potential).
Industrial activity has been constrained by a decline in oil and gas production
caused by the fall in prices, but weak public investment will also be a drag on
growth. However, consumer spending has been vibrant, although part of this owes
to pent up demand and the effect of a strong US dollar on remittances from the US.
Inthelongterm,fullimplement ationofthestructuralreformscouldeliminatesome
competitiveness bottlenecks and raise productivity, pushing the structural growth
rate from its current level of 3-3.5% to over 4% by 2020. However, extensive
institutional weaknesses and regulatory challenges make it unlikely that the reforms
will achieve their full potential, and our forecasts therefore reflect a much more
conservative growth outlook into the medium term, of just 3.1% on average annually
in 2017-20 (this figure is marred by a slight downturn in 2019 owing to a forecast US
cyclical slowdown).
Mexico will continue to benefit from the dynamism of its export-based
manufacturing sector, which has profited from relatively strong US demand, a fairly
weak peso, above-average productivity growth and a shrinking gap in average
wages compared with China. As a result, export volume growth will remain robust in
2016-20, as will growth in real imports. Export demand will also serve to drive fixed
investment,complementingsteadygrowthinprivateconsumptionasthecountrys
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Mexico
middle class expands. After some moderation in 2013-15, upticks in private

consumption and gross investment will be more evident in 2016-20, aided by a
recent public-private partnership (PPP) law. However, declining public capital
spending as a share of GDP into the medium term will be detrimental to growth.
Onthesupplyside,exportorientedindustrieswillcontinuetobenefitfromMexicos
low wages, relatively skilled labour force in these sectors, a weak peso and strategic
closeness to the US. This will be most evident in the automobile industry and the
nascent aerospace sector. Tourism is performing well, although some important
resort cities have been afflicted by drug-related violence. Other potentially dynamic
sectors (such as telecoms) have underperformed, owing to weak competition and
regulation, but the structural reforms could bring improvement, provided that the
stranglehold of local dominant firms can be loosened. Likewise, the oil sector will
receive an important boost from the energy reform, assuming that it manages to
attractprivateinvestmentintheeventualexploitationofMexicosconsiderable
deepwater reserves and its shale potential. A fall in electricity prices and greater
interconnection with the North American energy grid will also help to bring down
input costs for businesses. Expansion of financial services will remain below
potential because of low levels of financial inclusion, but the banking reform is
expected to improve competition in the sector and boost lending in the medium term.
Poor rural infrastructure and low productivity (hampered by high levels of poverty)
will cap any significant rise in agricultural production.
Economic growth
%
2015a
GDP
2.5
Private consumption
3.1
Government consumption
2.4
Gross fixed investment
3.9
Exports of goods & services
9.1
Imports of goods & services
5.1
Domestic demand
3.1
Agriculture
3.1
Industry
1.0
Services
3.3
a Actual. b Economist Intelligence Unit forecasts.
2016b
2.4
2.9
0.9
3.4
5.0
5.9
2.6
4.9
3.3
1.8
2017b
3.0
3.0
2.1
4.5
5.1
6.1
3.3
4.8
3.7
2.6
2018b
3.3
3.4
2.3
4.8
5.2
6.3
3.6
4.8
3.9
2.8
2019b
3.0
3.0
1.9
4.3
2.8
3.4
3.1
4.7
3.9
2.4
2020b
3.2
3.4
1.9
4.7
5.0
6.2
3.6
4.7
3.9
2.7
Inflation
A continuous nine-month slide culminated in the lowest inflation rate in January
(2.1%) since the current series began. Following this, annual inflation finally ticked
back up in February, to 2.9%, but easing base-year effects suggest that consumer
prices will be on an upward trend over the next few months. Pass-through effects
from higher import prices are also a cause for concern, and Banxico has highlighted
this risk as one of the reasons for the recent rate hike. In the longer term, restrained
increases in real wages and ample spare capacity will prevent firmer domestic
demand growth from exerting significant pressure on prices. These factors will also
helptokeepexpectationsanchoredclosetothemidpointofBanxicos2 4%target
range, despite occasional domestic supply-side shocks.
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Mexico
Exchange rates
The peso slumped considerably in January-February, losing almost 8% of its
nominal value, before rebounding after the mid-February rate hike. The peso has
since gained further ground in line with a trend towards strengthening seen in many
emerging economies, falling below Ps18:US$1. Although our baseline forecast sees
risks of continued volatility, we expect the peso to strengthen gradually from 2017
as global uncertainty eases and the economy strengthens, reaching Ps16.9:US$1 by
end-2020. Mitigating exchange-rate risks is a substantial reserves cushion
(US$171.9bn in January), which is high by historical comparison, albeit over
US$20bn below its January 2015 peak. A weakening of the peso in real terms
compared with the previous decade will support export competitiveness.
External sector
After widening to 2.8% of GDP in 2015 on account of the fall in oil prices, we expect
the current account to widen further, to 3% of GDP in 2016, before gradually
narrowing to 1.9% of GDP by the end of the forecast period as global oil prices
rebound from their current lows. The trade balance will suffer from lower oil export
revenue, owing to weaker prices and a decline in production in 2016, and from
higher imported goods costs. However, this will be offset by a more favourable
outlookformanufactures,whichrepresentafarlargershareofMexicosexport
profile (85%), and which will benefit from the weak peso. The services deficit will
remain broadly stable as a share of GDP, despite some improvement in tourism
revenue, while the primary income deficit will remain large, particularly if additional
investment feeds in over the coming years. Remittances rose further in 2015, and
should continue to rise in absolute terms, but will decline relative to GDP, pushing
the secondary income (transfers) surplus below the 2% of GDP mark from 2017.
The current-account deficit will remain manageable, and largely financed by foreign
direct investment (FDI) and portfolio inflows. FDI inflows rose to US$28.4bn in 2015,
one of the highest levels on record. The opening-up of the telecoms and energy
sectors will help to boost FDI inflows, although high entry barriers in other
domestic sectors will result in Mexico having a lower share of FDI relative to GDP
than countries such as Brazil and Chile. Portfolio inflows have been large in recent
years (well above FDI), but eased to US$20.4bn in 2015. These will decrease further
once global spreads begin to narrow. Import cover will average a comfortable
4.4 months in 2016-20.
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Mexico
Forecast summary
Forecast summary
(% unless otherwise indicated)
2015a 2016b 2017b 2018b 2019b
Real GDP growth
2.5
2.4
3.0
3.3
3.0
Industrial production growth
3.3
3.7
3.9
3.9
1.0c
Gross fixed investment growth
3.9
3.4
4.5
4.8
4.3
Unemployment rate (av)
4.4
4.4
4.4
4.4
4.7
Consumer price inflation (av)
2.7
3.2
3.5
3.5
3.4
Consumer price inflation (end-period)
2.1
4.0
3.2
3.7
3.6
Lending interest rate
3.4
3.6
4.3
4.7
4.8
Budgetary public-sector balance (% of GDP)
-3.5
-3.0
-2.5
-2.3
-2.2
Exports of goods fob (US$ bn)
381.2 384.4 416.2 449.9 474.8
Imports of goods fob (US$ bn)
395.6 400.8 431.3 459.4 483.1
Current-account balance (US$ bn)
-32.4
-31.8
-31.0
-29.7
-29.1
Current-account balance (% of GDP)
-2.8
-3.0
-2.6
-2.3
-2.1
External debt (end-period; US$ bn)
442.6c 491.7 548.6 614.0 686.6
Exchange rate Ps:US$ (av)
15.85 17.88 17.58 17.47 17.26
Exchange rate Ps:US$ (end-period)
17.21 17.73 17.53 17.37 17.16
ExchangeratePs:(av)
17.59 19.58 19.21 19.39 19.90
ExchangeratePs:(endperiod)
18.73 19.33 19.28 19.54 20.08
a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimate.
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2020b
3.2
3.9
4.7
4.6
3.4
3.5
4.8
-2.2
511.8
519.5
-29.8
-1.9
759.8
17.06
16.96
20.13
20.18
10
Mexico
Quarterly forecasts
Quarterly forecasts
2015
2016
2017
1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr
GDP
% change, quarter on quarter
0.5 0.6 0.8 0.5 0.5 0.5 0.7 0.7 0.7 0.8 0.9 0.9
% change, year on year
2.5 2.4 2.7 2.5 2.5 2.4 2.2 2.4 2.7 2.9 3.2 3.4
Private consumption
1.1 0.7 0.8 0.9 0.6 0.6 0.7 0.8 0.6 0.7 0.8 0.9
3.3 2.6 3.1 3.5 3.0 3.0 2.9 2.8 2.9 3.0 3.0 3.1
1.1 0.0 0.7 0.3 0.0 0.1 0.2 0.3 0.6 0.7 0.8 0.8
3.3 2.7 1.4 2.2 1.1 1.2 0.7 0.6 1.2 1.8 2.4 2.9
0.7 0.7 0.4 -1.1 1.4 1.5 1.6 1.6 0.7 0.8 0.9 1.0
6.4 4.8 3.8 0.7 1.5 2.3 3.5 6.3 5.6 4.9 4.2 3.5
2.2 0.8 2.5 -0.5 1.5 1.2 2.1 1.8 0.8 1.3 0.5 0.9
12.5 9.2 9.9 5.1 4.3 4.7 4.3 6.7 6.0 6.2 4.5 3.6
0.6 0.5 2.0 -0.8 2.1 2.1 2.2 2.2 1.0 1.1 1.2 1.2
6.6 5.6 5.8 2.4 3.8 5.4 5.6 8.9 7.7 6.7 5.6 4.6
Domestic demand
1.0 0.6 0.7 0.3 0.7 0.7 0.8 0.8 0.9 0.8 0.8 0.9
3.7 3.2 2.9 2.7 2.4 2.4 2.6 3.0 3.2 3.3 3.3 3.4
Consumer prices
0.3 0.7 0.7 0.6 0.9 0.7 0.8 1.3 0.9 0.8 0.6 0.6
3.1 2.9 2.6 2.3 2.9 3.0 3.1 3.7 3.7 3.8 3.7 3.0
Producer prices
-0.6 1.2 0.4 0.4 1.4 1.6 1.6 1.8 1.1 1.0 0.7 0.5
-0.4 0.3 0.5 1.3 3.4 3.8 5.0 6.5 6.2 5.5 4.6 3.3
Exchange rate Ps:US$
Average
14.93 15.31 16.40 16.75 17.61 17.86 17.99 18.07 17.96 17.66 17.43 17.27
End-period
15.15 15.57 17.01 17.21 17.73 17.92 18.03 17.73 17.81 17.54 17.35 17.53
Interest rate (%; av)
Money market rate
3.3 3.3 3.3 3.4 3.2 3.4 3.8 3.9 4.6 4.7 3.9 3.6
Long-term bond yield
3.3 3.5 3.7 3.6 3.6 3.7 4.1 4.4 4.2 4.3 4.4 4.4
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11
Mexico
Data and charts

Annual data and forecast
2011a
GDP
Nominal GDP (US$ bn)
Nominal GDP (Ps bn)
Real GDP growth (%)
Expenditure on GDP (% real change)
Private consumption
Origin of GDP (% real change)
Agriculture
Industry
Services
Population and income
Population (m)
GDP per head (US$ at PPP)
Recorded unemployment (av; %)
Fiscal indicators (% of GDP)
Public-sector revenue
Public-sector expenditure
Public-sector balance
Net public debt
Prices and financial indicators
Consumer prices (end-period; %)
Producer prices (av; %)
Stock of money M1 (% change)
Stock of money M2 (% change)
Money market interest rate (av; %)
Current account (US$ m)
Trade balance
Goods: exports fob
Goods: imports fob
Services balance
Primary income balance
Secondary income balance
Current-account balance
External debt (US$ m)
Debt stock
2012a
2013a
2014a
2015a
2016b
2017b
1,170.8 1,186.4 1,261.5 1,297.5 1,144.1 1,071.2 1,182.4

14,545 15,624 16,111 17,247 18,132 19,155 20,787
4.0
3.8
1.6
2.3
2.5
2.4
3.0
4.8
2.5
7.8
8.3
8.1
4.7
3.3
4.8
5.9
4.7
2.5
1.3
-1.5
2.2
3.5
1.8
2.4
2.8
7.0
5.9
3.1
2.4
3.9
9.1
5.1
2.9
0.9
3.4
5.0
5.9
3.0
2.1
4.5
5.1
6.1
-2.3
3.4
4.7
7.4
2.9
4.5
0.9
-0.5
2.4
4.3
2.6
1.9
3.1
1.0
3.3
4.9
3.3
1.8
4.8
3.7
2.6
120.4
15,748
5.2
122.1
16,287
4.9
123.7
16,244
4.9
125.4
17,352
4.8
127.0
17,338
4.4
128.6
17,824
4.4
130.2
18,406
4.4
22.5
25.0
-2.5
34.9
22.5
25.1
-2.6
35.2
23.6
25.9
-2.3
38.0
23.1
26.3
-3.2
41.9
23.5
27.0
-3.5
46.5
21.5
24.5
-3.0
49.7
21.6
24.1
-2.5
51.3
13.99
3.8
6.0
13.6
11.9
4.8
13.01
3.6
4.7
9.5
8.4
4.8
13.08
4.0
1.1
10.3
8.8
4.3
14.72
4.1
1.9
14.5
10.9
3.5
17.21
2.1
0.4
16.4
7.2
3.3
17.73
4.0
3.4
5.6
6.0
3.6
17.53
3.2
3.9
8.5
10.6
4.2
-14,375 -16,371
381,198 384,425
-395,573 -400,796
-9,448 -8,876
-32,844 -33,337
24,287 26,756
-32,381 -31,829
-15,093
416,160
-431,253
-10,103
-32,998
27,169
-31,025
-1,205
291
-909 -2,573
350,004 371,442 380,729 397,866
-351,209 -371,151 -381,638 -400,440
-14,793 -14,005 -10,983 -12,451
-20,373 -25,405 -40,083 -32,736
22,974 22,559 21,653 22,915
-13,397 -16,559 -30,322 -24,846
291,833 348,945 406,042 432,602 442,568c 491,703 548,574
Debt service paid
42,156
70,828
41,614
Principal repayments
28,708
35,413
20,200
52,242 50,946c
29,391 33,225c
48,565
55,640
29,369
32,434
17,721c
Interest
13,448 35,415 21,414 22,851
19,196 23,206
International reserves (US$ m)
Total international reserves
149,339 167,098 181,019 195,917 177,975 168,821 180,611
a Actual. b Economist Intelligence Unit forecasts. c Economist Intelligence Unit estimate.
Source: IMF, International Financial Statistics.
www.eiu.com
12
Mexico
Quarterly data
2014
1 Qtr
Non-financial public sector (Ps bn)
Revenue
Expenditure
Balance
Industrial production (2003=100)
General
Manufacturing
Mining
Employment, wages and prices
2 Qtr
3 Qtr
4 Qtr
2015
1 Qtr
2 Qtr
3 Qtr
4 Qtr
964.0 947.9 942.6 1,128.5 1,086.6 959.8 987.2 1,230.9

1,023.2 1,144.5 1,105.3 1,255.0 1,185.1 1,220.0 1,093.5 1,393.3
-59.2 -196.6 -162.7 -126.5 -98.5 -260.2 -106.3 -162.4
103.0
110.8
96.6
105.4
114.2
96.0
107.9
114.8
96.2
109.4
115.6
93.9
104.7
114.4
91.2
106.0
117.8
88.7
109.3
118.4
90.8
109.6
117.9
89.6
1.5
0.0
0.3
-0.2
1.5
2.1
2.6
n/a
Employment (% change, year on year)a
Unemployment rate (% of the labour force)
4.8
4.9
5.3
4.4
4.2
4.4
4.6
4.2
Consumer prices (Jun 16-30 2002=100)
112.1 113.0 114.1 115.2 115.5 116.3 117.1 117.8
Consumer prices (% change, year on
4.2
3.6
4.1
4.2
3.1
2.9
2.6
2.3
year)
Producer prices (Dec 2003=100)
102.6 103.1 103.2 102.7 102.1 103.3 103.7 104.1
Producer prices (% change, year on year)
1.7
2.4
2.2
1.3
-0.4
0.3
0.5
1.3
Financial indicators
13.23 13.00 13.11 13.83 14.93 15.31 16.40 16.75
13.08 13.03 13.45 14.72 15.15 15.57 17.01 17.21
Deposit rate (av; %)
1.1
1.0
0.6
0.6
0.6
0.6
0.6
0.6
Lending rate (av; %)
3.9
3.7
3.3
3.3
3.4
3.4
3.4
3.5
3-month money market rate (av; %)
3.8
3.7
3.3
3.3
3.3
3.3
3.3
3.4
M1 (end-period; Ps bn)
2,448 2,508 2,559 2,879 2,887 2,970 3,059 3,352
M1 (% change, year on year)
12.5
13.3
13.8
14.5
17.9
18.4
19.5
16.4
M2 (end-period; Ps bn)
9,752 10,010 10,183 10,540 10,678 10,950 11,081 11,302
9.4
11.5
10.0
10.9
9.5
9.4
8.8
7.2
BMV stockmarket index (% change, year
-13.3
6.5
8.3 -10.3
-6.7 -11.7 -25.0 -14.8
on year)
Sectoral trends
Crude oil production (m barrels/day)
2.49
2.47
2.40
2.36
2.30
2.23
2.27
2.28
Crude oil production (% change, year on
-2.1
-1.9
-4.3
-6.5
-7.7
-9.8
-5.5
-3.5
year)
Foreign trade and payments (US$ m)
Exports fob
90,759101,871101,120103,379 90,404 98,134 96,094 96,141
74,615 85,551 86,949 90,183 79,198 86,772 86,698 87,308
Manufacturingb
Oil
11,501 11,483 10,718 8,885 6,267 6,565 5,907
n/a
Imports fob
92,064100,864102,840104,209 92,605 99,985102,563100,080
69,590 77,018 77,879 77,544 70,137 76,139 76,706 74,273
Intermediate goodsb
Trade balance
-1,306 1,007 -1,720
-830 -2,201 -1,852 -6,469 -3,939
Services balance
-2,504 -3,357 -3,548 -3,042 -1,973 -2,156 -3,401
n/a
Primary income balance
-9,643 -11,544 -3,676 -7,874 -10,384 -9,855 -4,718
n/a
Net transfer payments
5,552 6,262 6,061 6,150 5,839 6,464 6,642
n/a
Current-account balance
-8,013 -7,875 -3,125 -5,831 -8,891 -7,613 -8,179 -7,698
Reserves excl gold (end-period)
180,369187,324188,516190,923193,092189,704177,567173,445
a Registered with the Mexican Social Security Institute. b Including maquila.
Sources:IMF,InternationalFinancialStatisticsBancodeMxico,IndicadoresEconmicosInstitutoNacionaldeEstadstica
yGeografaSecretaradelTrabajoyPrevisinSocial.
Monthly data
Jan
Feb
Mar
Apr
2014 13.20 13.29 13.22 13.07
2015 14.68 14.92 15.20 15.22
2016 17.98 18.48
n/a
n/a
2014 13.37 13.30 13.08 13.14
2015 14.69 14.92 15.15 15.22
2016 18.45 18.17
n/a
n/a
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
12.95
15.26
n/a
12.98
15.46
n/a
12.97
15.89
n/a
13.15
16.49
n/a
13.20
16.84
n/a
13.48
16.60
n/a
13.58
16.63
n/a
14.43
17.00
n/a
12.87
15.36
n/a
13.03
15.57
n/a
13.06
16.21
n/a
13.08
16.89
n/a
13.45
17.01
n/a
13.42
16.45
n/a
13.72
16.55
n/a
14.72
17.21
n/a
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13
Mexico
Public sector budget revenue (Ps m)

2014 366.8 281.0 316.3 346.8 296.0 305.1 325.5
2015 365.1 290.5 431.1 330.0 302.7 327.1 354.1
2016 370.6
n/a
n/a
n/a
n/a
n/a
n/a
Public sector budget expenditure (Ps m)
2014 376.2 324.5 322.5 340.8 343.6 460.2 412.3
2015 460.7 349.9 374.5 354.9 363.4 501.7 397.3
2016 417.9
n/a
n/a
n/a
n/a
n/a
n/a
Public sector budget balance (Ps m)
2014
-9.4 -43.6
-6.2
6.0
-47.5 -155.1
-86.8
2015
-95.6 -59.4
56.5
-24.8
-60.8 -174.6
-43.2
2016
-47.3
n/a
n/a
n/a
n/a
n/a
n/a
2014
12.9
13.2
12.5
14.9
14.7
13.3
14.7
2015
17.7
17.7
17.9
18.7
18.1
18.4
19.4
2016
14.3
n/a
n/a
n/a
n/a
n/a
n/a
2014
9.3
9.5
9.4
10.6
10.8
11.5
10.8
2015
11.4
10.5
9.5
10.1
10.7
9.4
10.0
2016
6.9
n/a
n/a
n/a
n/a
n/a
n/a
Industrial production (% change, year on year)
2014
1.7
1.4
1.2
2.9
3.3
2.9
2.9
2015
1.4
1.9
1.7
1.5
0.0
0.7
1.0
2016
1.8
n/a
n/a
n/a
n/a
n/a
n/a
Retail sales (% change, year on year)
2014
2.9
1.5
5.0
0.4
-0.4
4.7
0.9
2015
3.8
5.5
5.6
5.4
5.6
3.3
6.2
2016
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Unemployment rate (% of the labour force)
2014
5.1
4.7
4.8
4.9
4.9
4.8
5.5
2015
4.5
4.3
3.9
4.3
4.5
4.4
4.7
2016
4.2
n/a
n/a
n/a
n/a
n/a
n/a
Deposit rate (av; %)
2014
1.1
1.1
1.1
1.1
1.2
0.8
0.6
2015
0.6
0.6
0.6
0.6
0.6
0.6
0.6
2016
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Lending rate (av; %)
2014
3.8
3.8
3.9
3.9
3.8
3.4
3.4
2015
3.3
3.4
3.5
3.4
3.5
3.3
3.4
2016
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Stockmarket index (BMV; end-period, October 1978=0.78)
2014 40,880 38,783 40,462 40,712 41,363 42,737 43,818
2015 40,951 44,190 43,725 44,582 44,704 45,054 44,753
2016 43,631 43,715
n/a
n/a
n/a
n/a
n/a
Consumer prices (av; % change, year on year)
2014
4.5
4.3
3.8
3.5
3.5
3.7
4.1
2015
3.1
3.0
3.1
3.1
2.9
2.9
2.7
2016
2.6
2.9
n/a
n/a
n/a
n/a
n/a
Producer prices (av; % change, year on year)
2014
1.6
1.7
1.8
2.5
2.9
1.9
2.2
2015
-0.5
-0.8
-0.1
0.2
0.0
0.6
0.6
2016
2.9
3.4
n/a
n/a
n/a
n/a
n/a
Total exports fob (US$ m)
2014 27,052 30,462 33,245 34,060 34,374 33,436 33,687
2015 26,554 29,716 34,134 32,954 31,340 33,840 32,804
2016 24,536
n/a
n/a
n/a
n/a
n/a
n/a
Total imports cif (US$ m)
2014 30,234 29,544 32,287 33,562 34,251 33,051 34,691
2015 29,816 29,124 33,664 33,040 32,357 34,589 35,071
2016 27,978
n/a
n/a
n/a
n/a
n/a
n/a
Trade balance fob-cif (US$ m)
2014 -3181.1 918.0 957.5 498.5 122.7 385.7 -1003.7
2015 -3262.0 591.5 470.0
-85.4 -1017.4 -749.0 -2266.9
2016 -3441.1
n/a
n/a
n/a
n/a
n/a
n/a
www.eiu.com
306.7
315.1
n/a
310.4
318.0
n/a
327.5
299.4
n/a
359.9
415.5
n/a
441.1
516.0
n/a
325.7
341.6
n/a
367.2
354.7
n/a
362.9
343.4
n/a
378.2
423.5
n/a
513.9
626.4
n/a
-19.0
-26.5
n/a
-56.8
-36.7
n/a
-35.4
-44.0
n/a
-18.3
-72.8
-8.0 -110.4
n/a
n/a
13.6
19.9
n/a
13.8
19.5
n/a
18.3
18.5
n/a
15.6
15.4
n/a
14.5
16.4
n/a
10.3
9.1
n/a
10.0
8.8
n/a
10.0
8.4
n/a
10.1
6.3
n/a
10.9
7.2
n/a
2.6
1.2
n/a
3.0
1.4
n/a
3.0
0.9
n/a
2.9
0.1
n/a
2.6
0.0
n/a
5.8
6.7
n/a
2.4
5.1
n/a
6.1
3.8
n/a
2.6
6.6
n/a
1.5
3.3
n/a
5.2
4.7
n/a
5.1
4.5
n/a
4.8
4.6
n/a
4.5
4.0
n/a
3.8
4.0
n/a
0.6
0.6
n/a
0.6
0.6
n/a
0.6
0.6
n/a
0.6
0.6
n/a
0.6
n/a
n/a
3.3
3.3
n/a
3.4
3.5
n/a
3.3
3.4
n/a
3.2
3.6
n/a
3.4
3.6
n/a
45,628 44,986 45,028 44,190 43,146

43,722 42,633 44,543 43,419 42,978
n/a
n/a
n/a
n/a
n/a
4.1
2.6
n/a
4.2
2.5
n/a
4.3
2.4
n/a
4.2
2.2
n/a
4.1
2.1
n/a
2.5
0.3
n/a
1.8
0.7
n/a
1.5
1.3
n/a
1.5
1.4
n/a
1.0
1.3
n/a
33,287 34,147 36,879 32,356 34,144

31,048 32,241 34,155 31,025 30,961
n/a
n/a
n/a
n/a
n/a
34,484 33,666 36,943 33,405 33,861
33,830 33,661 35,599 32,594 31,887
n/a
n/a
n/a
n/a
n/a
-1196.9 480.8
-63.8 -1049.0
-2782.1 -1419.9 -1443.8 -1568.8
n/a
n/a
n/a
n/a
282.8
-926.5
n/a
14
Mexico
Foreign-exchange reserves excl gold (US$ m)

2014 178,054 178,521 180,369 183,758 185,649 187,324 187,798 188,281 188,516 192,422 192,047 190,923
2015 194,192 193,439 193,092 193,677 191,770 189,704 189,025 182,713 177,567 172,655 168,528 173,445
2016 171,983
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Sources: IMF, International Financial Statistics; Haver Analytics.
Annual trends charts
www.eiu.com
15
Mexico
Quarterly trends charts
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16
Mexico
Monthly trends charts
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17
Mexico
Comparative economic indicators
Basic data
Land area
1,964,375 sq km
Population
125.5m (2014; UN estimate)
www.eiu.com
18
Mexico
Main towns
Population (m), 2010 (INEGI data for metropolitan areas)
Mexico City (capital): 20.1
Guadalajara: 4.4
Monterrey: 4.1
Puebla: 2.7
Climate
Tropical in the south, temperate in the highlands, dry in the north
Weather in Mexico City (altitude 2,309 metres)

Hottestmonth,May,1226C(averagedailyminimumandmaximum)coldestmonth,
January,619Cdriestmonth,February,5mmaveragerainfallwettestmonth,July,
170 mm average rainfall
Languages
Spanish is the official language. Over 60 indigenous languages are also spoken,
mainlyNhuatl(1.2mspeakers),Maya(714,000),Zapotec(403,000)andMixtec
(387,000)
Measures
Metric system
Currency
Peso(Ps).Averageexchangeratesin2015:Ps15.85:US$1Ps17.53:1
Time
Six hours behind GMT in Mexico City
Public holidays
January 1st (New Year); February 1st (Constitution Day); March 21st (Benito
Jurez)March24th(MaundyThursday)March25th(GoodFriday)May1st
(Labour Day) and 5th (Battle of Puebla); September 16th (Independence Day);
November 2nd (Day of the Dead) and 21st (Mexican Revolution); December 25th
(Christmas) and 31st (New Year's Eve)
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19
Mexico
Political structure
Official name
United Mexican States
Political divisions
31 states and the Federal District (Mexico City); states are divided into
municipalities
Form of government
Presidential, with a constitutionally strong Congress
The executive
The president is elected for a non-renewable six-year term and appoints the cabinet
National legislature
Bicameral Congress: 128-member Senate (the upper house), elected for a six-year
term, with 64 seats elected on a first-past-the-post basis, 32 using the first minority
principle and 32 by proportional representation; 500-member Chamber of Deputies
(thelowerhouse),electedforathree yearterm,with300seatselectedonafirst
past-the-post basis and 200 by proportional representation
Regional governments
State governors are elected for six-year terms; each state has a local legislature and
has the right to levy state-wide taxes; municipal presidents are elected for three-year
terms
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20
Mexico
Legal system
There are 68 district courts and a series of appellate courts with a Supreme Court;
federal legal system, with states enjoying significant autonomy
National elections
Next elections June 2018 (presidential and congressional)
National government
Thepresident,EnriquePeaNietoofthePartidoRevolucionarioInstitucional(PRI),
heads a minority government
Main political organisations

Government: PRI
Opposition:PartidoAccinNacional(PAN)PartidodelaRevolucinDemocrtica
(PRD)PartidoVerdeEcologistadeMxico(PVEM)ConvergenciaPartidodel
Trabajo(PT)PartidoNuevaAlianza(Panal)MovimientoRegeneracinNacional
(Morena)
President:EnriquePeaNieto
Cabinet members
Agrarian reform: Rosario Robles Berlanga
Agriculture:JosCalzadaRovirosa
Attorneygeneral:ArelyGmezGonzlez
Communications & transport: Gerardo Ruiz Esparza
Economy: Ildefonso Guajardo Villarreal
Energy:PedroJoaqunColdwell
Environment & natural resources: Rafael Pacchiano
Finance & public credit: Luis Videgaray Caso
Foreign relations: Claudia Ruiz Massieu
Health:MercedesJuanLpez
Interior: Miguel Osorio Chong
Labour & social welfare: Alfonso Navarrete Prida
National defence: Salvador Cienfuegos Zepeda
Naval:VidalSobernSalas
Publiceducation:AurelioNuoMayer
Publicsecurity:ManuelMondragnyKalb
Socialdevelopment:JosAntonioMeadeKuribrea
Tourism: Enrique de la Madrid
Central bank governor

AgustnCarstens
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21
Mexico
Recent analysis
Generated on April 24th 2016
The following articles have been written in response to events occurring since our most recent forecast was released, and
indicate how we expect these events to affect our next forecast.
Politics
Forecast updates
April 14, 2016: Political stability
Government not keen on extending Ayotzinapa investigation

Event
The government has declared that it has no intention of renewing the mandate of
the Grupo Interdisciplinario de Expertos Independientes (GIEI), an international task
force investigating the 2014 Ayotzinapa kidnappings of 43 students.
Analysis
The GIEI's mandate stretches until April 30th, after which it will require government
approval to continue. However, there have been some recent clashes between the
group, which is composed of experts from the Inter-American Commission on
Human Rights (IACHR), and government authorities. In March the IACHR released
a damning report on the state of human rights in Mexico, making note of the high
number of murders (over 100,000) and disappearances (around 27,000) in the nearly
decade-long drug war, as well as torture by police and extra-judicial killings.The
report was immediately criticised by the government, which claimed that there was
not, in fact, a "human rights crisis" as the IACHR suggested.
The debate has now centred on whether the GIEI should extend its mandate,
something that is strongly supported by the families of the 43 disappeared students,
who have stated that they are no closer to finding out their fate. The GIEI's findings
have been at odds with those of the government, and it has particularly questioned
the official view that the bodies of the students were disposed of in a fire in a
garbage dump near the town of Cocula, in the state of Guerrero. On April 1st the
government held a press conference in which it announced results of a further
investigation which suggested that there was indeed evidence that a fire in Cocula
could have charred as many as 17 bodies. The GIEI was not granted the right to
discuss the findings owing to confidentiality issues, and consequently stated that it
would no longer co-operate with the government on any investigation related to the
fire.
According to the IACHR, the GIEI should retain its mandate to investigate the
Ayotzinapa kidnappings until conclusive answers are obtained. The government
has not stated what other forms of collaboration with the GIEI could take shape after
April. Given the sensitive nature of the GIEI's work, and that its conclusions have
been somewhat embarrassing to national authorities, it is highly likely that the
government will prefer to take back control of the investigation.
Impact on the forecast

The lack of closure in the Ayotzinapa kidnapping case will continue to fuel
dissatisfaction with the government, underpinning our forecast of risks to political
stability.
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Analysis
April 1, 2016
Auditor highlights lack of transparency in state finances

TheAuditoraSuperiordelaFederacin(ASF,thecongressionalauditoffice)in
February disclosed the results of its most recent public accounts audit, covering
2014. The report has highlighted the problem of public-sector corruption and
reignited calls from opposition parties in particular to move ahead with approval of
byelaws linked to anti-corruption legislation that was passed in early 2015.
Nevertheless, much more remains to be done if the fight against corruption is to be
effective, particularly regarding institutional independence and enforcement of the
law at all levels of government.
The latest ASF report comprises 1,641 audits of federal spending, with observations
made wherever irregularities need to be clarified. The ASF's observations covered
Ps77.4bn (US$4.5bn) of spending, equivalent to 13% of all audits. The report
identifies that most problems were found in instances of federal funds being sent to
the states. Underspending is particularly prevalent, which not only leads to
unfulfilled goals and objectives of federal programmes, but also to the possibility of
misused resources. When local administrations fail to respond satisfactorily to the
ASF's observations within the established deadline, they are formally accused of
corruptionbytheASF,whichfilesacriminallawsuitwiththeProcuraduraGeneral
delaRepblica(theattorneygeneral'soffice).Duringthepresentationofthe2014
report, Juan Manuel Portal, the ASF's head auditor, said that it is likely that the ASF
will issue around 100 lawsuits related to unclarified observations.
Dire situation
The report shows that the 19 states that in 2014 were governed by the ruling Partido
Revolucionario Institucional (PRI) accounted for Ps17.7bn in federal funds that need
to be clarified. Shockingly, 60% of these refer to Veracruz alone, which accumulated
Ps10.8bninunaccountedfundsduring2014.AccordingtoMinervaHernndez,a
congresswoman who sits on the ASF's vigilance committee, the auditors have
already issued criminal lawsuits for irregularities in the public finances of Veracruz
between 2008 and 2013 for underspending, refusal to return unspent federal funds,
refusal to deliver funds to public universities, and "simulation" of the return of
unused federal funds.
The ASF report shows that the Veracruz state government provided false
information regarding the use of federal funds destined to combat crime in the state,
which has escalated enormously during the administration of the current governor,
Javier Duarte. The audit claims that although by the end of December 2014 Veracruz
authorities reported that 71% of the objectives of the funds for crime reduction had
been achieved, in reality only Ps23m of the funds had been used, equivalent to 6.3%
of the total. Nevertheless, Veracruz is far from being the only state with
dubiouspublicaccounts.IrregularitieswerealsosignificantinMichoacn,Jalisco,
Mxicostate,Chiapas,GuerreroandOaxaca.InChiapas,theonlystateruledbythe
PartidoVerdeEcologistadeMxicoacloseallyofthePRItheASFreportfound
that more than Ps886m was unaccounted for.
Problems extend beyond the PRI

Lack of transparency and accountability is not exclusive to PRI-run state
administrations. Indeed, the report shows that states ruled by the main opposition
parties,boththeleftistPartidodelaRevolucinDemocrtica(PRD)andthe
conservativePartidoAccinNacional(PAN),alsohavehighlydeficientpublic
accounts. Irregularities in the four PRD-run governments (in the capital,
Mexico City, and Morelos, Oaxaca and Tabasco states) amounted to Ps3.7bn. These
were led by Oaxaca, with Ps1.7bn. Irregularities there were mostly identified in funds
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Mexico
foreducationaswasthecaseinMorelosandTabasco.MexicoCityrecordedthe
smallest number of irregularities, totalling Ps433m, mostly regarding funds for social
infrastructure.
PAN governments in Baja California, Baja California Sur, Guanajuato, Puebla,
Sinaloa and Sonora states also racked up anomalies equivalent to around Ps3.7bn in
2014. In these states, most irregularities revolved around programmes in the
education, health, and public security sectors. The administration of the Guanajuato
governor,MiguelMrquezMrquez,wastheworstoffender,withPs1.5bn,followed
bythatofGuillermoPadrsinSonora,withPs646m.
The problem also extends to the federal legislature, with the report showing that
both chambers of Congress failed to account for significant amounts. The Chamber
ofDeputiesrecordedanomaliesequivalenttomorethanPs1.9bnequivalentto
one quarterofitstotalbudgetin2014whiletheSenatewasmissingappropriate
documentationtojustifyPs1.3bn,equivalenttoone thirdofitsbudget.
Little impact on corruption

The number of lawsuits issued by the ASF has been growing significantly in the
past few years, from seven in 2010, to 53 in 2011, 80 in 2012, 134 in 2013, 186 in 2014
and 157 in 2015. This has been partly the result of increasingly exhaustive audits,
which have led to greater numbers of irregularities detected. However, these
lawsuits have not translated into sanctions. Between 1998 and 2015 the ASF
presented a total of 656 criminal reports for corruption, of which only 19 led to penal
action. This is equivalent to an impunity rate of 97%.
EduardoBohrquez,headoftheTransparenciaMexicana,theMexicanchapterof
an anti-corruption NGO, Transparency International, has pointed out that this level
of impunity illustrates the ineffectiveness of transparency when not accompanied
by anti-corruption measures. In this regard, the new anti-corruption framework
signedintolawbyMrPeaNietoonMay27th2015,whichnolongerreliesona
single entity to take charge of all aspects of anti-corruption efforts, is a very
positive development. Despite its improvements, however, the framework has yet to
become applicable, as it is still missing its byelaws, which must be voted on by
Congress by May 28th this year.
Similarly, efforts to rein in state governments' lack of accountability have made some
progress. The Ley de Disciplina Financiera a las Entidades Federativas y
Municipios (law of fiscal discipline of the states and municipalities) was presented
by the government in August 2015, and includes procedures to curb the use of state
resources for illegitimate uses. But, just as with the anti-corruption byelaws, it
remains stuck in Congress.
Citizens take a stand

Mr Portal has repeatedly highlighted that inadequate implementation of internal
controls and poorly designed rules are at the root of the problem. However, there is
also a clear lack of political will to allow for greater accountability. The ASF report
has shown that no single political party is without blame. Indeed, the introduction
of a citizen-led initiative to create a new administrative responsibilities law, dubbed
"Ley 3de3" (Law 3 of 3), on March 17th illustrates the extent to which civil society
mistrusts politicians to put conditions in place in order to address corruption more
effectively.
Although all political parties welcomed this initiative, which has to be debated in
Congress (both the PAN and the PRD are claiming that they would endorse the
proposal as their own), it remains unclear whether or not its provisions will be
diluted. Moreover, even if this legislation is approved largely unchanged, more
changes need to be made within Mexico's law enforcement system in order to make
the new anti-corruption measures successful.
Without effectively sanctioning public officials who fail to account for the use of
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Mexico
public money, impunity will persist, and even the promising new framework will fail
to curb a problem that is becoming increasingly sensitive. Ultimately, it is in
politicians' interest to address the issue of corruption before it exacerbates already
growingfrustrationwiththeestablishmentandleadstomoresignificantand
potentiallydisruptinglevelsofpopular,antiestablishmentmobilisation,astook
place in 2014, when thousands of Mexicans took to the streets.
April 11, 2016
Panama Papers release has region-wide implications

ThePanamaPapersexposcametolightonApril3rd,whenaGermannewspaper,
SddeutscheZeitung, and the International Consortium of Investigative
Journalists (ICIJ, a US-based non-profit organisation) made a vast trove of
confidential documents public. It will take some time before the full implications of
the leak of 11.5m documents obtained from Mossack Fonseca, a Panama-based law
firm with a global practice, fully emerge. However, the leak has sparked an
immediate global response, with governments launching investigations into
possible wrongdoing and potential illicit activities. The repercussions are already
reverberating across Latin America and the Caribbean, but the greatest mediumterm impact will be felt in tax havens themselves.
The release of the documents emerged after a year-long investigation by
SddeutscheZeitung into offshore tax havens, the creation of shell companies, and
alleged tax evasion, money-laundering and bribery. The files included financial
records, legal documents and correspondence dating back over 40 years that
exposed the financial affairs of some of the world's richest and most powerful
individuals, including a number of leaders in Latin America. These include the
names of current and former leaders from Argentina, Brazil, Ecuador, Mexico,
Panama, Peru and Venezuela.
Legality of schemes no barrier to political fallout

Carefully structured tax-avoidance schemes have long served as a legal loophole
allowing companies and wealthy individuals to legally reduce or avoid the payment
of corporation tax and other levies on their foreign earnings. The secretive nature of
most offshore jurisdictions has also served to mask the ownership of such wealth, a
characteristic that has been increasingly exploited by those benefiting from illicit
income, such as corrupt public officials and drug traffickers.
The information revealed may ultimately not provide evidence that any laws have
been broken, and Mossack Fonseca insists that all of its activities taken on behalf
of its clients are lawful. However, the revelations of wealth accrued by figures in
public office and the perceived hypocrisy of storing funds offshore in order to
avoid domestic taxes will put pressure on politicians to stamp out such practices. It
will also focus renewed attention on countries in Latin America and the Caribbean
that derive a substantial part of their income from offshore financial services driven
by a low- or no-tax fiscal policy regime.
Spotlight on Latin American and Caribbean

leaders
The list of Latin American and Caribbean leaders and public officials who will now
be required to account for their offshore financial activities is long and will continue
to grow. The Panama Papers affair will add to the woes of Panama itself, which for
years has been struggling with a plethora of corruption scandals. At the end of
January this year, Mossack Fonseca was the subject of an investigation into
involvementinascandalinvolvingtheBrazilianstateoilfirm,PetrleoBrasileiro
(Petrobras), and alleged participation in money laundering. During the investigation
a Brazilian prosecutor, Carlos Fernando dos Santos Lima, claimed that the law firm
was a criminal organisation responsible for money laundering, bribery, and secret
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Mexico
offshore accounts and shell companies.

In Argentina the recently elected president, Mauricio Macri, has been associated
with an offshore company, Fleg Trading, which was incorporated in the Bahamas in
1998 and dissolved in January 2009, a period in which Mr Macri served as mayor of
the Argentinian capital, Buenos Aires. Mr Macri's official spokesman,
Ivan Pavlovsky, insists that the Argentinian president had no investment
participation in the company and was not a shareholder. A former finance minister
ofBuenosAires,NstorGrindetti,isalsolinkedtothePanamaPapers,buthas
refused to comment. In Ecuador the documents name Pedro Delgado, a former
governor of the Banco Central del Ecuador (the Central Bank) and cousin of the
president, Rafael Correa. Mr Delgado is a fugitive in the US and is facing an
extradition request from Ecuadorean authorities for forging a university degree.
The impact of the released papers is also being felt in the Peruvian presidential
elections, with most but not all of Peru's major presidential candidates having been
named in the leaked documents. Keiko Fujimori, who won the first-round
presidential election on April 10th and is likely to face Pedro Pablo Kuczynski in a
runoff election in June, has been linked to her father's financial activities.
AlbertoFujimori,theformerPeruvianpresident(1990 2000),isinjailfor
embezzlement and corruption, and his former financial backers were clients of
Mossack Fonseca. The information covered in the Panama papers could possibly
delegitimise the electoral process. It is highly likely in the coming weeks that more
information regarding the candidates' involvement will emerge ahead of the secondround runoff.
The documents also name Juan Armando Hinojosa, known as the "favourite
contractor"oftheMexicanpresident,EnriquePeaNieto.TheICIJreportsthat
during 2015 the law firm Mossack Fonseca aided Mr Hinojosa and members of his
family to create three trusts that seemingly took over accounts valued at US$100m.
In Venezuela those implicated by the Panama Papers include a former security chief
oftheVenezuelanpresidency,AdrinJosVelsquezFigueroa,aformerheadofthe
treasury,ClaudiaDazGuilln,andaformercommanderinchiefoftheVenezuelan
armed forces, Victor Cruz Weffer.
The full implications of the Panama Papers leak are yet to be seen, but the
revelations made so far have already taken many governments and tax and legal
authorities by surprise. The depth and response capacity to investigate any
potential wrongdoing and adopt measures will test the capacity, independence and
strength of local institutions and should be closely monitored.
Pressure for reform will grow

The offshore finance and hidden bank accounts used by wealthy individuals and
corporations to hide their income and ownership of assets are not confined to tiny
Caribbean Islands or small Latin American countries. Of Latin American and
Caribbean nations, only the Cayman Islands is included in the top ten global tax
havens, according to the Tax Justice Network (TJN, a UK-based advocacy group).
Panama, home to the headquarters of Mossack Fonseca, comes 13th on the TJN list.
Other jurisdictions instrumental in aiding offshore company formation are also being
tainted by association. These include the Bahamas, Bermuda and the British Virgin
Islands,allofwhichobtainmorethanone quarteroftheirtotalGDPfromoffshore
financial services.
Pressure on offshore financial centres to improve transparency has been growing
for some time. The two main instruments used to tackle opaque offshore company
registration have been the signing of Tax Information Exchange Agreements and the
Foreign Account Tax Compliance Act (FATCA), a US tax-reporting initiative
designed to assist the US Internal Revenue Service to prevent tax evasion by US
persons living overseas. Although the potential political impact of the Panama
Papers leaks is as yet unquantifiable, pressure to beef up and accelerate the
implementation of initiatives to clamp down on offshore financial services seems
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Mexico
inevitable. The potential impact on Panama and some small Caribbean economies
that depend on this trade is likely to be significant.
Economy
Forecast updates
April 6, 2016: Exchange rates
Peso recovers some ground

Event
The peso has regained ground after hitting historic lows in the first quarter.
Analysis
During much of the first three months of 2016, the peso was under strong pressure,
and slid to a record low level of Ps19.18:US$1 by February 11th. Thereafter, it slowly
recovered ground and ended the quarter at Ps17.25:US$1, which marked a 1.3%
depreciation relative to its level at the end of 2015. Nonetheless, volatility was
significant, and the average exchange rate during the quarter was Ps18.08:US$1, a
7.3% depreciation with respect to the previous quarter.
Two key factors help to explain these trends. First, concerns about economic
performance around the world prompted a sharp rebalancing in global portfolios as
investors switched to less risky markets. This increased flight-to-safety resulted in
significant pressure on currencies across many emerging markets, including Mexico.
In fact, the correlation between weakness in the peso and movements in the
currencies of other Latin American countries such as Brazil, Colombia and Peru, was
very high during the period. Likewise, the correlation with currencies in some Asian
economies such as China, Taiwan, the Philippines and India was also elevated.
Second, the sharp decline in commodity prices, particularly oil prices, was also an
important contributing factor to peso weakness during the quarter, as oil exports are
a significant source of foreign currency that is used to build foreign reserves and
finance public spending. For this reason, the correlation between the movement of
the peso and that of the currencies of commodity-dependent nations like Russia,
Australia and Canada was also very high. As the economic uncertainty began to
ease and commodity prices edged back up towards the end of the first quarter, the
pressures on the peso started to recede, allowing an important recovery that
continued until the end of the first quarter.

Despite the risk of continued volatility in the markets, a more stable environment in
the second quarter will be positive to build confidence for economic growth, as
reflected in our forecast.
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Mexico
April 12, 2016: Inflation
Inflation eased in March

Event
Annual consumer inflation eased to 2.6% in March, according to the Instituto
NacionaldeEstadsticayGeografa(thenationalstatisticsinstitute),afterseveral
months of increases. In month-on-month terms, prices were up by just 0.15%.
Analysis
Core inflation remained the primary driver of annual consumer inflation in March,
growing by 2.8%. Goods prices were roughly similar, with prices for both food,
beverages and tobacco and for non-food items expanding by 3.2%. Services
showed greater variation, with education costs up by 4.4%, while inflation in rent
and household services came in at just 2.2%, and other services at 2.1%. In contrast,
non-core inflation was lower than the core figure, rising by just 2.1%. This owed to a
2.2% decline in energy costs, which offset a 3.1% rise in government-set prices
(utilities). On the agricultural side, fruit and vegetables were up by a massive 20.9%
mostlyonaccountofasharpriseinthepricesoflemonsbutfishpriceswere
down by 1.3%.
The March results suggest that benign inflationary conditions may yet persist, after
fears that the peso's weakness was finally set to spill over into import costs. This
wasoneofthemainconsiderationsfortheBancodeMxico(Banxico,thecentral
bank) when it made a surprise 50 basis point rate increase in mid-February. Since
then, the peso has strengthened noticeably, in line with many other emergingmarket currencies. Given the slack still evident in the Mexican economy, further rate
rises are unlikely as long as the peso remains at current levels (or strengthens
further) and inflation does not begin to creep up. Inflation has come in at under 3%
(the target rate, plus or minus 1 percentage point) for almost a year, having
persistentlyhoveredinthe35%rangeduring2012 14.
At current levels, inflation will be supportive of Banxico's efforts to focus on
growth, and further rate increases are unlikely under current conditions.

Our forecast of 3.2% average inflation in 2016 may be downgraded in the light of the
lower than expected figures seen so far this year.
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April 12, 2016: Economic growth
Consumer confidence contracts in March

Event
Consumer confidence contracted further in March, by 4.1% year on year, according
totheInstitutoNacionaldeGeografayEstadstica(thenationalstatisticsagency).
In seasonally adjusted terms, confidence contracted by 1.8%.
Analysis
In year-on-year terms, consumer confidence has been edging downwards over the
past few months. Since September, it has been positive in only two months (October
and January), but the March contraction is the deepest since 2014. All five
categories of the index contracted in March. Household conditions and
expectations decreased by 2.1% and 4.5% respectively, whereas national conditions
and expectations fell to 4.4% and 8.6% respectively. The latter is particularly
concerning, as the average contraction so far this year has been 7%, and suggests a
very grim view of the country's economic outlook. Prospects for high-ticket
purchases were also down by 1.3%, which was the most benign decline among the
five categories. However, this is the first time that it has been negative since mid2014.
The seasonally adjusted figures show roughly the same trend, the only difference is
that prospects for high-ticket purchases were the only positive category, growing
by 0.7%. All others were negative, and national expectations also showed the
steepest contraction, falling by 3.1%.
Despite the gloomy March (and first-quarter) results, the link between consumer
confidence and economic performance has been somewhat patchy over the past
year, as highlighted by the relatively strong levels of consumer spending and retail
sales. This persisted into the first quarter: retails sales were up by a nominal 11% in
the first three months of the year, although they slowed somewhat in March. It is
possible that consumer spending is being propped up by factors unrelated to
confidence; for example, a weakening of the peso has raised the purchasing power
of dollar-based remittances from the US. Likewise, there is still some pent up
demand from 2014, when consumer spending eased considerably. Finally,
consumers may also not be acting upon their pessimistic views of the economic
outlook, which is clouded by the slump in oil prices and subsequent budget cuts.

Our forecast of 2.4% GDP growth in 2016 remains unchanged, and we will continue
to expect that confidence figures will underestimate the real state of consumer
demand.
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Mexico
April 18, 2016: Fiscal policy outlook
Government offers financial support to Pemex

Event
ThefederalgovernmenthasannouncedthatitwillcapitalisePetrleosMexicanos
(Pemex, the state-owned oil firm) with Ps73.5bn (US$4.2bn) in order to bolster its
finances, which have been badly affected by the plunge in global oil prices since
2014.
Analysis
Pemex's profitability has been severely affected by weak oil prices, exacerbating the
firm's already difficult financial position; it has recorded losses for 13 consecutive
quarters, and its loss in the fourth quarter of 2015 was its largest yet (Ps168.9bn).
Total losses for 2015 as a whole amounted to Ps521.6bn. Adding to the problem of
lower oil prices is the fact that Pemex's crude production has also been sliding for a
decade, ever since it reached peak output in 2004 of 3.3m barrels/day (b/d).
Of the total provided by the federal government, Ps47bn will be in the form of a
credit facility to help to finance the company's pensions liabilities in 2016; the
remaining Ps26.5bn is a standard capital infusion. New changes to Pemex's fiscal
regime will leave a further Ps50bn in Pemex's coffers. In February the Ministry of
Finance announced that Pemex would bear the brunt of a new round of budget cuts,
of which Ps100bn will have to be borne by the firm.
The sum of these resources and cuts is Ps223.5bn, which is less than half of Pemex's
losses in 2015; this suggests that the company will be in the red for at least another
year, and probably longer, given the expected persistence of low oil prices and
stagnating production. Nevertheless, the financial assistance that the government
will provide gives a strong message that it will support Pemex during this period of
transition triggered by the energy reform, via which it hopes to transform the
company from essentially being a government cash cow to a "productive state
firm".

Although the announced support will help to ease Pemex's finances in 2016, we
continue to expect the company to suffer further losses while oil prices remain so
low.
Analysis
April 4, 2016
Panama Papers: Impacts will be widespread, but uneven

The impacts of the Mossack Fonseca leak will vary considerably, but The
Economist Intelligence Unit expects significant political fallout.
This will largely affect countries that are already politically fragile, or
facing institutional challenges.
Significant emerging markets may face renewed political uncertainty as a
result.
Russia, and other large authoritarian states, will not be heavily affected.
The Kremlin will dismiss the allegations as politically motivated.
The number of resignations directly linked to the leak may be limited.
However, the revelations will help to undermine establishment parties.
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Mexico
There is a possibility of some indirect impacts on the Brexit debate.

Papers seen by the International Consortium of Investigative Journalists (ICIJ), a
US-based non-profit organisation, have revealed alleged financial impropriety
involving public figures from a large number of countries. There will be significant
political fallout from these revelations, with more information expected to be
revealed shortly from the leak at the Panama-based law firm Mossack Fonseca.
It will take some time before the full implications are clear; more than 11m documents
from Mossack Fonseca's database have been leaked. In many cases, the information
revealed may not show that leaders have broken laws. But the revelations of wealth
accrued while in public office, and the hypocrisy of storing this offshore in order to
avoid domestic taxes, will put pressure on politicians named in the leak. We expect
six main areas of impact from the information that has been released so far. These
are set out below.
Overall, we expect the political impact on flawed democracies, hybrid regimes and
weak states to be more substantive than that in either full democracies or
authoritarian regimes linked to the allegations. For those governments that are
already facing significant political challenges, the allegations have the potential to
be serious. For others, they are likely to be manageable; indeed, we expect most of
the impacts of the leaks to be indirect. The potential impacts are as follows:
i) Some leaders might be forced from office

It is possible that some serving political leaders may be forced from office as a direct
consequence of the Panama leaks. Iceland's prime minister, Sigmundur
Gunnlaugsson, is the likeliest candidate. Mr Gunnlaugsson, who has been accused
of impropriety involving an investment vehicle, Wintris, leads a coalition
government of the centrist Progressive Party and the centre-right Independence
Party (IP). Bjarni Benediktsson, the finance minister and leader of the IP, is also
implicated in the leak. A vote of no confidence on April 4th would trigger new
elections in which the Pirate Party (PIR) could secure the largest share of the vote.
ii) Political risks will increase in a number of

fragile economies
The leaders of several politically fragile states are implicated in the allegations,
among which Ukraine and Pakistan stand out. It is alleged that the Ukrainian
president, Petro Poroshenko, sought to avoid domestic taxation on the sale of his
assets in Roshen, the country's largest confectioner. This is damaging both because
of the implication of trying to evade taxes in a time of war and fiscal strain, and
because it smacks of the "old" corrupt politics that Mr Poroshenko came to office
promising to tackle. More critical is the timing; local media have made much of the
juxtaposition of the president approving the details of the offshore restructuring
planandtheIlovaiskincidenttheturningpointinthewarinthesouth east,in
which large numbers of Ukrainian volunteer forces were killed or captured by
pro Russianforces.Theaccusationmaydosignificantdamagetothepresident's
patriotic credentials, weakening further his popular support, and probably
exacerbating an already serious government crisis. We do not expect him to be
removed from office, but the allegations complicate an already fragile domestic
environment, where policymakers are focused on managing the departure of the
prime minister, Arseny Yatsenyuk.
In Pakistan, it is alleged that the prime minister, Nawaz Sharif, concealed ownership
of a number of assets revealed in the disclosures, notably including London
property held in the name of family members. The Sharif family has long faced
corruption allegations, albeit unproven. This will limit the political fallout from the
new revelations. Still, opposition politicians will use the new claims to put pressure
on the government (possibly in the form of public protests) and urge the country's
anti-corruption agency and electoral commission to take action against the family.
We do not expect any change of government as a result.
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Mexico
iii) Government legitimacy may be undermined

in key emerging markets
There are a number of allegations affecting leaders in large emerging markets,
notably Argentina's new president, Mauricio Macri. Mr Macri has come to office on
a reform platform with a commitment to fight corruption. His reformist and anticorruption credentials are likely to be damaged by the allegations, and there may be
an impact on the speed and effectiveness of the reform agenda in Argentina as a
result. The context for other major emerging markets is challenging, with
impeachment proceedings under way in both Brazil and South Africa, where large
corruption scandals affecting political and business leaders are already being
investigated. We have recently changed our forecast on Brazil and expect the
president, Dilma Rousseff, to fail to see out her term. In South Africa, Jacob Zuma's
presidency is already looking increasingly shaky. The Constitutional Court ruled on
March 31st that South Africa's president had breached the constitution in relation
to the use of state resources to fund improvements to his private Nkandla
homestead. Any suggestion of involvement from policymakers in either country
could worsen existing political instability.
iv) Another source of volatility in the Brexit

debate
The Panama allegations that have surfaced thus far have little direct impact on the
UK, and they do not alter our forecast that the UK will vote to remain in the EU in
the referendum on June 23rd. However, coming in the wake of significant domestic
disruptionsachaotic2016budgetandaseniorresignationfromgovernmentthe
leaks again highlight the inauspicious backdrop against which the electorate will be
voting on June 23rd. Our Brexit call rests in part on an assessment that despite
beingelevatedatpresent,antiestablishmentsentimentintheUKacountrywitha
broadlyconservativepoliticalcultureistooinchoatetoswingthereferendumin
favour of those campaigning to leave the EU. Nevertheless, we acknowledge the
potentialcumulativeimpactforexampleonturnout,whichcouldbecrucialtothe
resultofdevelopmentsthatmayintensifydiscontentwiththepoliticalstatusquo.
We will therefore be monitoring the reception of the Panama leaks in the UK
carefully. And if the leaks lead to any allegations with a more direct focus on senior
figures in the UK or the EU, we will review our assessment of their impact on the EU
referendum result.
v) Political populists and non-traditional parties

are well placed to benefit
The leak comes at a time when establishment political parties are under stress in a
numberofregionsnotablyEurope.Thecritiqueofferedbypopulistpartiesofthe
radical left and right, that the political mainstream is corrupt, is likely to be bolstered
by the allegations. This will have resonance in countries such as Italy and Spain (a
member of the Spanish royal family has been specifically identified by the ICIJ). The
direct impact is unlikely to be large, but if the scandal continues to develop we
would expect to see the indirect impact supporting gains for parties such as Italy's
Five StarMovementandFrance'sFrontnational.InGreece,allegationssurrounding
the previous New Democracy government could potentially complicate an already
fraught political environment, where leaders are struggling to pull together a new
deal with the IMF.
vi) Pressure on offshore centres is likely to

increase
Pressure on offshore financial centres has been growing for some time, and we
expect the leak to exacerbate this. States that in the past have relied on lax oversight
and plausible deniability when it comes to the criminal misuse of their financial
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32
Mexico
centres may be unable to resist calls for further reform. States likely to be affected
varybyregion.InAsia Pacific,statessuchasSamoamaybeaffected.Theuseof
shell companies in jurisdictions such as Samoa has been identified by the Financial
Action Task Force (FATF) as the major risk for money-laundering and the FATF
stated in its 2015 mutual evaluation report that although there was "little firm
evidence" of the proceeds of crime being laundered via Samoa, the lack of due
diligence and the inability to detect the misuse of shell companies suggested abuse
was likely. The Panama Papers will in Samoa and other jurisdictions provide to some
degree the firm evidence that may hasten the improvement of standards. In Europe,
we expect further political pressure on Cyprus. The revelations may offer the
possibility,througharenewedurgeforinternationalco operationonfinancial
regulation, that the usual pattern of jurisdiction shopping for money-laundering will
be curtailed as countries generally improve regulatory compliance.
Authoritarian governments better placed to

respond
Much of the commentary thus far has centred on allegations around the Russian
president, Vladimir Putin. In practice however, we expect very little meaningful
impactinRussiaorotherlargeauthoritarianstatesfromtheallegations.
Expectations around corruption in larger authoritarian states are, to a significant
extent, already "in the price", and governments also have a greater ability to restrict
information. In Russia, much of what has been leaked is in line with previous
allegations that the government has largely ignored. We expect any political impacts
to be de minimis, with the government simply not reporting the allegations directed
against it and/or indicating that the claims reflect an ongoing hostile campaign from
the West. Similarly, we expect any further allegations about senior Chinese officials
to be dismissed, although there has been heightened political nervousness around
criticism of senior leaders in recent months.
Overall, it appears likely that the impacts of the allegations are likely to be greatest
on weak states and flawed democracies that are already facing very significant
institutional challenges, or countries where the political environment is already
fragile. However, with further information likely to emerge, the full contours of the
political impacts of the leak are not yet clear.
April 7, 2016
Latin America goes through the motions with Basel III

TheexperienceofLatinAmericanandtheCaribbean(LAC)visvisthe
implementation of the Basel III banking reform proposals has been mixed so far,
split between strong participants and those who have been slower to follow up on
the proposals, against a backdrop of solid banking fundamentals. Capital and
liquidityindicatorsremainstrongingeneral,andthiscoupledwithadesireto
avoid restricting credit provision and limiting financial inclusion through overregulationhasreducedtheimpetusforwholesalereform.Aregionaleconomic
slowdown in 2016 will also put pressure on bank balance sheets and make reform
less of a priority.
However, the major economies of the region have taken important steps towards
Basel III implementation. Argentina, Brazil, and Mexico are the region's three Basel
Committee members, while Chile joined the committee as an observer in 2014.
Institutions from Chile, Colombia, Mexico, Peru, and the Caribbean are members of
the Basel Consultative Group, and the Chilean capital, Santiago, will host the 19th
International Conference of Banking Supervisors (ICBS) in November 2016.
Moreover, throughout LAC, most banks comply with the general Basel III
principles, even if official government regulation, which is needed for asset
definition and reporting requirements, has been slow.
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33
Mexico
Mexico, Southern Cone lead the way

The 28-member Basel Committee on Banking Supervision began drafting the third
round of non-binding banking reform proposals (Basel III) in 2010, in the wake of
the global financial crisis, in order to increase bank stability in two key areas:
capitalisation and liquidity. A classification system for global and domestically
systemically important banks (G-SIBs and D-SIBS respectively) was also designed
to reduce the impact and negative externalities from too-big-to-fail-type incentives.
In Europe, the US, and in large, systemically important international financial
institutions, these Basel III standards have largely entered into force well in
advance of the 2019 full-compliance deadline.
Mexico incorporated the main Basel III principles into the 2014 bank reform, and
leads the region in terms of compliance. Brazil has also taken steps to implement
both capital and liquidity requirements, while Argentina has also attempted to
introduce Basel III even as many aspects of the financial system remain highly
restricted.
In early May Chilean officials plan to release the details of a plan to bring the Ley
General de Bancos (General Bank Law) into Basel III compliance at a Chile Day
presentation in London. Although Costa Rica, El Salvador and Panama have made
steps towards compliance with Basel III, many of their neighbours have yet to do
so. Regional banks show strong fundamentals but regulators in many countries
have not yet institutionalised the Basel III recommendations.
Capital not a pressing issue

Most LAC banks surpass the Basel III-stipulated 10.5% total capital requirement
ratio required on risk-weighted assets. Only Mexico and Brazil, however, are in
official compliance, and have issued the appropriate tier 1 and tier 2 securities.
In Mexico, the commercial bank capitalisation index (ICAP) was at a strong 14.6% in
January 2016, even though this figure was the lowest in several years. Scotiabank
Invert, the lowest scoring G7 bank in Mexico, easily passed the Basel III threshold
at 12.1%, while INBURSA had the highest, at 17.8%. In Brazil, significant adjustment
to Basel III capital requirements was not necessary as local regulation already
required an 11% buffer.
Regional banks hold sufficient capital to comply with the Basel III capital
requirement, even if all asset definitions are not necessarily in line with Basel
standards. Early 2016 data show that banks retain a sufficient buffer, even if the
overall levels have slipped slightly (in many cases, in line with bank profits).
Nor is liquidity
Mexico is the only LAC country in official compliance with the liquidity coverage
ratio (LCR), which requires banks to hold sufficient cash or highly liquid assets to
cover 60% of liabilities (100% by 2019) over a 30-day period. Even with some
allowancesintheimplementationperiodsmallbanksweregrantedanextra
6 months to prepare for the requirements and daily LCR reporting has also been
delayedliquiditydoesnotappeartobeanissueforMexicanbanks.
The largest Brazilian banks started LCR reporting in 2015, and early data show that
these banks have held well over the required level of liquid assets. This trend is
likely to be boosted by a slack credit supply as banks prefer to hold cash than
extend credit in the current economic environment. Argentina has also initiated
required LCR compliance, and the other major LAC financial systems continue to
earn high marks from ratings agencies for liquidity. Nonetheless, regional regulators
lag behind when it comes to classification of liquid assets and data reporting tools.
On both liquidity and capital, the private sector has often led the way, and is often
in compliance with the rules well before they are in place at the domestic level. After
all, regional banks are often subsidiaries of large international banks and, peer
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34
Mexico
pressure, or at least a strong fear of failure, also works in favour of compliance. The
challenge for regulators is to ensure that no corners are cut in defining assets that
are appropriate buffers, and to ensure that data management systems are in place to
facilitate reporting.
Systemic importance
D-SIB classification is necessary in Latin America, as domestic banking is highly
concentrated. On this count a handful of countries, including Argentina, Brazil,
Chile, Mexico, Uruguay and Peru have established a criterion for identifying
domestically important institutions. Such institutions will face higher capital buffers
according to Basel III rules. No Latin American banks are classified as G-SIBs as per
the November 2015 Financial Stability Board list.
Regional regulators are wont to tailor rules for small and government-run banks as
well. New banks, as long as their portfolio remains small, are allowed a lengthy
regulatory reprieve in Mexico, for example. The desire to protect small enterprises is
well-founded, but many state-run development banks (BNDES in Brazil) or
agricultural loan institutions (Agrobanco in Peru) have also been granted clauses
that may restrict regulation when it is not in line with other government policy.
Fixing the roof mid-storm

Further implementation of Basel III reforms will have to come against the backdrop
of a dramatically reduced short- and medium-term economic growth outlook for most
of LAC. Non-performing loans (NPL) have ticked up in Brazil, rose slightly in Chile
in early 2016 (despite a downward trend in recent years) and have gradually been
rising in Peru in recent years as a dollarised banking system exposes borrowers to
currency risk (although the NPL ratio recovered slightly in 2015). A widespread
slowdown in output growth is likely to put further pressure on bank balance sheets.
Reform may become less of a priority if the growth outlook deteriorates further.
Despite relatively strong participation, the regional response to Basel III has been
reactive rather than proactive. Countries such as Mexico have improved standards
from a low base, while others such as Chile have moved more slowly. Nevertheless,
a recent string of political and financial scandals both regionally and internationally
will see public demands for transparency and anti-corruption measures intensify,
something that may feed into greater progress on the regulation of the banking
sector.
April 20, 2016
EIU global forecast - Volatility will be a recurring theme

The global economy has found a firmer footing after a rocky start to 2016. The
opening weeks of the year were notable for dramatic falls in global stockmarkets,
a renewed dip in the oil price and remarkable declines in sovereign bond yields:
Japanese ten-year yields fell below zero for the first time ever in February. The
downturn in sentiment was sparked by two factors: concerns about the strength of
Chinese demand and volatility caused by the start of a US monetary tightening
cycle.
Sentiment has since improved. The US has continued to post excellent job creation
numbers and inflation is gradually rising. There are further signs that a cyclical
upturn is under way in the Chinese property market, and even Europe was given
something to cheer with the introduction of further monetary easing by the
European Central Bank (ECB) to encourage banks to lend more to companies. In
many emerging markets, local currencies have appreciated against the US dollar.
These developments boosted market confidence, prompted a market rally and
spurred higher commodity prices.
However, volatility will remain the dominant theme of 2016, driven by global
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35
Mexico
monetary policy divergence and the sustainability of Chinese growth in the light of
that economy's build-up of debt. The developed world will remain dependent on
central bank stimulus, and the outlook for emerging markets will not be helped by
capital outflows, heightened geopolitical risk and the slowdown in China. Overall,
The Economist Intelligence Unit expects global GDP growth to moderate slightly,
from 2.4% in 2015 to 2.3% this year. Growth will accelerate to an annual average of
2.6%in2017 18astheoutlookforemergingmarketsimproves.Theglobaleconomy
will then slow once more, to 2.3% in 2019, when we expect the end of the US
business cycle to result in a mild recession, before recovering to 2.6% in 2020.
Developed world
Among the most fundamental problems facing the global economy is the inability of
the developed world to stimulate domestic demand. It is now clear that the financial
crisis provided a structural break in the functioning of these economies, but the new
rules of the game are still being learned. Trend levels of real GDP growth, consumer
price inflation, interest rates and trade are all lower than in the pre-crisis period. The
policy response has been to engage in unprecedented levels of monetary easing.
We are pessimistic about the ability of the UK, Europe and Japan to lift their main
policyinterestratesfromrockbottominourforecastperiod(2016 20),andweexpect
the pace of monetary tightening by the Federal Reserve (Fed, the US central bank)
to be pedestrian compared with previous cycles.
Of the four, the US economy is in the best position. We believe that the long
business cycle that began with the recovery from the financial crisis still has some
waytorun.Thisyearislikelytobeasoftonewithgrowthofaround2%,held
down by contracting business investment in the energy sector and the strong
dollar,whichwilldampenexportsbutweexpectgrowthtorisetoanannual
averageof2.3%in2017 18,supportedbystrongerinvestment.Inflationwill
accelerate as the labour market tightens and commodity prices recover. The
business cycle will turn in 2019 as higher interest rates curb private consumption,
resulting in a short recession. Weaker US import demand will weigh on global
growth in 2019, but we expect a swift recovery in 2020.
In Europe, the ECB remains firmly in loosening mode. In March it reduced its
depositratefrom 0.3%to 0.4%increasedthesizeofitsquantitativeeasing(QE)
assetpurchasesby20bn(US$22bn)amonth,addedinvestmentgradenonbank
corporate debt to the QE programme; cut its policy rate to zero; and introduced more
measures to encourage banks to lend. This was an aggressive package, but the euro
failed to weaken against the dollar in response. The resilience of the euro will
hamper the ECB's efforts to deliver inflation of 2%. Confidence in the euro zone will
continue to be undermined by wider existential questions about its future, the rise of
national opt-outs from region-wide policy and its failure to resolve the migrant
crisis. In the UK, the high level of indebtedness and an ageing population will
preventtheBankofEngland(thecentralbank)fromraisingratesbeforemid 2020.
The fate of Japan is what European governments are keen to avoid. Growth is
lacklustre, pulled down by a shrinking workforce, a rising old-age dependency ratio
and tight immigration controls. The Bank of Japan (BOJ) is pursuing unconventional
measures, most recently a fee on some commercial bank holdings. The appreciation
of the yen is a troublesome trend that it wishes to end, but the central bank appears
to lack the tools to do so. The BOJ's QE programme probably has another year to
run at its current volume before the central bank reduces the size of its purchases
overanother12 monthperiod.
Emerging markets
There has been a heightened sense of instability surrounding the Chinese economy
in the past year, with the government unwisely intervening in stock and currency
markets. This suggests that the authorities are finding the ongoing process of
delivering a consumption- and services-driven economy hard to manage. The
economy is growing at two speeds: the manufacturing sector, plagued by
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36
Mexico
overcapacity and inefficiency, is struggling to expand at all, but the consumerdriven services sector is thriving. Recent policy measures suggest that the
government is again prioritising short-term growth over rebalancing. As a result, we
believe that the risk of China experiencing a hard landing at some point in the next
five years is around 40%. (We define a hard landing as growth of 2 percentage
points or more below that of the previous year.) There are many routes to such an
outcome, including a house price crash and the state sector crowding out
investment, but we are particularly concerned by the build-up of debt in the
economy. Our GDP forecast includes a slowdown from 6.5% in 2016 to 4.3% in 2020.
This view assumes that the government recognises that credit growth has become
unsustainable and takes steps to curb it as early as late 2016. These measures will
be stepped up in 2017 and will result in a notable slowing of loan issuance in
2018 20.
In India lower oil prices have eased structural problems with high inflation and
enabled looser monetary policy. Growth should remain steady, averaging 7.3% a
yearin2016 20,butthemeasuresthatcouldseeitreachdoubledigitsagainland
acquisitionreformsandanationwidegoodsandservicestaxwillprovehardto
legislate without an upper house majority.
The malaise affecting Latin America will continue for a third year in 2016. The
underperformance is being driven by Brazil, where GDP shrank by 3.8% in 2015 and
is forecast to fall by the same amount in 2016. We have changed our political
forecasts and now assume that the president, Dilma Rousseff, who faces
impeachment, will be ousted in 2016 and a new, more orthodox, government will take
office. This will be a catalyst for a moderate recovery in business confidence from
record-low levels, brightening the outlook. But economic recovery will take some
time to gain momentum because of the imperative of fiscal adjustments. Other than
Brazil, even the better-performing countries, such as Peru and Colombia, are
struggling with a downturn in the credit cycle. Venezuela faces a high risk of default.
Weassumeapoliticaltransitionthatwillseethepresident,NicolsMaduro,leave
office early, probably in 2017. Owing to the steep decline in oil prices, there is likely
to be a restructuring of part of the debts of PDVSA, the state oil company, in 2016.
The outlook for the Middle East and North Africa is uncertain and fraught with
downside risk. In the wake of the Arab Spring in 2011 an intra-regional struggle has
developed, pitting democrats against dictators, secularists against Islamists, Shia
against Sunni and the jihadi Islamic State group against pretty much everyone else.
The region's problems have increasingly spilled over its borders, exemplified by the
flood of refugees into the EU and deteriorating relations between Iran and Saudi
Arabia.InSyriawenolongerexpectthepresident,Basharal Assad,tobetoppled
within the forecast period: instead, Russia (supported by an enlarged Iranian role)
will seek to ensure a balance of power within Syria, stepping up its intervention at
times when the regime appears particularly vulnerable and stepping back when it is
at risk of overreach. Cheaper oil means that even countries with large sovereign
wealth funds, such as Saudi Arabia, are cutting spending to contain budget deficits.
Non-oil economies have received a boost and, combined with a stronger Iran, will
enable regional GDP growth to accelerate from 1.9% in 2016 to 3.7% a year on
averagein2018 20.
Sluggish growth in South Africa, Nigeria and Angola will continue to depress SubSaharan African growth. At 2.4 %, GDP growth this year will be the second-slowest
rate this century. A less supportive external environment, including generally weak
commodity prices, slower growth in China and much reduced international liquidity
amid rising interest rates in the US, will continue to expose the structural flaws that
plague many African economies. Growth will reach 4% only occasionally in the
forecast period, a rate considered mediocre during periods of high commodity
prices. By 2020 GDP per head at purchasing power parity exchange rates will have
barely improved from its 2015 levels.
Exchange rates
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37
Mexico
The US dollar has weakened again, reflecting the Fed's admission that the pace of
interest-rate rises will be slow. The weakening of the dollar has coincided with a
rebound in commodity prices, which has supported commodity currencies. The euro
isnowtradingclosetotheupperboundoftheUS$1.15:1toUS$1.05:1rangethat
has held for the past year. The ECB would like a weaker euro, given sluggish growth
and persistent deflationary pressures. But with monetary policy already extremely
accommodative, it is questionable whether any further easing will have much
impact. We expect the dollar to rise against the yen in the rest of 2016. Like the euro,
the yen is supported by a current-account surplus and a cheap valuation. These
factorswillcontributetoamildappreciationoftheyenagainstthedollarin2017 20.
Commodities
Wedonotexpectcrudeoilpricestobouncebacktopre 2014levelsinthenextfive
years, as modest demand growth will fail to catch up with resilient supply. Despite a
dip in US production in 2016, global crude supply will expand further, on the back of
continued output growth from OPEC and, to a lesser extent, Russia. Combined with
moderating demand growth, this points towards only a gradual increase in prices.
Industrial metals prices will recover slowly in the remainder of the decade. An
ElNiophenomenonhasputsomeupwardpressureonfoodprices,butstocksare
generally very plentiful.
World economy: Forecast summary
2011
2012
2013
2014 2015
2016
2017
2018
2019
2020
4.0
3.3
3.3
3.4
3.1
3.5
3.6
3.2
3.5
2.8
2.2
2.2
2.5
2.4
2.3
2.6
2.7
2.3
2.6
Real GDP growth (%)

World (PPP* exchange rates)
World (market exchange
rates)
US
1.6
2.2
1.5
2.4
2.4
2.3
2.3
2.1
Euro area
1.7
-0.8
-0.2
0.9
1.6
1.4
1.5
1.7
1.5
1.6
Europe
2.2
0.6
1.4
1.6
1.5
1.8
1.9
1.8
1.9
China
9.5
7.7
7.7
7.3
6.9
6.5
6.0
5.1
4.6
4.3
Asia and Australasia
4.2
4.4
4.4
3.8
3.7
3.5
3.6
Latin America
4.7
3.2
2.9
1.3
0.1
-0.4
1.9
2.9
2.9
3.2
Middle East & Africa
3.2
3.8
1.8
2.4
2.0
1.9
2.8
3.7
3.5
3.8
4.6
4.2
4.7
4.4
3.0
2.4
3.5
4.1
3.9
3.9
World inflation (%; av)
Sub-Saharan Africa
4.9
4.0
3.9
3.6
3.3
4.1
3.7
3.1
3.1
World trade growth (%)
7.1
3.4
3.8
3.6
2.6
2.9
3.6
3.7
2.8
3.4
98.9 52.4
40.2
55.5
67.5
62.8
61.8
Commodities
Oil (US$/barrel; Brent)
110.9 112.0 108.9
Industrial raw materials

(US$; % change)
21.7
-19.4
-6.8
-5.1
15.2
-7.7
8.2
7.5
-5.7
-1.7
Food, feedstuffs &

beverages (US$; % change)
30.0
-3.5
-7.4
-5.2
18.7
-6.8
5.2
11.2
-0.2
0.1
:US$
79.7
79.8
97.6 105.9
US$:
1.39
1.29
1.33
Exchange rates (av)

121 112.4 112.1 113.9 112.5 110.9
1.33 1.11
1.1
1.09
1.11
1.15
1.18
*PPP=purchasing power parity

Source: The Economist Intelligence Unit.
April 20, 2016
Progress still slow on financial inclusion

The7threportforfinancialinclusionpublishedbytheComisinNacional
Bancaria y de Valores (CNBV, the national bank regulator) shows only modest
advances in Mexico over the past few years. Substandard financial infrastructure,
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38
Mexico
coupled with high levels of informality and geographical inequality, have been
identified as the main factors keeping financial inclusion in Mexico below even
regional averages. Despite these limitations, however, the recent financial reform
will provide an impetus for steady progress on this front, even if the government's
targets are not met.
Mexico remains a laggard in terms of financial inclusion, even compared with other
countries in the region. According to the Global Findex survey published by the
World Bank, which is cited in the CNBV's report, the share of adults with a bank
account in Mexico increased from 27% to 39% between 2011 and 2014, which is
considerably lower than the Latin America average of 51% in 2014, and much less
than high-income OECD countries, where it was 94%. Similarly, only 14% of
Mexicans held savings in a financial institution, which compares with an average of
40% in developing economies and 70% of high-income OECD countries. Only 10%
of Mexicans obtained credit from a financial institution, although this is in line with
the developing country average of just 9%. An index of financial inclusion
producedbytheBancodeMxico(Banxico,thecentralbank)gaveMexicoascore
of 0.29 and a rank of 74 among 131 countries, which was below that of Chile, Brazil
and Colombia.
Credit penetration is still weak

With regards to credit, the CNBV report showed that as a share of GDP, it only
represented 31.4% at end-2014. This was less than half of Brazil (69.1%) and less
than one-third of Chile (109.4%). It was also behind Costa Rica, Colombia and Peru.
Large businesses continue to be the most favoured by banks: these received 88.9%
of all credit, despite representing 28.6% of employment and just 0.2% of the total
number of firms. In that same year, credit to businesses represented 45% of the total
credit portfolio, which was almost equal to the sum of all mortgage, consumer and
public-sector credits. According to the CNBV, one of the main factors explaining the
dearth of credit to smaller firms is informality. As many as 73.3% of all micro firms
are informal, which constrains their access to the financial sector and consequently
results in just 5.6% of them obtaining formal credit (in contrast, 45.3% of small firms
have credit, and 13.2% of medium firms). CNBV data show that among those micro,
small and medium firms that are in the formal sector, the percentage that has
received credit jumps to 27%, compared with just 7.1% overall.
In order to offset the problem of informality, the CNBV has highlighted the role of
credit bureaus, of which three currently operate in the country, and which are legally
obliged to share credit information between them. Despite this, information from
credit bureaus is not always used by banks to determine credit risk when the
business is informal. Another element that is intended to offset the lack of credit
from the private banking sector is the development banking sector, whose credits
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39
Mexico
increased by 15.1% in 2014 alone. Credit from development banks also rose, from
5.1% at end-2012 to 6.7% at end-2014. The CNBV also made note of the growth in
crowdfunding, which is now firmly established in Mexico (there are at least
20 national and international crowdfunding platforms operating in the country),
although at levels that are still minuscule compared with other regions. Nonetheless,
the growth of crowdfunding has been exponential in recent years, growing from just
Ps500m (US$40m) in 2011 to Ps135.4bn (US$10.5bn) in 2014.
Challenges to greater inclusion

The CNBV report made note of numerous challenges to increase financial inclusion,
which is also one of the main objectives of the financial reform that was passed in
2013. The first is that there is large inequality in financial access based on
geography, with rural areas frequently devoid of the services that are available in
cities; in mid-2015 as many as 82% of rural municipalities did not have a local bank
branch, 92% did not have an ATM, and 78% lacked any establishment with a pointof-sale terminal. Numerous rural municipalities had no existing credit contracts.
Income is also a strong determinant of financial access, as highlighted by the fact
thathigherincomestateslikeMexicoCityandNuevoLenhaduptoafourtimes
higher share of credit penetration than lower-income states, and ten times the
density of point-of-sales terminals. The CNBV also suggested that there should be a
larger number of informal firms that provide their information to the credit bureaus,
as well as new tools to quantify their credit risk. Some legal vacuums could also be
addressed to support smaller firms, such as expanding the definition of collateral to
include intangible goods.
Strengthening financial education is also essential for speeding up the adoption of
financial services, and this would also take advantage of some of the country's key
strengths. For example, the share of Mexicans receiving remittances via digital
transfers is one of the highest in the world, and around half of public-sector workers
or workers who received a government transfer do so through a bank account,
which is also in line with global averages. In contrast, use of credit and debit cards
is among the lowest in the region, as is the use of digital platforms to pay utility
bills. This suggests that Mexicans are eager to adopt modern financial services
when needed, but may still not see the benefits otherwise, particularly if there are
large associated costs (such as distance or access to the Internet).
Finally,thestructureofthenationalfinancialsystemalbeitevolvingisstilla
limitation. Just seven out of the 45 institutions in the banking sector (known as the
"bancamltiple")concentrated79%ofassetsand84%ofcredits.Inordertoreduce
the dependency of the banking sector, various non-bank financial entities have
been created over the past decade, particularly to cater to smaller businesses and
individuals. However, regulation has been patchy. In November 2014, a Sociedad
Financiera Popular (SOFIPO, a low-income financial society) was taken over by the
CNBV owing to major fraud against its clients. Earlier that same year, a niche bank
known as Banco Bicentenario also went bankrupt. In broader terms, the need to
ensurefinancialstabilityandthereforerestrictionsimposedonbankswillalso
have to be counterbalanced with the need to develop new products for people that
by definition represent a higher risk.
The road ahead

There are still questions over how effective the financial reform will be at boosting
credit and improving competition, and whether it will hit the government's target of
credit penetration equivalent to 40% of GDP by the end of its term in 2018. On the
plus side, credit growth expanded strongly in 2015 (by double-digits) and, although
there is still a sizeable gap between large and small firms, interest rates have been
graduallyfallingacrosstheboardinrecentyearstheaverageloanrateformicro
firms was 10.3% in mid-2015, compared with almost 15% six years earlier. Finally,
there is the issue of informality, which is a major detriment to financial inclusion.
Unfortunately, progress on this front has been unimpressive, and it's difficult to see
www.eiu.com
40
Mexico
the government hitting its target of 40% informality by the end of its term (from
current levels just under 60%). Overall, efforts to promote financial inclusion are
likely to pay off eventually, but the speed of progress may not be in line with
government's hopes.
www.eiu.com

Country Report Mexico April 2016

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Country Report Mexico April 2016

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______________________________________________________________________________

Generated on April 24th 2016

The Economist Intelligence Unit

Economist Intelligence Unit

Economist Intelligence Unit

Economist Intelligence Unit

Economist Intelligence Unit

Symbols for tables

Data and charts

Annual data and forecast

Annual trends charts

Quarterly trends charts

Monthly trends charts

Comparative economic indicators

Country Report April 2016

Forecast Closing Date: March 23, 2016

Outlook for 2016-20

Country Report April 2016

Outlook for 2016-20

Country Report April 2016

Country Report April 2016

Country Report April 2016

middle class expands. After some moderation in 2013-15, upticks in private

Country Report April 2016

Country Report April 2016

Country Report April 2016

Country Report April 2016

Data and charts

1,170.8 1,186.4 1,261.5 1,297.5 1,144.1 1,071.2 1,182.4

291,833 348,945 406,042 432,602 442,568c 491,703 548,574

Debt service paid

Country Report April 2016

964.0 947.9 942.6 1,128.5 1,086.6 959.8 987.2 1,230.9

Public sector budget revenue (Ps m)

45,628 44,986 45,028 44,190 43,146

33,287 34,147 36,879 32,356 34,144

Foreign-exchange reserves excl gold (US$ m)

Annual trends charts

Country Report April 2016

Quarterly trends charts

Country Report April 2016

Monthly trends charts

Country Report April 2016

Comparative economic indicators

Country Report April 2016

Weather in Mexico City (altitude 2,309 metres)

Country Report April 2016

Main political organisations

Central bank governor

Country Report April 2016

Government not keen on extending Ayotzinapa investigation

Impact on the forecast

Country Report April 2016

Auditor highlights lack of transparency in state finances

Problems extend beyond the PRI

Little impact on corruption

Citizens take a stand

April 11, 2016

Panama Papers release has region-wide implications

Legality of schemes no barrier to political fallout

Spotlight on Latin American and Caribbean

offshore accounts and shell companies.

Pressure for reform will grow

Peso recovers some ground