Mexico Country Risk Report

Published 29 April 2015 | Quarterly

  • 54 pages
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  • Includes 3 free updated quarterly reports
 
$1,195.00
Mexico Country Risk Report

Core Views

  • We remain optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics.

  • The passage of energy sector reform will bolster sentiment towards Mexican assets and contribute to stronger real GDP growth in the coming years.

  • The 2015 mid-term elections will be key for the main centre-right opposition party, the Partido Accion Nacional, to position itself to return to the presidency in the next general elections in 2018, though we expect the ruling Partido Revolucionario Institucional to retain dominance in the lower house.

Major Forecast Changes

  • We have revised down our 2015 real GDP growth estimate from 3.5% to 3.3%, mainly due to public investment cuts announced in early January.

  • Government spending cuts has prompted us to revise our 2015 fiscal budget from a deficit of 3.2% of GDP to smaller shortfall of 2.9% of GDP.

  • We have revised our average exchange rate forecast for 2015, from MXN13.75/USD to MXN14.75/USD, following a sharp sell-off in Q115 and persistent US dollar strength.

Key Risks To Outlook

  • A further drop in oil prices could temper investment excitement towards Mexico's first international oil licensing round (Round One). A disappointing Round One which would drive a sharply weaker exchange rate and would weigh heavily on the long-term fixed investment outlook of the country.

  • A weakening in the US economy would weigh on real GDP growth in Mexico, through lower export growth of manufactured goods.

  • A deteriorating security environment also poses downside risk to our growth outlook, as it could drive a reversal in investor sentiment.

Macroeconomic Forecasts (Mexico 2013-2016)
Indicator 2013 2014e 2015f 2016f
National Sources/BMI
Real GDP growth, % y-o-y 1.4 2.1 3.3 3.5
Nominal GDP, USDbn 1,281.9 1,304.5 1,249.1 1,343.4
Consumer price inflation, %...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Ruling PRI Will Retain Dominance After Midterm Elections
8
TABLE: Political Overview
8
TABLE: Mai n Three Parties At A Gla nce
9
Long-Term Political Outlook
10
Long-Term Political Outlook Is Strengthening, But Challenges Remain
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Manufacturing And Consumption Will Drive Stronger Growth
14
TABLE: GDP By Expenditure
14
Balance Of Payments
16
Robust Manufacturing Exports To Narrow Current Account Deficit
16
TABLE: Current Account
17
Fiscal Policy
18
Spending Cuts To Narrow Budget Deficit
18
TABLE: Fiscal Policy
18
Exchange Rate Policy
19
MXN: Robust BoP Dynamics To Temper Depreciation
19
TABLE: BMI Currency Forecast
19
Monetary Policy
21
Gradual Rate Hiking Cycle Will Begin In H215
21
TABLE: Monetary Policy
21
Chapter 3: 10-Year Forecast
23
The Mexican Economy To 2024
23
Stronger Growth Ahead Following The Passage Of Key Reforms
23
TABLE: Long-Term Macroeconomic Forecasts
23
Chapter 4: Operational Risk
27
SWOT Analysis
27
Operational Risk Index
27
Operational Risk
28
TABLE: Operational Risk
28
Legal Environment
29
TABLE: Legal Environment Risk
30
Costs Of Labour
32
TABLE: Labour Market Risk
33
TABLE: Regulations Governing Flexibility Of Workforce
34
TABLE: Average Annual Wages By Sect or (MXN)
35
Chapter 5: Key Sectors
37
Freight Transport
37
TABLE: Air Freight
38
TABLE: Road Freight
38
TABLE: Rail Freight
38
TABLE: Inla nd Waterwa y Freight
38
TABLE: Maritime Freight
39
Tourism
40
TABLE: Inbound Tourism
41
TABLE: Outbound Tourism
42
Other Key Sectors
45
TABLE: Oil and Gas Sector Key Indicators
45
TABLE: Pharma Sect or Key Indicat ors
45
TABLE: Telecoms Sector Key Indicators
46
TABLE: Defence and Security Sector Key Indicators
46
TABLE: Food and Drink Sector Key Indicators
46
TABLE: Autos Sector Key Indicators
47
TABLE: Infrastructure Sector Key Indicators
47
Chapter 6: BMI Global Macro Outlook
49
Global Outlook
49
Softening Growth Picture
49
Table: Global Assumptions
49
Table : Developed States , Real GDP Growth, %
50
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table : Emerging Markets , Real GDP Growth , %
51

The Mexico Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Mexico. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Mexico's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Mexico's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Mexico's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Mexico, including currency volatility, the commodity price boom and protectionist policies.

The Mexico Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Mexico' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Mexico through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Mexico Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Mexico and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Mexico, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Mexico over the next 5-years?

BMI's Mexico country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Mexico Market - Political Strengths, Weaknesses, Opportunities and Threats facing Mexico.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Mexico's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Mexico’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Mexico's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Mexico?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Mexico against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Mexico’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Mexico will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Mexico's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express