Posted on 03/09/2009 4:32:48 PM PDT by SwinneySwitch
Troubles in Mexcio are brewing. Rogelio Ramirez de la O, the economist Bloomberg cites as having predicted the 1994 peso devaluation, says the national currency will weaken another 16 per cent by year-end as the nation’s twin deficits swell.
According to the news agency the peso has now declined more against the dollar than any of the 16 most-traded currencies, with South Korea’s won the next-worst performer.
Given Mexico’s dependence on oil revenues and US remittances, economic troubles should perhaps not come as that much of a surprise. Nevertheless, it was only on Monday that the country revised its growth estimates for the year to zero — a move described by the FT as a frank government admission that the US recession would hit the economy far more than official estimates had previously suggested. Standard & Poor’s, however, maintains the Mexican economy will more likely shrink by 0.5 per cent this year.
A government response to the slowdown, meanwhile, only took shape at the weekend. As the FT reports:
The government’s recognition that Mexico’s economy is set to suffer more than had previously been acknowledged comes a day after Felipe Calderón, Mexico’s centre-right president, announced a series of measures to try to offset the worst effects of the fallout from the US.
The measures include freezing the price of petrol, reducing by 10 per cent the cost of liquid gas used in many households, and rolling out cheaper electricity prices to small and medium-sized companies. Mr Calderón also announced a scheme to allow Mexicans access to a greater portion of their pensions’ savings, extending temporarily social security benefits for those who lose their jobs and spurring government spending, particularly on infrastructure projects, by making bureaucracy more agile.
Of course, as one of the world’s biggest importers of gasoline, freezing the price of petrol in Mexico could ironically heighten pressure on the government purse. There’s also the issue of this year’s successful government oil hedges, which RBC Capital estimates will have provided up to a $9.2bn boost for fiscal accounts this year. That support, they say, is unlikely to be there come 2010.
As for inflation, that too remains a very real risk, especially if the currency continues to fall. As RBC Capital explains:
People in the central bank are concerned about the impact that the sharp depreciation of the peso could have on inflation. Although pass-through is now a lot more muted than it was at the turn of the millennia (they believe that 2001-2002 represented a structural break), the sharp and sustained peso weakness could adversely affect inflation. Our take is that Banxico is still assessing what the passthrough will be, leading to cautious monetary policy easing.
On the plus side, however, they add:
The banking sector is well capitalized and provisions for NPLs appear to be adequate. We don’t expect the banking sector to be a source of systemic problems.
Ping!
If you want on, or off this S. Texas/Mexico ping list, please FReepMail me.
Obama is a little busy.
Can we get back to you?
Ping!
Unlike U.S. reports, Mexico’s does not address the effects on their working classes because they are regarded as expendable livestock destined to serve. When a unit falters it’s replaced by a younger and dumber one thanks to the total disregard for birth control. What “units” Mexico can’t provide jobs for gets pushed to North America with minimal education beyond loyalty to Mexico.
Okay, now that we’ve absorbed over 20 million plus of these drags on our economy can we FINISH THE DAMNED FENCE before their narco turf war pushes the rest of them over?
I know we have a Department of National Security. As a citizen I expect their job is to secure our nation. That starts at our borders and Canadians aren’t the imminent threat. Let’s get crackin’, hup hup, NOW!
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