« Insights > Maquiladora

Growth Opportunities for Mexico in 2015

Karla Salinas | 19.11.2014

The recovery of the US economy will be a key element to revive the economy; compared to Brazil, Mexico has greater stability in its macroeconomic indicators.

The recovery of the US economy will be a key element to revive the economy; compared to Brazil, Mexico has greater stability in its macroeconomic indicators.

2014 is a year that Mexico can forget in terms of economic growth; However, 2015 is a new opportunity for reactivation. Economists agreed on four factors that the country can take to increase the Gross Domestic Product (GDP).

1. Link with the US

The main element for the economy's takeoff lies in the US economy, which grows more than expected.

"The United States will have a strong growth and will boost the manufacturing sector," said chief economist at Barclays Mexico, Marco Oviedo.

Additionally, sending remittances can help improve consumption levels. Last September, remittances totaled 17.585 million dollars (mdd), the highest figure in six years.

In the third quarter, GDP grew 3.5% annually, a level above the 3% expected by the consensus of economists.

2. Structural Reforms 

The successful implementation of the energy reform will be a key element to the arrival of new capital.

"Mexico has factors that will play in its favor. The structural reforms -although its effects will be seen in a couple of years- give signs to the investors and a big part of these play in the domestic market. If implemented well, these will be support factors"commented the academician for the Center of Economic Investigation and Teaching (CIDE), Alejandro Villagomez.

In the next four years, the Government estimates capital inflows for almost 12,600 million dollars per year from 2015-2018 thanks to the accomplishment of four Rounds of bidding in energetic matter.

3. Weaknesses of emerging countries 

In relative terms, Mexico can take advantage of the weaknesses of other emerging economies, mainly those from Southeast Asia, and Brazil to reach more markets and attract more investments.

"The weakness in these countries can influence a change in the outlook of investors. For example, Brazil has a picture of deterioration and in relative terms Mexico looks good, "said an analyst at Grupo Financiero Ve por Más, Isaac Velasco.

4. Stability of macroeconomic indicators 

According to Marco Oviedo, the country has good macroeconomic indicators, such as a low current account deficit, which is expected to close the year at 1.5% as a proportion of GDP (against 3.7% in Brazil) as well as a good level international reserves (191,410 bd), reason why it stands out among countries of the same level of development.

Villagomez added that the initiative of El Buen Fin will be a test to see if the trust of consumers begins to react.

Experts agreed that the increase of violence in the country is a risk for the reactivation of the economy, provided that it is an element that generates uncertainty among investors and consumers.

Source: Article by http://www.cnnexpansion.com

Insights

Top