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Analysis

Measuring up: Fiscal austerity planned for 2015 and 2016
OBG
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The sharp decline in international oil prices has forced the government to cut its fiscal spending plans for 2015 and 2016. In part this is because the administration has already committed itself to introducing no further tax increases in 2015, following the hikes that took place at the beginning of 2014 as part of the structural reform programme. The deficit can therefore only be reduced by an adjustment…

Analysis

Project capital: Infrastructure will benefit from the Fibra E investment vehicle
OBG
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As announced during President Enrique Peña Nieto’s state-of-the-union speech in September 2015, Mexico is launching a new energy and infrastructure investment vehicle known as the Fibra E. The new instrument aims to meet one of the country’s current financing challenges. Despite being ready to move on a wide range of major, long-term and profitable infrastructure projects, Mexico faces a short-term…

Analysis

Building bridges: MILA is helping to open up the country’s equities
OBG
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In late 2014 the Mexican Stock Exchange (Bolsa Mexicana de Valores, BMV) joined the Integrated Latin American Market (Mercado Integrado Latinoamericano, MILA). The market was first set up in December 2011 by the stock exchanges of Chile, Colombia and Peru. MILA’s aim is described as “generating more and better exposure of the stock markets that integrate, as well as [a] wider range of products…

Analysis

Opportunities abound: Banks are developing mobile and internet banking services for a growing number of online customers
OBG
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Mobile and internet banking is at a relatively early stage of development in Mexico, but most players are convinced that it is the shape of things to come, and that banks that do not invest in developing their online and mobile presence are at risk of losing market share. According to a study by BBVA Research, around 16% of Mexico’s total banking transactions are carried out online, and 6.4% of…

Analysis

Starting small: Entrepreneurship is common, but greater support would spur growth
OBG
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There is growing interest across Mexico in innovation and entrepreneurship, and in how they can contribute to raising the country’s levels of productivity, employment and economic growth. However, a review of what is happening in the country in this important space must be undertaken in two parts. The first involves the acknowledgment that as a developing economy Mexico faces serious structural problems,…

Analysis

Corporate bond market: Reforms set to drive new issues and boost liquidity
OBG
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The corporate debt market in Latin America remains relatively small, and Mexico is no exception. As of December 2014, there was MXN1.02trn ($68.65bn) in outstanding corporate long-term bonds, including corporate, state, municipal and infrastructure issues, as well as those from state-owned companies and federal agencies. Corporate debt issuance has grown at a compound annual growth rate (CAGR) of 14.1%…

Analysis

Profitable activity: Lending continues to grow, while the ratio of non-performing loans falls
OBG
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During their annual convention in May 2015, leaders of the Mexican Banking Association (Asociación de Banqueros de México, ABM) said that the industry was doing well. “Mexican banking is experiencing the best credit growth cycle in its history,” Luis Robles Miaja, president of the ABM, said, adding that “credit has been growing at a rate 3.7 times faster than GDP over the last 11 years”.…

Analysis

Wealth reserves: The nation’s sovereign wealth fund gets a slow start
OBG
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On January 1, 2015 the new Mexican Oil Fund for Stabilisation and Development (Fondo Mexicano de Petróleo para la Estabilización y el Desarrollo, FMP) began operations. The FMP was created as part of the package of energy sector reforms and constitutional changes approved by Congress during the course of 2013 and 2014. Technically, it is intended as a sovereign wealth fund, destined to receive, manage…

Analysis

Higher standards: The new insurance law will further strengthen the industry
OBG
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Mexico’s new insurance and sureties law (Ley de Instituciones de Seguros y de Finanzas, LISF) came into effect in April 2015. The law, considered one of the most advanced of its type in Latin America, seeks to bring the country into line with the Solvency II insurance industry regulatory standards developed in Europe. The new solvency framework consists of three pillars: pillar I concerns capital…

Analysis

Extraction protraction: Despite major hurdles, shale still holds great potential
OBG
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At first glance, the story of Mexican shale oil and gas sounds frustrating. Like its northern neighbours Canada and the US, Mexico has some of the world’s largest shale deposits. The government’s deep energy reforms of 2013-14 created an environment attractive to international oil companies (IOCs) willing to invest the tens of billions of dollars needed to develop shale. But in 2014-15, just as…