Mexico eyes rebound next year

Monday, August 26, 2013 gulfdailynews.com

SANTIAGO: Mexico's economy, the second largest in Latin America, is set to rebound next year, boosted by a recovery in its main trade partner, the US, Finance Minister Luis Videgaray has said. The upbeat forecast came days after data showed Mexico's economy contracted for the first time in four years in the second quarter because of lower government spending, sluggish consumption and weak demand for exports. The second-quarter contraction prompted the government on Tuesday to cut its 2013 growth outlook to 1.8 per cent from a previous outlook of 3.1pc. "We expect an important recovery in the pace of (economic) growth next year of around 4pc," Videgaray said on the sidelines of a meeting of finance ministers of the Pacific Alliance countries. Emerging market currencies have come under heavy selling pressure recently following signals from the US Federal Reserve that it may be getting ready to dial back the pace of its bond-buying monetary stimulus. "The withdrawal of monetary stimulus undoubtedly introduces market volatility ... but beyond this volatility, the withdrawal of monetary stimulus in the US is good news for Mexico," Videgaray said. An economic recovery in Mexico's neighbour will help "stimulate exports and stimulate remittances of Mexicans living in the US," he said. Making a case for a tax overhaul plan that lawmakers say President Enrique Pena Nieto will present on September 8, Videgaray said the country should not "simply conform itself with growing at a faster pace next year due basically to cyclical reasons." Pena Nieto plans to boost tax revenue by an extra $50 billion a year with an overhaul extending sales tax coverage, closing loopholes and possibly imposing charges on capital gains. Earlier this month, Pena Nieto also proposed an overhaul of Mexico's energy industry to offer private companies profit-sharing contracts. The reform would mark the largest private-sector opening in decades for Mexico's energy industry, which was nationalised in 1938 and is controlled by state monopoly Pemex.