Mexico's Carstens sees resilient economy

(Reuters) - Mexico will experience only a moderate economic hit if Greece leaves the euro and the peso should quickly bounce back from a recent slump without fanning inflation, central bank governor Agustin Carstens said on Monday.

Below are comments Carstens made at the Reuters Latin America Investment Summit.


HOW MUCH WILL CURRENCY VOLATILITY AFFECT INFLATION?


"I really think that there should not be a big inflationary impact."


PESO FAIR VALUE


"I think that the current level of the exchange rate is very undervalued, it certainly does not correspond to the fundamentals of the Mexican economy. If we take into account the relative strengths of the Mexican economy with respect to the United States and other countries, this should be reflected in a stronger exchange rate."


PESO REBOUND

"At the moment the peso is at these levels precisely because there is this fear that something undesirable could happen in Europe but the truth is that to the degree that these fears dissipate and the Mexican economy demonstrates that it can successfully navigate these periods of volatility, I would expect that this will lead to a peso correction."


LITTLE PASS THROUGH TO CONSUMER PRICES


"Companies understand that .... if they raise prices, they will lose market share, especially if the exchange rate movement does not turn out to be permanent. This is the good part of a floating exchange, that movements are not just in one direction, but both, and this makes companies be more prudent when they set prices."


LOW RISK OF TAIL EVENT FROM EUROPE


"Clearly, we can always construct a catastrophic scenario and a bad scenario. The reality is that, even if the possibility of a scenario of this nature exists, and I want to underscore that the possibility does exist and in fact the possibility has increased, on the margin, up until now it still continues to be an event with a relatively low probability."


IMPACT ON MEXICO OF GREEK

"For us the central scenario is that Greece stays in the monetary union. I think, on the other hand, a big part of the possible impact would be seen if this happened with other countries. It appears to me that all the countries of the euro zone are trying to reinforce their economies and so I expect that (a Greek exit from the euro zone) would have a moderate impact (on Mexico)."


SPANISH BANKS IN MEXICO SOUND


"The strength of these (Spanish) subsidiaries will be maintained independently of whatever the fate their parent companies may face. At the moment I would say that foreign-owned Mexican institutions are strong, they are well-capitalized, they don't have a problem with bad loans. There are no imbalances which would be a cause for concern on the part of Mexican authorities; on the contrary, I think that they are supporting credit growth in the country and supporting Mexico's economic growth."


(By Krista Hughes, Michael O'Boyle, Ana Isabel Martinez and Luis Rojas; Editing by Kenneth Barry)