chinapost.com
By Leticia Pineda ,AFP
July 27, 2014
MEXICO CITY -- Japanese Prime Minister Shinzo Abe struck a series of energy deals Friday with Mexican President Enrique Pena Nieto at the start of a five-country Latin American tour.
Abe, whose visit to the region comes on the heels of Chinese President Xi Jinping's, met Pena Nieto at the presidential palace for talks that ended with the signing of a raft of deals.
The new agreements included one between Mexican state oil firm Pemex and Japan's development bank, and another between Pemex and the Japan Oil, Gas and Metals National Corporation.
With Japan on the lookout for new power sources after the Fukushima disaster forced the shutdown of its nuclear reactors, energy is high on the prime minister's agenda for the trip.
Mexico is undergoing sweeping changes in its energy sector, with Congress poised to end struggling Pemex's 75-year monopoly and open up the oil and gas sectors to foreign investment.
The two leaders, both elected in 2012, took turns praising each other for the reforms they have implemented.
Pena Nieto hailed the “bold transformations” of Abe's fiscal stimulus and monetary easing programs, while Abe drew parallels between their leadership styles, saying both saw reform as a growth strategy.
Traveling with a delegation of Japanese executives and his wife Akie, Abe received a red-carpet greeting at Mexico City airport from Foreign Minister Jose Antonio Meade.
Pena Nieto and first lady Angelica Rivera then threw a welcome ceremony for them at the presidential palace.
Kenko Sone, an official traveling with Abe, mentioned the “special interest” of Japanese companies in Mexico's shale gas, though he said there were no firm investment plans yet.
Sone said that it would be cheaper for Japan to import gas from Mexico than from the United states. The American gas Japan currently buys comes from the eastern United States, and must be shipped through the busy Panama Canal.
Japan is Mexico's fourth trade partner, with total trade of US$19.3 billion last year. There are some 800 Japanese companies that have investments in Mexico, especially automobile giants like Nissan, Mazda and Honda.
Abe is the first Japanese leader to visit Mexico since Prime Minister Junichiro Koizumi in 2004.
Natural Resources
Abe's nine-day trip — which will also take him to Trinidad and Tobago, Colombia, Chile and Brazil — comes two days after China's Xi wrapped up his own four-country tour.
The interest of the rival powers underlines Asia's growing interest in the region's fast-growing economies and vast natural resources.
Announcing Abe's trip earlier this month, government spokesman Yoshihide Suga said Latin American countries “are increasingly important for the Japanese economy because of their growing economies and natural resources.”
Japan, long one of the world's top exporting countries, has registered two consecutive years of trade deficits since the March 2011 earthquake and tsunami triggered the Fukushima disaster.
With its emerging economies, Latin America holds promise as a relatively untapped market for Japanese exports, in addition to its coveted raw materials.
But Japan is not the only one showing growing interest in the region often considered the United States' back yard.
The back-to-back Chinese and Japanese visits come at a moment when territorial disputes between the Asian rivals have pushed their relations to a low point.
China's Xi headed home from his own trip to Brazil, Argentina, Venezuela and Cuba with dozens of deals in areas from oil to mining to agriculture.
Russian President Vladimir Putin also recently wrapped up a tour of the region, visiting Cuba, Nicaragua, Argentina and Brazil.
Xi and Putin, who overlapped in Brazil, played to Latin American resentment toward perceived dominance of the region by Japan's longtime ally the United States.
Together with Brazil, India and South Africa — their partners in the BRICS group of emerging nations — they announced a new US$50 billion development bank and US$100 billion reserve fund to rival the Western-dominated World Bank and International Monetary Fund.
Showing posts with label BRIC. Show all posts
Showing posts with label BRIC. Show all posts
Sunday, July 27, 2014
Tuesday, July 15, 2014
Imagine the unthinkable… Mexico’s currency stronger than the dollar
roguemoney.net
Posted by Ken Schortgen
July 13, 2014
Posted by Ken Schortgen
July 13, 2014
The only difference between Mexico’s corrupt society and America’s corrupt financial system is the level of saturation in which the corruption has filtered down to. In Mexico, corruption is a way of life for the people, government, and corporate structures, and each generation lives by a vast segregation of the haves and have nots. For America however, their corruption on a wide scale basis it relatively new, and is based on monetary policies which promote artificial economic growth by any means necessary, and through which government and corporate agendas are aligned to facilitate ‘legalized corruption’.
However, at the core of all financial corruption in any sovereign nation is the control of the currency, and especially, control over monetary policy. The axiom that the paternal Rothschild coined four centuries ago carries just as much weight today as it did at the beginning of the age of central banking.
“Give me control of a nation’s money and I care not who makes it’s laws”
But as the entire world meanders through greater and greater boom and bust cycles created by ever increasing debt stimulus and a financial system grounded solely in fiat currencies, what is the key component that could potentially take the least of nations and skyrocket them to greater financial status in an instant?
That key resides in the formation of sound money, or a currency backed by a historic asset known and trusted for thousands of years. And of all the countries vying for supremacy, or even stability at the very same time the global system stands of the precipice of collapse, it may be Mexico that is willing to take the plunge, and catapult themselves symbolically, at least above the dollar and the U.S., by creating a currency backed by silver.
According to Future Money Trends, all that could change in the near future as key Mexican financial leaders and politicians have been working to institute sweeping monetary change that, if implemented, could unleash a global power shift of epic proportions.
“Take just three or four men out of the ‘anti’ group,” says Hugo Salinas Price, a Mexican multi-billionaire and the man behind the monetary push, “and we could practically get a unanimous ‘yes’ vote in both houses.”
Like recent monetary shifts in Russia, China and the middle east that aim to divest themselves of US dollar reserve trade requirements, the news of such a move in Mexico has been downplayed. And though it is being generally ignored as a serious possibility, a powerful consortium of influential people in Mexico believe it is a realistic possibility, and one that could be responsible for shifting the balance of world power. - SHTFPlan.com
Ironically, it is the West that has had a discrimination between gold and silver as a basis for backing a monetary currency. We all know in history the famous Populist fights of the 19th century which led William Jennings Bryan to coin the phrase, “You shall not crucify mankind upon a cross of gold”. But for nations such as Ancient Greece, Rome, and China, silver has been not only a viable form of money, it was the currency of commerce that sustained markets and economic prosperity to a greater number of people than gold ever has.
Mexico does not have the production capacity of the United States when it comes to manufacturing, but it has two crucial markets that could forge the nation into the upper crust of global economics. First, it is in the top 10 in oil production, providing 3.5% of the world’s output and distribution. And with the advent of fracking and other technologies, the potential for even more production lies in its wilderness and vast offshore coastlines. Secondly, Mexico had been an agricultural juggernaut until recently, when government policies advocated that Mexico provide enough food to sustain its own populations rather than focusing on exports and using food as a source of GDP. Yet these policies could turn around at any time, and with Mexico’s diverse land mass, farming could easily become a massive source of income to a world that is quickly becoming over-populated, and desperately in need of imported food.
During the global Great Recession, Mexico has experienced one negative that could be behind the discussion to collateralize their currency with a precious metal. Since 2008, Mexico’s debt to GDP has more than doubled from 17.1% to 36.9% in 2014, and much of this has been specifically tied to falling oil production, and less remittances coming into the country from U.S. migrants (and illegals working within the U.S.). However, during this same time period the Peso has remained relatively stable against the dollar, fluctuating between a low of 11.7 in 2011, to a high of 14.26 two years ago.
In the end, Mexico appears to have bought in the coming sea change that the new economic paradigm resides Eastward, and not in its historic partnerships with the U.S. and South America. Since 2006, trade with China has increased 300%, and Mexico has been rising as an economic power, even surpassing India to compete head to head with the core BRICS nations. And because of this, Mexico is a country highly sought after to be a part of the new Eurasian Trade Zone.
The economic landscape around the world is changing, with current and former financial allies swapping partners as quickly as the wind changes. Global currencies are starting to fail as well, with many of the big 5 (yen, euro, dollar, pound sterling, swiss franc) losing strength due to their diminishing returns over time as a fiat currency. And as many economists know, quite often the first out of the gate can have a distinct advantage over every other horse, despite their size, speed, and pedigree. And if Mexico chooses to seize the day and be the first in decades to back their currency in silver, then very quickly, they will become a major force on the economic landscape and launch themselves as a major player in the coming new financial paradigm.
Monday, March 31, 2014
JIM O'NEILL: Latin America can learn from Mexico’s efforts
emergingmarkets.org
29/03/2014
The man behind the Bric acronym has come up with a new one: Mint. Here Jim O’Neill explains why he has chosen M for Mexico
When the BRIC acronym I coined 13 years ago first started to receive comment, among the most vocal came from supporters of Mexico bemoaning the fact that they weren’t included. While there were others disappointed also such as Indonesia and Turkey, I often thought Mexico had the most reasonable grounds for gripe given their population size and geography. Despite this, I was for the first decade pretty pleased that I left them out because of course, despite a huge rise in oil prices from 2001-2010, Mexico only grew by a paltry 1.7%, less than half Brazil, and way below the growth rate of the other Bric countries.
In the past couple of years, I found myself starting to rethink the Mexico question and it was partly this that led me to the Mint idea, a name to describe the next set of countries, Mexico, Indonesia, Nigeria and Turkey, after the four Bric nations, to have an exciting future.
There used to be that great GE (General Electric) phrase, “Who needs Mexico, when you have got China?” In the past year or so, I started thinking to myself, actually “who needs China when you have got Mexico?” Because of China’s accession into the WTO, any benefits that Mexico in theory would accrue from its trade agreements with the US and Canada led to nought given the massive rise of China as the world’s cheap exporter.
But events have changed this. The slow but persistent rise of the RMB since 2005 has meant that China is no longer the great factory for the world. On top of this, China’s external vulnerability as evidenced by the 2008 global credit crisis caused China to shift gear policy-wise. Going into the worst of that mess, China had as much as 12% of its GDP just in exports to the US, clearly unsustainable. This event made a huge contribution to Chinese policymakers deliberately deciding to boost Chinese wages in an attempt to help real incomes of their workers as part of an effort to redistribute growth towards consumption.
For other countries, especially the likes of Mexico, close to large consumer markets, this was indirectly a present from heaven, as it helped give them back all that competitiveness they lost. When I made a documentary for BBC Radio about the Mint countries, it was striking to me how strong the evidence came over from interviews about Mexico’s increased competitiveness. Whether it was the likes of giants like Volkswagen, who now produce more cars in Mexico than anywhere in the world outside of its home town, or Carcal Plastics, a small family owned producer of basic plastic products such as dustpans and brushes, producing all these things is a lot more economical in Mexico than China these days. On OECD measures of comparable unit labour costs, Mexico is one of the cheapest in the world.
Of the winners and losers of the new China, Mexico is one of the bigger winners, which importantly is different than for some of Mexico’s Latin neighbours than might be among the bigger losers, possibly Brazil and Chile included.
But this is not all that is going in Mexico’s favour. They also have in power a set of young people whose eagerness for policy reforms to boost the supply side potential of the economy makes what Margaret Thatcher do in the UK seem like the efforts of a pussy cat. Whether it be energy, education or overall governance, I was quite blown away with my meetings with the President and several of his key team members.
I was bothered ahead of my late 2013 visit that too many foreign macro hedge fund and international bond investors were in love with Mexico, and it might not be justified, and I still slightly worry about being “with the crowd”. But the commitment to getting rid of so many of the structural rigidities that have held Mexico back is highly impressive. As we can witness, implementation of many of these reforms is not straightforward and meets obvious resistance, but there are few signs that President Nieto is being put off. I believe that this gives Mexico the chance to double its growth rate to closer to 4% for the decade starting 2015, and allow a more reasonable chance for the nation’s impoverished to earn a better standard of living.
It also interests me that Mexico’s policymakers are quite keen to pursue areas of common interest with the other so called Mint countries, possibly even creating their own club inside the G20 Group the same way that the Bric nations have done.
What if anything can be learnt or relevant for the rest of Latin America from Mexico’s efforts? Well for the likes of Chile and Colombia, perhaps not much more than vindication that their own strong path of reforms have been noticed and mimicked. While many often say that this is Asia’s century, I actually think that if you take China out of the equation, which is such a special unique place, one could then have a more open debate as to whether it is Asia’s or Latin America’s. With the important exceptions of Argentina and Venezuela, much of the continent is on a much stronger path than for most of my lifetime, and one day, both these countries will even find leaders who realise that there is no easy quick path to a better future and painful reforms to improve competitiveness are in fact the only way forward.
Jim O’Neill is Visiting Research Fellow to Breugel and Economic Advisor to the International Finance Corporation.
Tuesday, February 18, 2014
Growth forecast rises to 3.4 pct
BY KELLY ARTHUR GARRETT
The News
Citing the recovering global and U.S. economies and a resulting increase in demand for Mexican manufactured goods, analysts at one of Mexico’s leading banks have revised their forecast for 2014 Mexican GDP growth upward to a healthy 3.4 percent.
That figure, announced Monday by Carlos Serrano Herrera, head researcher for BBVA Bancomer, represents a significant jump from the previously predicted 3.1 percent for 2014, and a decided improvement over the 2013 growth rate, which is expected to come in at 1.2 percent when the final figures are available.
“Based on a number of factors, 2014 is shaping up to be a much better year than 2013 in economic terms,” Serrano said. “We also expect this coming year to establish the foundation for more economic development in the years that follow.”
Just as important, the predicted growth rate outpaces the nation’s average of 2.6 percent over the last two decades — the era of the North American Free Trade Agreement (NAFTA).
“That growth rate was not enough to generate the quality jobs needed each year to strengthen the market and improve the wellbeing of the society at large,” Serrano said.
Despite the resulting lag in competitiveness, and lackluster 2013 growth, Serrano sees a turnaround already in progress.
“At the regional level, Mexico is better positioned in terms of the various indicators of competitiveness than other Latin American nations,” Serrano said. “In fact, it outpaces the so-called BRIC countries (Brazil, Russia, India and China).”
The Bancomer report, entitled Situation Mexico, also offered a mild caution about the inflation rate, which rose in January of this year by an annualized rate of 4.48 percent.
That upward push was predictable, according to Serrano, as the new tax rates took effect. But the price increases seem to be limited to those good affected by the tax reforms.
Bancomer analysts predict an overall annual inflation rate of 4.3 percent for 2014.
With its report, Bancomer joins a recent chorus of optimistic predictions about the Mexican economy over the next several years.
The optimists got a boost earlier this month when Moody’s, the prestigious bond credit rating service, lifted Mexico’s grade from Baa1 to A3, a move that the Bancomer analysts said delivered immediate benefits, including in the value of the peso and in the Bolsa, which went up 1.24 percent as soon as the news came out.
The Bancomer report also predicted that the peso should close 2014 at about 12.9 per dollar.
Monday, February 17, 2014
BRIC to MINT: Why China and Mexico Will Remain Strong Despite Slowing
dailyfinance.com
by
by
This article is the last in a series examining parallels between BRIC (Brazil, Russia, India, China) countries and the "emerging markets" of the MINT (Mexico, Indonesia, Nigeria, Turkey) community. This article looks at the final pairing, China and Mexico, and why they have the best chance of becoming strong economic powers in the long term.
There's one success story in every group. With China consistently declared the next world economic leader, the BRIC crown is easily claimed. What may be surprising is that Mexico is representing the MINT community. In a system that has been marred by corruption allegations and exists under the shadow of political instability, economic conditions indicate that the country is poised to continue its market successes and continue to grow despite these challenges.
Why China will be strong in the long term
Despite what negative press may say, the Chinese economy will long be dominant. While some claim recent economic slowdowns are indicative of a failing market model, China's recent commitment to market reform shows a focus on a long-term growth strategy that has not been seen in any of the other BRIC nations. How is this possible with a economy known for its relative rigidity?
It could be because China has seen the proverbial writing on the wall and is attempting to liberalize its markets. The recent Likonomic reforms, taking a more "hands-off" approach to the economy, mean a more fluid system that is able to easily adapt to conditions. However, this fluidity is useless when one considers how cheap the renminbi is comparative to other currencies. (Cheaper currency means prices set far too low and high exports.)
This is not always a good thing, especially considering the eventual trade imbalance that will occur from a consistent trade surplus against other economies. A surplus now may result in the importing country decreasing imports in the long term (due to decreased purchasing capital over time.)
To combat this potential scenario, China has been easing banking and trade restrictions. In places like Shanghai, China has been exploring options that will slowly raise the market value of the renminbi and increase prices of Chinese goods.
Coupling market decisions like this with an ongoing effort to combat corruption, China's continued and future success is strengthened by the country proactively responding to market conditions.
Copying an effective strategy
Mexico seems to be moving along the same path. Recent reforms in energy policy have been moving to secure cheap energy for planned productivity surges in the near future. Mexican goods have been getting cheaper comparative to its greatest competitor, China. In part due to China's efforts, Mexico has been enjoying a few new waves of revenue lost to China a decade ago.
All is not being handed to Mexico on a plate, however. Crime and instability are very real issues in the country. In the case of the former, over 60,000 have been killed in drug-related violence alone.
Accompanying claims of state corruption does present a unique set of challenges, as most of Mexican industrial production is in the north of the country, which is in the heart of drug cartel territory.
Still, Mexico seems to be following China's lead. While not specifically following a state-directed economy, the government is taking a hands-off approach with the market, at least in regards to the macro-economic vision of the state.
Corruption is also being attacked by the government as well. By taking on alleged embezzlers such as controversial education union leader Elba Esther Gordillo, the government shows a willingness to both adapt to current conditions as well as attack the underlying causes for previous economic retarding.
While the Mexican peso has long been a punchline when compared to most world currencies, there are indications that the peso is poised to rise as long as there is positive economic growth. That growth does not seem to be slowing anytime soon.
Birds of a feather
There are a laundry list of reasons that both countries have the potential to be strong for a long time to come, but there are common characteristics that link the two. Despite historically central governments, both administrations are showing that they can react proactively to address potential future economic concerns. This level of responsiveness, while debatable, is one that has not been conclusively evidenced in any other BRIC or MINT country.
Both countries share commonality in the choice of trading partners as well. While more true for Mexico than for China, both states are major trading partners with the United States. This is not to suggest that only major trade partners of the U.S. can succeed economically in the long term, of course. However, the countries are two of the top three exporters to the U.S. Attaching an economy to the current world leader certainly cannot hurt the bottom line.
At the end of the fiscal year, Mexico and China face significant challenges that are varied. Regardless, current circumstances cannot hide the fact that these two countries have the staying power to remain economically strong well into the future.
Birds of a feather flock together. So do economies.
There's one success story in every group. With China consistently declared the next world economic leader, the BRIC crown is easily claimed. What may be surprising is that Mexico is representing the MINT community. In a system that has been marred by corruption allegations and exists under the shadow of political instability, economic conditions indicate that the country is poised to continue its market successes and continue to grow despite these challenges.
Why China will be strong in the long term
Despite what negative press may say, the Chinese economy will long be dominant. While some claim recent economic slowdowns are indicative of a failing market model, China's recent commitment to market reform shows a focus on a long-term growth strategy that has not been seen in any of the other BRIC nations. How is this possible with a economy known for its relative rigidity?
It could be because China has seen the proverbial writing on the wall and is attempting to liberalize its markets. The recent Likonomic reforms, taking a more "hands-off" approach to the economy, mean a more fluid system that is able to easily adapt to conditions. However, this fluidity is useless when one considers how cheap the renminbi is comparative to other currencies. (Cheaper currency means prices set far too low and high exports.)
This is not always a good thing, especially considering the eventual trade imbalance that will occur from a consistent trade surplus against other economies. A surplus now may result in the importing country decreasing imports in the long term (due to decreased purchasing capital over time.)
To combat this potential scenario, China has been easing banking and trade restrictions. In places like Shanghai, China has been exploring options that will slowly raise the market value of the renminbi and increase prices of Chinese goods.
Coupling market decisions like this with an ongoing effort to combat corruption, China's continued and future success is strengthened by the country proactively responding to market conditions.
Copying an effective strategy
Mexico seems to be moving along the same path. Recent reforms in energy policy have been moving to secure cheap energy for planned productivity surges in the near future. Mexican goods have been getting cheaper comparative to its greatest competitor, China. In part due to China's efforts, Mexico has been enjoying a few new waves of revenue lost to China a decade ago.
All is not being handed to Mexico on a plate, however. Crime and instability are very real issues in the country. In the case of the former, over 60,000 have been killed in drug-related violence alone.
Accompanying claims of state corruption does present a unique set of challenges, as most of Mexican industrial production is in the north of the country, which is in the heart of drug cartel territory.
Still, Mexico seems to be following China's lead. While not specifically following a state-directed economy, the government is taking a hands-off approach with the market, at least in regards to the macro-economic vision of the state.
Corruption is also being attacked by the government as well. By taking on alleged embezzlers such as controversial education union leader Elba Esther Gordillo, the government shows a willingness to both adapt to current conditions as well as attack the underlying causes for previous economic retarding.
While the Mexican peso has long been a punchline when compared to most world currencies, there are indications that the peso is poised to rise as long as there is positive economic growth. That growth does not seem to be slowing anytime soon.
Birds of a feather
There are a laundry list of reasons that both countries have the potential to be strong for a long time to come, but there are common characteristics that link the two. Despite historically central governments, both administrations are showing that they can react proactively to address potential future economic concerns. This level of responsiveness, while debatable, is one that has not been conclusively evidenced in any other BRIC or MINT country.
Both countries share commonality in the choice of trading partners as well. While more true for Mexico than for China, both states are major trading partners with the United States. This is not to suggest that only major trade partners of the U.S. can succeed economically in the long term, of course. However, the countries are two of the top three exporters to the U.S. Attaching an economy to the current world leader certainly cannot hurt the bottom line.
At the end of the fiscal year, Mexico and China face significant challenges that are varied. Regardless, current circumstances cannot hide the fact that these two countries have the staying power to remain economically strong well into the future.
Birds of a feather flock together. So do economies.
Thursday, January 16, 2014
Education, financial and energy reforms in Mexico improve outlook
offshoregroup.com
Recently, the BRIC nations – Brazil, Russia, India and China – have taken the greatest share of the world's attention as rising economic powers. From companies looking to reduce manufacturing costs to businesses hoping to expand into new markets, a number of enterprises welcomed the development of these nations as a sign that international commerce will continue to flourish. However, as much success as the BRIC nations have had in improving their economies and raising the standard of living for their citizens, many global organizations are beginning to recognize some of the drawbacks of moving manufacturing and production facilities far from their target consumer markets.
As part of a series of investigations, the BBC had economist Jim O'Neill visit Mexico to look into the nation's potential to expand its economy as a manufacturing powerhouse. Instead of focusing on the past successes of the BRIC countries, O'Neill highlighted the rise of the MINT nations – Mexico, Indonesia, Nigeria and Turkey. At the forefront of manufacturing, Mexico has pushed for greater reforms and regulations with regard to its financial, education and energy strategies.
China losing its foothold
As a growing number of businesses consider expanding to Mexico, the country has been quick to take note of increasing demand from companies wishing to leverage a strong labor market and inviting trade policies.
One of the persuasion points that's motivating businesses to move out of China is the Asian nation's efforts to focus on internal concerns. The one child policy that has limited population growth has also influenced the country's demographics, meaning there are fewer young people with the skills or expertise to work in advanced manufacturing facilities. On the other hand, Mexico's demographics have shifted to a larger, younger population than its Asian counterpart, which helps develop a stronger labor market.
At the same time, Mexico's proximity to the U.S., Canada and South American consumers is attractive to many companies. While manufacturing costs aren't as cheap as in China, materials and goods can be distributed through a convenient supply chain without having to face such stringent import or export tariffs.
Education
Undergirding a strong labor force is access to education. What O'Neill found was a country pushing for reforms to its education that would remove outdated hiring practices. Currently, teachers are able to pass on their position to their children, resulting in widespread nepotism. Mexican President Enrique Pena Nieto is working to remove this limitation, opening up the education system to a wider range of individuals.
Finance
Mexico is also actively pursuing financial reforms to enable a stronger economy. In fact, Mexico's president recently approved a banking law aimed at improving lending among the country's banks, according to Agence France-Presse. The reform will work to push banks to offer lines of credit and lower lending rates to consumers, even as Mexico provides the most cost-efficient lending compared to other Latin American countries. Finance Minister Luis Videgaray explained the reform will improve economic growth, as credit in the private sector is expected to rise.
Energy
Meanwhile, officials in the Mexican energy sector recognize the need for continuing energy reform if the country aims to take substantive steps to ensure access to resources and a mature market. O'Neill spoke to a representative from Pemex, the Mexican petroleum firm, and found the nation has plentiful supplies – in fact, the country has access to oil fields that can produce roughly 10 percent of that of Saudi Arabia.
However, the country requires strategic partnerships with foreign experts to help lower the cost of production, which will in turn lower the cost of consumption for Mexicans. In fact, The Wall Street Journal indicated Italian energy firm Eni SpA recently spoke with representatives from Pemex to discuss future collaboration.
To enable manufacturing in Mexico, government and private sector stakeholders are working toward a common goal of keeping the country's economy strong and develop international ties.
Recently, the BRIC nations – Brazil, Russia, India and China – have taken the greatest share of the world's attention as rising economic powers. From companies looking to reduce manufacturing costs to businesses hoping to expand into new markets, a number of enterprises welcomed the development of these nations as a sign that international commerce will continue to flourish. However, as much success as the BRIC nations have had in improving their economies and raising the standard of living for their citizens, many global organizations are beginning to recognize some of the drawbacks of moving manufacturing and production facilities far from their target consumer markets.
As part of a series of investigations, the BBC had economist Jim O'Neill visit Mexico to look into the nation's potential to expand its economy as a manufacturing powerhouse. Instead of focusing on the past successes of the BRIC countries, O'Neill highlighted the rise of the MINT nations – Mexico, Indonesia, Nigeria and Turkey. At the forefront of manufacturing, Mexico has pushed for greater reforms and regulations with regard to its financial, education and energy strategies.
China losing its foothold
As a growing number of businesses consider expanding to Mexico, the country has been quick to take note of increasing demand from companies wishing to leverage a strong labor market and inviting trade policies.
One of the persuasion points that's motivating businesses to move out of China is the Asian nation's efforts to focus on internal concerns. The one child policy that has limited population growth has also influenced the country's demographics, meaning there are fewer young people with the skills or expertise to work in advanced manufacturing facilities. On the other hand, Mexico's demographics have shifted to a larger, younger population than its Asian counterpart, which helps develop a stronger labor market.
At the same time, Mexico's proximity to the U.S., Canada and South American consumers is attractive to many companies. While manufacturing costs aren't as cheap as in China, materials and goods can be distributed through a convenient supply chain without having to face such stringent import or export tariffs.
Education
Undergirding a strong labor force is access to education. What O'Neill found was a country pushing for reforms to its education that would remove outdated hiring practices. Currently, teachers are able to pass on their position to their children, resulting in widespread nepotism. Mexican President Enrique Pena Nieto is working to remove this limitation, opening up the education system to a wider range of individuals.
Finance
Mexico is also actively pursuing financial reforms to enable a stronger economy. In fact, Mexico's president recently approved a banking law aimed at improving lending among the country's banks, according to Agence France-Presse. The reform will work to push banks to offer lines of credit and lower lending rates to consumers, even as Mexico provides the most cost-efficient lending compared to other Latin American countries. Finance Minister Luis Videgaray explained the reform will improve economic growth, as credit in the private sector is expected to rise.
Energy
Meanwhile, officials in the Mexican energy sector recognize the need for continuing energy reform if the country aims to take substantive steps to ensure access to resources and a mature market. O'Neill spoke to a representative from Pemex, the Mexican petroleum firm, and found the nation has plentiful supplies – in fact, the country has access to oil fields that can produce roughly 10 percent of that of Saudi Arabia.
However, the country requires strategic partnerships with foreign experts to help lower the cost of production, which will in turn lower the cost of consumption for Mexicans. In fact, The Wall Street Journal indicated Italian energy firm Eni SpA recently spoke with representatives from Pemex to discuss future collaboration.
To enable manufacturing in Mexico, government and private sector stakeholders are working toward a common goal of keeping the country's economy strong and develop international ties.
Thursday, December 19, 2013
Man Who Coined 'BRICs' Sees Boom Coming From Mexico Reforms
Jim O'Neill said, “Markets are only just really starting to give Mexico any credibility now that the energy reform is going through.” Photographer: Simon Dawson/Bloomberg
Jim O’Neill has been tracking economic reform initiatives in countries across the world during his 33-year career on Wall Street. Only a few of them, he said, rank higher than what Mexico achieved this year.
“I can’t think of many other countries that have had a period of such deep reforms,” said O’Neill, who coined the term BRICs while serving as a top Goldman Sachs Group Inc. economist in 2001, correctly predicting a surge in growth for Brazil, Russia, India and China. “Markets are only just really starting to give Mexico any credibility now that the energy reform is going through.”
President Enrique Pena Nieto shepherded through at least 10 constitutional amendments in his first year in office, including measures to open Mexico’s oil industry to private investment for the first time in 75 years.
He is slated to enact as soon as this week the new drilling rules, which are aimed at luring oil majors from Exxon Mobil Corp. (XOM:US) to Chevron Corp. (CVX:US), after a majority of states ratified the changes adopted by the national congress.
O’Neill estimates the reforms will boost Mexico’s long-term economic growth to 5 percent from the current 3 percent, helping trigger a bond rally that will top gains in other emerging markets next year. Barclays Plc predicts the reforms will spark investor demand for bonds in coming weeks, with yields on longer-term securities falling about 0.25 percentage point by year-end.
Analysts forecast Mexico’s peso will strengthen 3.4 percent against the U.S. dollar by the end of 2014, boosting dollar-based gains on local fixed-income assets. The projected gain is the biggest among 33 currencies tracked in a Bloomberg survey of analysts.
The reform agenda has drawn praise from Pacific Investment Management Co.’s Bill Gross, BlackRock Inc. Chief Executive Officer Laurence D. Fink and former U.S. Treasury Secretary Lawrence Summers. O’Neill says the legislative victories put Pena Nieto in position to be the decade’s most successful policy maker from the Group of 20 nations, a title he gave to Brazilian President Luiz Inacio Lula da Silva in the past decade.
Changes he implemented include forcing teachers to undergo annual evaluations and curbing the market power of dominant telecommunications companies such as billionaire Carlos Slim’s America Movil SAB. (AMXL) He also signed measures to encourage banks to lend more and added taxes on dog food, soda pop and high-calorie snacks in an attempt to reduce the government’s dependence on oil revenue.
The president’s office declined to comment about his first year in office.
Pena Nieto has retained enough political goodwill to keep pressing ahead, said Jan Dehn, the head of research at Ashmore Group Plc in London, which oversees $78.5 billion in emerging-market assets.
“This is just the beginning of good news for Mexico,” Dehn said in a phone interview. “Compared to a lot of other EM countries, Mexico has already done all of the hard work, and there’s much less uncertainty going forward.”
Mexico’s improved growth outlook will help the country’s bonds outperform other emerging markets next year, Marco Oviedo, the chief Mexico economist for Barclays, said in a phone interview. The economy will grow 3.6 percent next year, after 1.35 percent growth this year, based on the average of economists’ estimates in a Bloomberg survey.
Risks remain that Mexico’s energy legislation will take a long time to implement, and any gains in oil output may be delayed by a lack of pipelines and other infrastructure, according to Joe Kogan, the head of emerging-market strategy at Bank of Nova Scotia.
The government’s goal of pumping 3 million barrels per day of oil by 2018 is “unrealistic,” New York-based consulting firm Eurasia Group said in a Dec. 17 report. The country’s output was about 2.5 million a day during the first half of December.
“Many years go by between when you start exploring for oil and when you produce oil,” Kogan said in an e-mailed response to questions.
He said he visited Mexico City in October for a BBC radio program on the rise of “MINT” countries -- Mexico, Indonesia, Nigeria and Turkey -- he predicts are poised for faster growth.
As he walked through Tepito, an open-air market reported to be a forum for sales of pirated video games, fake Levi’s jeans and stolen stereos, he asked a woman he met what she thought about Pena Nieto’s economic reforms.
“She looked at me like I was coming from another planet,” O’Neill said. “They need to persuade all these huge numbers in the informal economy that their lives could be better if they’re in the formal economy.”
Rising wages in China will make Mexico more competitive as a manufacturing center, helping bolster economic growth, O’Neill said.
If Pena Nieto’s administration “really persuades investors they’re serious, and they stick to the reform program, it’s going to result in a lot of people wanting to invest in Mexico,” he said.
“I can’t think of many other countries that have had a period of such deep reforms,” said O’Neill, who coined the term BRICs while serving as a top Goldman Sachs Group Inc. economist in 2001, correctly predicting a surge in growth for Brazil, Russia, India and China. “Markets are only just really starting to give Mexico any credibility now that the energy reform is going through.”
President Enrique Pena Nieto shepherded through at least 10 constitutional amendments in his first year in office, including measures to open Mexico’s oil industry to private investment for the first time in 75 years.
He is slated to enact as soon as this week the new drilling rules, which are aimed at luring oil majors from Exxon Mobil Corp. (XOM:US) to Chevron Corp. (CVX:US), after a majority of states ratified the changes adopted by the national congress.
O’Neill estimates the reforms will boost Mexico’s long-term economic growth to 5 percent from the current 3 percent, helping trigger a bond rally that will top gains in other emerging markets next year. Barclays Plc predicts the reforms will spark investor demand for bonds in coming weeks, with yields on longer-term securities falling about 0.25 percentage point by year-end.
Outperforming Peers
Mexico was the only major Latin American economy whose local-currency bonds gained this year in dollar terms. They returned 1.6 percent, compared with an average 3.9 percent loss for emerging-market countries. Yields on Mexico’s benchmark peso bonds have risen 0.98 percentage point this year to 6.40 percent as speculation the Federal Reserve will curtail U.S. monetary stimulus eroded demand for developing-nation bonds.
Analysts forecast Mexico’s peso will strengthen 3.4 percent against the U.S. dollar by the end of 2014, boosting dollar-based gains on local fixed-income assets. The projected gain is the biggest among 33 currencies tracked in a Bloomberg survey of analysts.
Brazil’s Lula
Pena Nieto, 47, wasted little time pushing his agenda after taking office a year ago. On his second day on the job, he signed a pact with the two biggest opposition parties to pursue legislative proposals to spur economic growth.
The reform agenda has drawn praise from Pacific Investment Management Co.’s Bill Gross, BlackRock Inc. Chief Executive Officer Laurence D. Fink and former U.S. Treasury Secretary Lawrence Summers. O’Neill says the legislative victories put Pena Nieto in position to be the decade’s most successful policy maker from the Group of 20 nations, a title he gave to Brazilian President Luiz Inacio Lula da Silva in the past decade.
Changes he implemented include forcing teachers to undergo annual evaluations and curbing the market power of dominant telecommunications companies such as billionaire Carlos Slim’s America Movil SAB. (AMXL) He also signed measures to encourage banks to lend more and added taxes on dog food, soda pop and high-calorie snacks in an attempt to reduce the government’s dependence on oil revenue.
‘Laser-Beam-Focused’
“On political success, I’d give him an A,” said James R. Jones, a former U.S. Congressman and CEO of the American Stock Exchange who served as ambassador to Mexico from 1993 to 1997, when the North American Free Trade Agreement was implemented. “Pena Nieto from what I hear is laser-beam-focused on what he wants to accomplish. His cabinet meetings are no-nonsense. He makes assignments, holds people responsible.”
The president’s office declined to comment about his first year in office.
Pena Nieto has retained enough political goodwill to keep pressing ahead, said Jan Dehn, the head of research at Ashmore Group Plc in London, which oversees $78.5 billion in emerging-market assets.
“This is just the beginning of good news for Mexico,” Dehn said in a phone interview. “Compared to a lot of other EM countries, Mexico has already done all of the hard work, and there’s much less uncertainty going forward.”
Mexico’s improved growth outlook will help the country’s bonds outperform other emerging markets next year, Marco Oviedo, the chief Mexico economist for Barclays, said in a phone interview. The economy will grow 3.6 percent next year, after 1.35 percent growth this year, based on the average of economists’ estimates in a Bloomberg survey.
‘Unrealistic’
Risks remain that Mexico’s energy legislation will take a long time to implement, and any gains in oil output may be delayed by a lack of pipelines and other infrastructure, according to Joe Kogan, the head of emerging-market strategy at Bank of Nova Scotia.
The government’s goal of pumping 3 million barrels per day of oil by 2018 is “unrealistic,” New York-based consulting firm Eurasia Group said in a Dec. 17 report. The country’s output was about 2.5 million a day during the first half of December.
“Many years go by between when you start exploring for oil and when you produce oil,” Kogan said in an e-mailed response to questions.
Informal Economy
O’Neill, 56, who left Goldman Sachs in April and now writes a column for Bloomberg View, Bloomberg LP’s opinion website, said one of Mexico’s biggest challenges is the high percentage of the population in undocumented jobs. About 60 percent of workers are off the books, according to the national statistics institute.
He said he visited Mexico City in October for a BBC radio program on the rise of “MINT” countries -- Mexico, Indonesia, Nigeria and Turkey -- he predicts are poised for faster growth.
As he walked through Tepito, an open-air market reported to be a forum for sales of pirated video games, fake Levi’s jeans and stolen stereos, he asked a woman he met what she thought about Pena Nieto’s economic reforms.
“She looked at me like I was coming from another planet,” O’Neill said. “They need to persuade all these huge numbers in the informal economy that their lives could be better if they’re in the formal economy.”
Rising wages in China will make Mexico more competitive as a manufacturing center, helping bolster economic growth, O’Neill said.
If Pena Nieto’s administration “really persuades investors they’re serious, and they stick to the reform program, it’s going to result in a lot of people wanting to invest in Mexico,” he said.
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