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MEXICO.

MEXICO

 % Change (In millions US $)

 Interest Trade
Date CPI M1 Rate (%) Imports Exports Bal

 1990 29.9 54.8 37.4 29,779.0 26,773.0 -3,025.0
 1991 18.8 83.9 22.3 38,184.0 27,120.0 -11,064.0
 1992 12.0 87.5 18.8 47,652.0 27,399.0 -20,253.0
 1993 8.0 15.8 14.7 65,367.0 51,886.0 -13,481.0
 1994 7.1 12.1 16.0 79,375.0 60,833.0 -18,542.0
 1995 51.2 10.7 45.0 72,453.0 79,542.0 7,088.0
 1996 27.7 36.5 30.5 90,000.0 96,000.0 6,000.0
 1997 15.7 29.5 18.9 109,798.0 110,380.0 582.0
 1998 18.6 12.7 28.6 125,242.0 117,500.0 -7,742.0
 1999 12.3 26.0 15.4 142,063.0 136,643.0 -5,420.0
Jan 2.5 19.3 28.3 9,271.0 8,728.0 -543.0
Feb 1.3 18.3 26.9 9,936.0 9,652.0 -284.0
Mar 0.9 17.3 22.8 11,999.0 11,675.0 -324.0
Apr 0.9 17.6 19.2 10,946.0 10,589.0 -357.0
May 0.6 18.9 17.8 11,321.0 11,102.0 -219.0
Jun 0.7 17.7 18.6 12,352.0 12,000.0 -352.0
Jul 0.7 18.7 18.1 11,288.0 11,047.0 -240.0
Aug 0.6 17.7 18.2 12,727.0 12,286.0 -441.0
Sep 1.0 22.1 17.9 12,261.0 11,940.0 -321.0
Oct 0.6 23.4 17.3 12,931.0 12,304.0 -627.0
Nov 0.9 21.9 16.3 13,851.0 13,089.0 -762.0
Dec 1.0 26.0 15.4 13,180.0 12,231.0 -948.0
 2000 9.0 15.0 15.0 173,985.0 165,816.0 -8,169.0
Jan 1.3 10.9 17.6 11,860.0 11,284.0 -576.0
Feb 0.9 10.3 15.5 13,439.0 13,115.0 -324.0
Mar 0.5 12.8 12.3 14,022.0 13,583.0 -439.0
Apr 0.6 14.8 12.8 12,717.0 12,383.0 -334.0
May 0.4 11.1 15.4 15,118.0 14,680.0 -438.0
Jun 0.6 16.5 17.0 14,075.0 13,526.0 -549.0
Jul 0.4 14.7 13.5 14,074.0 13,526.0 -548.0
Aug 0.5 11.3 13.7 16,090.0 15,302.0 -788.0
Sep 0.7 12.0 14.0 14,776.0 14,107.0 -669.0
Oct 0.7 7.5 13.5 16,843.0 16,029.0 -814.0
Nov 0.9 9.6 14.4 15,895.0 14,715.0 -1,180.0
Dec 1.1 5.6 14.4 15,076.0 13,566.0 -1,150.0
 2001 6.0 5.0 9.0 185,000.0 170,000.0 -15,000.0
Jan 0.5 5.8 18.2 13,800.0 12,856.0 -944.0
Feb -0.1 7.5 16.8 13,130.0 12,557.0 -573.0
Mar 0.6 7.4 15.4 14,933.0 14,229.0 -704.0
Apr 0.5 4.5 13.9 14,113.0 13,300.0 -813.0
May 0.2 3.9 10.8 14,660.0 14,041.0 -619.0
Jun 0.2 8.9
Column
Number 1 2 3 4 5 6

 (In millions US $)

 Current Exchange Rate
Date Acct Bal Reserves Off/Par

 1990 -5,254.0 10,274.0 2,949.0 2,959.0
 1991 -13,283.0 17,547.0 3,095.0 3,105.0
 1992 -22,800.0 19,000.0 3,219.0 3,229.0
 1993 -23,400.0 24,537.0 3.3 3.1
 1994 -28,863.0 6,148.0 5.2 5.0
 1995 -654.0 15,741.0 7.7 7.8
 1996 -1,922.0 17,509.0 7.9 7.9
 1997 -7,315.0 28,176.0 8.1 8.2
 1998 -15,578.0 30,140.0 10.4 10.5
 1999 -14,325.0 30,733.0 9.5 9.6
Jan -- 30,366.0 10.2 10.3
Feb -- 30,478.0 9.9 10.1
Mar -3,291.0 30,102.0 9.5 9.7
Apr -- 30,260.0 9.3 9.5
May -- 30,184.0 9.7 9.9
Jun -2,949.0 30,159.0 9.4 9.5
Jul -- 31,421.0 9.4 9.6
Aug -- 30,851.0 9.4 9.5
Sep -3,300.0 31,206.0 9.4 9.5
Oct -- 30,766.0 9.6 9.8
Nov -- 30,355.0 9.4 9.6
Dec -4,472.0 30,733.0 9.5 9.6
 2000 -17,900.0 33,555.0 9.6 9.7
Jan 31,530.0 9.6 9.8
Feb 31,910.0 9.4 9.5
Mar -4,679.0 34,010.0 9.3 9.4
Apr 33,746.0 9.4 9.5
May 32,736.0 9.4 9.6
Jun -3,364.0 31,904.0 9.8 10.0
Jul 32,337.0 9.4 9.5
Aug 30,558.0 9.2 9.4
Sep -3,978.0 31,870.0 9.4 9.6
Oct 32,937.0 9.6 9.7
Nov 32,164.0 9.5 9.6
Dec -5,669.0 33,555.0 9.6 9.7
 2001 -20,000.0 38,000.0 9.2 9.3
Jan 35,942.0 9.7 9.8
Feb 39,759.0 9.7 9.8
Mar -4,388.0 38,036.0 9.5 9.6
Apr 38,579.0 9.3 9.4
May 38,900.0 9.2 9.3
Jun 38,730.0 9.0 9.2
Column
Number 7 8 9 10

FOOTNOTES BY COLUMN: Annual figures for 2001 are projections. 1:
Annual figure represents January December increase. 2:
Annual figure represents 12 month average. 3:
Until 2001, figures are banks average cost of
funding (CPP), and annual figures represent average for year.
An additional 10% is usually charged by banks for loans to private
companies. As of 2001, figures represent 28 day Cetes (treasury bills),
and annual figures represent year end figures. 4-6: Trade figures
include maquiladora transactions 7: Quarterly
accumulated figures. 4-9: Annual figures represent values at year end.

SOURCES BY COLUMN: 1-9: Banco de Mexico, SPP Other official data.


FINANCIAL OUTLOOK

* Inflation in the 12 months to June stood at 6.57%, as the consumer price index continued to slow down. The government has predicted inflation will end the year at 6.5%, but the figure might be closer to 6%.

* Money in circulation continues to grow at a much-reduced pace. Mia, the new index that discounts inflation, was down to 3.9% annual growth in May, the lowest figure since the 1960s.

* Interest rates have dropped sharply after an uptick in January that pushed them over 18%. Twenty-eight-day treasury bills (Cetes) stood at a yearly yield of 8.9% at the end of June. A large inflow of foreign money has been the main reason for this decline. The central bank has also relaxed monetary policy, but only slightly. In mid-July, the Mexican bankers association launched a new 30-day plus interbank lending rate, to be known as Mexibor, and patterned after Britain's Libor.

* The trade deficit continues to widen sharply. During the first four months of 2001 it went above $3 billion, 56% higher than the nearly $1.7 billion recorded for the same period of 2000. The overvalued peso and the US economic slowdown are having a marked impact on Mexico's balance of trade.

* The current account deficit in the first quarter of 2001 totaled just under $4.4 billion, which was actually lower than the deficit for first-quarter 2000 (almost $4.7 billion). This was a consequence of lower interest payments and healthy tourism revenues. But the growing trade deficit is likely to increase the current account deficit by the end of the year.

* Gross reserves rose 15%, from $33.5 billion at end-2000 to $38.7 billion by the end of second-quarter 2001. At the end of June, the central bank decided there was no current need for more reserves, and it stopped purchasing dollars. It was feared, however, that the move could strengthen the peso even more.

* The peso continues to gain strength. At the end of June, the wholesale spot dollar, which is the market's benchmark, stood at 9.04 pesos, as opposed to 9.62 at the end of 2000. Overall, the peso has remained strong in spite of a sharp reduction in interest rates. Also at the end of June, the central bank decided to discontinue its emergency currency stabilization mechanism. This was designed to prevent wild exchange rate fluctuations by having the central bank inject $200 million into the market if there was a one-day movement of more than 2%. The decision was tested on July 11, when fears about the Argentine economy provoked speculation in the peso market. But although the peso lost some ground, it remained reasonably stable.

ECONOMY MONITOR

* Growth Outlook: First-quarter CDP growth plunged to 1.9% from 7.7% year-on-year, as the economic slowdown in the US hit Mexico hard. Forecasts for the year have been reduced drastically, from 4.5% to 2.5%-3%.

* Political Factors: Although constantly attacked by the media, President Vicente Fox continued to have a high approval rating of 69% according to a TV Azteca poll. The president's marriage on July 2, his birthday and the anniversary of his electoral victory in 2000 strengthened his popularity. A previous scandal, in which towels, sheets and other household items for the presidential residence had been purchased at very high prices, did not affect his approval rating. President Fox's fiscal reform package, submitted to congress in April, was still held up in Congress in late July. The legislators were working on a plan that would totally change the reform. The new plan would involve no reduction in income tax rates, while some foods and medicines would be exempted from the value-added tax (VAT). President Fox's National Action Party (PAN) was suggesting a possible reduction of the VAT to 13% from its present 15%. The reforms are likely to be voted on by congress in September.

* Fiscal Situation: The economic slowdown is beginning to affect fiscal revenues. Both income and value added tax revenues are down. The administration has already announced a minor spending cut, and an additional one is expected later in the year. Higher than expected oil prices, however, are helping to balance the government's books.

* Major Sectors: Some areas of the economy started to decline in the first quarter. Agriculture was down 5.5% year-on-year and construction 3.8%. Manufacturing, hurt by declining exports, was down 1.2%. Services, however, remain surprisingly strong as higher-than-inflation wage settlements have kept aggregate demand growing relatively fast. Commerce, restaurants and hotels expanded 5.9% year-on-year, while transportation and communications grew at a 5.8% rate.

* Employment: In spite of much publicized layoffs, especially in the maquiladora and other exporting industry installations, unemployment has remained at a critically low level. The figure for May 2001 was 2.5%, only slightly higher than 2.3% in January. The tight employment market is pushing wage settlements higher, gut it is expected that the slowdown should have an impact on unemployment figures by the third quarter.

* Stock Market: The Mexican Bolsa's main index, the IPC, rose 16.4% between the first quarter and the second quarter of 2001, from 5,727.89 points to 6,666.17. The increase for the year is 17.9%, from an end-2000 level of 5,652.19 points. However, the IPC still has not recovered the ground it lost in 2000.

COMPANY MONITOR

* Citigroup has made a bid to buy all of Banacci, owner of Banamex, Mexico's largest bank, and Accival, one of the largest stock brokerages, for $12.5 billion in cash and shares. This operation, coming soon after Spain's BBVA bought Bancomer, the country's largest bank, would bring some 80% of Mexico's banking assets under foreign control. Nationalists have fought against this operation, but Mexico's financial and competition authorities have, in principle, authorized the transaction, which would be the largest in Mexican history.

* Aeromexico, Mexico's largest airline, had a two-day flight attendants' strike in June. The union, which first demanded a 30% increase, settled for 9.5%. The airline's first offer had been 6.5%. Like many other airline companies, Aeromexico faces losses in the first quarter of 2001. The government is set to decide whether it will privatize Aeromexico on its own or whether it will merge it with long-time rival Mexicana de Aviacion. Mexico's federal competition commission has ruled that a merger of Aeromexico and Mexicana would violate antimonopoly legislation. But congress is apparently prepared to legislate in order to keep them together.

* Grupo Savia, Alfonso Romo's holding company, managed in June to roll over debt of Seminis, its high-technology seed business. Seminis has sales of close to $500 million a year, and it aims to become the worldwide leader in this field. Overall, however, Grupo Savia had $1.3 billion in debt, so it had to sell Empaques Ponderosa, a packaging firm, and Seguros Comercial-America, Mexico's largest insurance company, in order to raise cash to reduce its debt burden.

* Consorcio Azucarero Escorpion (Caze), Mexico's largest sugar company, has been accused of receiving government export-support subsidies worth P 102 million ($11 million) for sugar that was not exported. According to its main competitors in the domestic market, Caze then proceeded to sell the sugar in the domestic market, thus adding to a previously existing price slump. Caze, which is a major Pepsi-Cola bottler, has also failed to meet about $100 million in payments to sugar growers.

* Spain's Telefonica plans to invest $88 million in local affiliate Telefonica Data Holding, a corporate Internet and data services firm. The company plans to expand to at least 60 cities by 2005 and hopes to gain 15% of Mexico's data market.
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Title Annotation:economic indicators
Publication:America's Insider
Article Type:Illustration
Geographic Code:1MEX
Date:Aug 3, 2001
Words:2456
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