Tuesday, June 07, 2005

Mexico's Economy

We receive a Mexican economic report from Lloyd's each month. Those who contemplate living in Mexico might be interested in a few items from the month of June or you can read the entire newletter by following the links in the URL listed above.
  • HEALTHY ECONOMY - Various statistics show that Mexico's economy continues its healthy growth. For example, the Finance Secretary, Francisco Gil Diaz, has said that the number of tax payers has increased by almost 2 million, or 10%, over the past 4 years. Some 18 million individuals and 5 million businesses are now formally registered for taxation purposes. In addition, the budget deficit has been reduced each of the last four years, with a balanced budget expected in 2006. The Finance Secretariat reports, and private sector analyst agree, that economic growth is well on track to exceed 3.88% this year, and that inflation should drop below 4%.
  • REGIONAL DISPARITIES - One economic challenge still to be faced is how to reduce the growing disparity between the prosperous north and relatively poor south of the nation. National Statistics Institute (INEI) figures show clearly that the gap in economic development is widening. From 2000 to 2004, for instance, while the center and north of the country enjoyed GDP growth rates of about 5% a year, the economies of the west and south-east grew by only 2.4%, thus, ways must be found to catch up with the considerable economic progress that has occurred in the north.
  • SECONDARY MORTGAGE MARKET - The federal government is taking steps to develop the secondary mortgage market, as well as private sector insurance plans for mortgage credit. In turn, these developments should make it possible for banks and mortgage companies to offer housing loans for up to 95% of a property's value. The insurance will allow mortgages packed for resale to obtain a AAA credit rating, making them attractive to investors. The amount of credit available in the house sector has risen rapidly since 2000 in the states of Nuevo Leon, Jalisco, Coahuila and Baja California, though it has remained relatively stagnant in the Federal District, Oaxaca, Chiapas, Yucatan, Sonora and Sinaloa.
  • REMITTANCES STILL RISING - The total value of remittances received by families in Mexico from the estimated 11 million Mexicans working abroad reached 4.065 billion dollars during the first quarter of this year. This was 20.55% more than the same period a year earlier, according to the central bank, Banco de Mexico. During the first three months, 12.32 million remittance transactions were made, giving an average value of 330.12 dollars per transaction. The two states to benefit most were Michoacan and Guanajuato. Analyst are predicting that the total remittances for the year may exceed 20 billion dollars, more than crude oil exports, tourism income (likely to be around 12 billion dollars this year) or direct foreign investment. Remittances have risen from the equivalent of 1.21% of GDP for the period 1995-2000 to 2.2% of GDP in 2004.

The economic indicator for us personally is that when we came back to Mexico about 2-1/2 months ago, we were getting about 11.4 pesos to the dollar. This week it was 10.6 pesos to the dollar.

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