Business Monitor International


Mexico Business Forecast Report

Published 29 January 2014

  • 53 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Mexico Business Forecast Report

Core Views

  • We remain optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics.

  • The passage of energy sector reform will bolster sentiment towards Mexican assets and contribute to stronger real GDP growth in the coming years.

Major Forecast Changes

  • After real GDP growth came in at 1.1% in 2013, below our initial 1.6% estimate, we have revised our 2014 growth forecast. We now forecast real GDP to expand by 3.3% in 2014, compared to 3.5% previously.

  • We have revised our 2014 average exchange rate forecast from MXN12.55/US$ to MXN12.85/US$, following a weaker peso than initially expected in Q114, when it averaged MXN13.23/US$.

  • We revised our 2014 fiscal deficit forecast from 3.1% of GDP to 3.0%, after the fiscal shortfall came in below our 2.5% estimate last year, at 2.5% of GDP.

Key Risks To Outlook

  • A further deterioration in the construction sector poses significant downside risk to our 2014 real GDP growth forecast. We expect the sector to recover, after contracting for several consecutive quarters since late 2012. However, homebuilders remain in a critical state financially, which could lead to an additional deterioration of the sector.

  • A significant delay in secondary legislation for energy sector reform, or a bill that fails to meet investor expectations, would likely lead to a significant deterioration in sentiment, which could result in weaker investment than we expect, as well as currency weakness.

  • A deteriorating security environment also poses downside risk to our growth outlook. Growing violence, particularly in the state of Michoácan could spread to other regions of the country and drive investor pessimism. Under such scenario, the exchange rate would be under pressure, which would weigh on household spending.

MEXICO - MACROECONOMIC FORECASTS
2012 2013 2014f 2015f
Real GDP growth, % y-o-y ...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Ratings
7
Domestic Politics
8
Energy Liberalisation Means A Bumpy Road For Pe-a Nieto
8
Table: Political Overview
8
Long-Term Political Outlook
9
Strengthening, But Challenges Remain
9
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Ratings
13
Economic Activity
14
Favourable Domestic And External Dynamics To Drive Stronger Growth
14
table: GDP BY EXPENDITURE, REAL GROWTH %
14
Fiscal Policy
16
Wider Budget Deficit In 2014 As Spending Picks Up
16
table: FISCAL POLICY
16
Balance Of Payments
17
Manufacturing Pickup To Drive Narrower Current Account Shortfall
17
table: CURRENT ACCOUNT
18
Monetary Policy
19
Above-Target Inflation To Prompt Tightening In H214
19
Table: MONETARY POLICY
20
Exchange Rate Policy
21
MXN: Appreciation Over A Multi-Month Period
21
table: EXCHANGE RATE
21
Regional Sovereign Risk Ratings
22
Credit Deterioration Has Largely Run Its Course
22
table: Latin America Sovereign Risk Ratings - Evolution Of Ability To Pay
23
table: Latin America Sovereign Risk Ratings - Evolution Of Willingness To Pay
24
Chapter 3: 10-Year Forecast
27
The Mexican Economy To 2023
27
Stronger Growth Ahead Following The Passage Of Key Reforms
27
table: Long-Term Macroeconomic Forecasts
27
Chapter 4: Business Environment
31
SWOT Analysis
31
BMI Business Environment Risk Ratings
31
Business Environment Outlook
32
Institutions
32
Table: BMI Business And Operation Risk Ratings
32
Infrastructure
33
Table: BMI Legal Framework Rating
33
TABLE: LABOUR FORCE QUALITY
34
Market Orientation
35
TABLE: TRADE AND INVESTMENT RATINGS
35
Table : Top Export Destinati ons (US$mn )
36
Operational Risk
37
Chapter 5: Key Sectors
39
Autos
39
table: Autos Sales By Segment, 2010-2017
40
Food & Drink
41
table: Food Consumption Indicators, 2010-2017
42
table: Hot Drinks Value Sales, 2010-2017
44
table: Mass Grocery Retail Sales By Format, 2010-2017
45
Other Key Sectors
47
table: Oil & Gas Sector Key Indicators
47
table: Pharma Sector Key Indicators
47
table: Infrastructure Sector Key Indicators
47
table: Defence & Security Sector Key Indicators
48
table: Telecoms Sector Key Indicators
48
table: Freight Key Indicators
48
Chapter 6: BMI Global Assumptions
49
Global Outlook
49
Momentum To Continue In H114
49
Table: Global Assumptions
49
Table: Developed States, Real GDP GrowtH, %
50
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table: Emerging Markets, Real GDP Growth, %
51

The Mexico Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Mexico and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market..

An influential new analysis of Mexico's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Mexico's economic and industry growth through end-2017.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Mexico's country risks against regional peers using BMI's country comparative Risk Ratings system.
  • Evaluate external threats to doing business in Mexico, including currency volatility, the commodity price boom and protectionist policies.

The Mexico Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Mexico economic policy-making and performance impact on corporate profitability over 2013-2017?

BMI provides our fully independent 5-year forecasts for Mexico through end-2017 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Mexico Business Forecast Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Ratings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2017 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Mexico and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Mexico, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Mexico over the next 5-years?

BMI's Mexico country Risk Ratings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Mexico Market - Political Strengths, Weaknesses, Opportunities and Threats facing Mexico.
  • Political Stability and Risk Assessment - BMI's Risk Ratings assess explicit short- and long-term risks to political stability; latest ratings, rankings and trends for Mexico's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Mexico's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Ratings with SWOT Analysis - Business environment Risk Ratings for Mexico, benchmarked against ratings for regional neighbours.

Country Competitiveness - Competitiveness of Mexico's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Ratings.

Key Sector Outlook

Which industry sectors in Mexico will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Mexico's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2008-2012, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2013-2017, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express