Itaú BBA - A difficult road to USMCA ratification

Scenario Review - Mexico

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A difficult road to USMCA ratification

mayo 13, 2019

Healthy public finances in 1Q19, but risks remain


For the full version with all charts and tables, please open the attached pdf file
 

• Given the Democrats’ continued concerns about the USMCA’s enforceability (in particular labor standards) and the current divisive environment between Democrats and the White House, ratification of the agreement is still at risk, which constitutes an important source of uncertainty for Mexico’s economy.  

• Meanwhile, Mexico’s first-quarter public finance results were consistent with AMLO’s commitment to fiscal responsibility, but execution of the coming targets remains a risk given the high number of expenditure promises.

• The 1Q19 GDP flash estimate confirms weak economic activity. However, inflation accelerated more than expected in April. In a context of still-high inflation and elevated uncertainty, we expect the policy rate to remain on hold in the short term. An easing cycle will likely start in 4Q19, as inflation stabilizes within the range around the target and assuming a dissipation of the risks for the exchange rate and, consequently, inflation.
 

João Pedro Bumachar
Julio Ruiz

 

For the full version with all charts and tables, please open the attached pdf file



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