Itaú BBA - Committed to fiscal responsibility, but execution is a risk

Scenario Review - Mexico

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Committed to fiscal responsibility, but execution is a risk

Abril 11, 2019

Further support for PEMEX is expected


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

• The Ministry of Finance (MoF) is considering using part of its stabilization fund to pay down part of PEMEX’s debt and avoid refinancing this year. The measure would require a change in the Fiscal Responsibility Law, which should not be a problem for the Morena coalition because amending the law requires only a simple majority.

• The MoF updated its fiscal estimates, reinforcing its commitment to responsible public finances, but execution is still a risk. Achieving fiscal targets will depend on the ability of AMLO’s administration to reduce expenditures, despite the promise of additional social and capital spending. GDP and oil output also pose a risk to revenues. 

• The year started off with weak economic activity, but inflation is slowing down. We believe that with inflation falling further into the central bank’s target range, below-potential growth and a looser monetary policy stance by the Fed, Banxico will have room to start a gradual normalization cycle in 4Q19.
 

João Pedro Bumachar
Julio Ruiz

 

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



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