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 Business News | January 2008 
Mexico to Resist U.S. Economic Slowdown - Ortiz
 Adriana Barrera & Noel Randewich - Reuters
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| | Mexican Central Bank Governor Guillermo Ortiz | | |
Mexico City - Mexican Central Bank Governor Guillermo Ortiz said on Friday the local economy will stand up "fairly well" to a U.S. slowdown and that inflation pressures were not as widespread as thought.
The United States is by far Mexico's largest trading partner, buying about 80 percent of all exports, and in the past when the U.S. economy has slumped it has hit the local economy too.
But several years of financial stability and windfall additional income from sky-high oil prices and billions of dollars remittances from Mexicans working abroad have made Mexico less vulnerable to any U.S. downturn.
"We can expect that the Mexican economy is going to be able to resist fairly well this period of slowdown in the United States," Ortiz said in a speech at an economic event.
Ortiz also said that the inflation impact from a new corporate tax law passed last year should be less than previously thought.
He also ruled out any inflationary impact from a rise in gasoline prices imposed Jan. 1 and played down the effect of price rises in staple foods such as tortillas.
"Probably the impact of the corporate tax will be less than we had incorporated in our forecasts. We have to be revising them constantly," Ortiz said.
The bank had previously said inflation would be driven above 4 percent for much of 2008, in part by a landmark tax reform that will raise about $11 billion in extra fiscal income, largely from companies.
Banco de Mexico had said companies would probably pass on some of their extra costs to consumers by charging higher prices for products and services, sending inflation above the bank's 3.0 percent inflation target.
Ortiz said tortillas, which are eaten more widely than bread in Mexico, were not causing inflation.
"There is no latent pressure in the tortilla issue," he added.
Ortiz's comments come a day after Mexico's leading retailers agreed to cut prices on 300 household goods, ranging from eggs to shampoo, to the end of March as part of a government-backed plan to fight inflation.
Supermarket chains also agreed on Thursday to freeze the price of tortillas.
Mexican inflation was 3.76 percent in 2007.
(Editing by Diane Craft) |
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