Mexico Economy Still Strong: Cenbank Noel Randewich & Alistair Bell - Reuters go to original
Speaker: Guillermo Ortiz Central Bank Governor, Mexico English Translation: Oritz saying: "In fact, it is being estimated that in this first quarter, the contribution of net exportations to growth will be around 1 percent in the U.S. and this forecasts a better reaction of the Mexican economy faced with this situation. In fact during the first months of the year, so far this year, we haven't really felt an important slowdown in Mexican economic indicators, both the figures of consumption as well as investment in industrial production of exterior commerce, they indicate a first semester with a relatively strong activity." "In this context, Mexico has faired less worse than other countries, but truly as we predicted last October, when we saw inflation previsions, we could already see that there were different pressures in piping, stemming from food costs, stemming also from the possible impact on the fiscal reform, the JETU, which has some impact. However, having said this, the expectation for the medium term are well-anchored. We are not comfortable with that level of inflation but it is something that we expected and it explains why the inflation in food and partly the repercussion in energy." "All the central banks in the world, even those in charge of supervising inflation, all the central banks that I know, have in mind the topic of growth. We see this, us central bankers, as a long term topic. In the long term the best contribution that the central bank can do is to supply a platform of expectations that will lead to real, low interest levels."
Mexico City - Mexico's economy has yet to suffer a significant slowdown despite a feared recession in the United States, as industrial output and investment stay fairly healthy, the central bank governor said on Monday. Experts warn that a drop in the U.S. economy will hurt Mexico more than others in Latin America, but Gov. Guillermo Ortiz, at the Reuters Latin America Investment Summit in Mexico City, said recent data suggested Mexico is in relatively good shape. "So far this year, we haven't really felt an important slowdown in Mexican economic indicators," he said. "Figures for consumption, as well as investment, industrial production and foreign trade point to a first quarter with relatively strong activity," Ortiz said, although he predicted the period would be slower than it was a year ago. Easter, a major Mexican holiday, fell this year in the first quarter, which will add to the slight cut in economic growth compared to the same period in 2007, when the week was in April, Ortiz said. The central bank is under pressure to cut interest rates to shore up economic growth, seen taking a hit this year from lower demand from the United States, Mexico's main trading partner. Many investors in Mexico have bet that the central bank will make two interest cuts in the second half of this year, but a recent inflation spurt gives the bank a bit less room to maneuver. Ortiz, who has been the Bank of Mexico's governor for over a decade, gave few clues to the direction of monetary policy. "Medium-term (inflation) expectations continue to be well-anchored. We're not completely comfortable with this level of inflation but it was expected," given high energy and food prices Ortiz said. Annual inflation rose to 4.24 percent in early March, above the 4 percent limit the central bank considers acceptable. Mexico's average inflation for the second quarter will very probably be between 4 to 4.5 percent, Ortiz said, adding that average inflation in the first quarter was between 3.75 and 4.25 percent, within the bank's forecast. FOOD PRICES Inflation across Latin America has jumped over the past few months as rapidly developing economies, such as India and China, boost global demand for food commodities. At the same time, large amounts of grains are increasingly being diverted to make biofuels. Mexico's economy is seen growing less than 3 percent this year, compared with 3.3 percent in 2007. Mexico sells some 80 percent of its exports to the United States, making it very sensitive to the economy there. Mexico's industrial output grew a better-than-expected 3.1 percent in January on a surge in car production, but economists don't believe Mexico can indefinitely avoid fallout from a weaker U.S. economy. In a sign of waning demand from the United States, automaker Nissan Motor Co (7201.T: Quote, Profile, Research) this month temporarily slowed production in Mexico of cars destined for export. (Additional reporting by Luis Rojas and Pablo Garibian; Editing by Gary Hill)
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News Around the Republic of Mexico | April 2008 
Noel Randewich & Alistair Bell - Reuters
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