| | |  Business News | September 2008 
Calderon - Finances Solid, Economy May Slow
 Manuela Badawy & Noel Randewich - Reuters
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| | Mexican President Felipe Calderon participates in a panel discussion on climate change and poverty at the Clinton Global Initiative annual meeting Thursday, Sept 25, 2008 in New York. (AP/Jason DeCrow) | | |
New York/Mexico City - Mexican President Felipe Calderon and Central Bank Governor Guillermo Ortiz said on Thursday a widening U.S. credit crisis could crimp Mexico's economic growth but that their country's financial system is healthy.
Calderon told investors at the New York Economics Club that Mexico has strengthened its finances in recent years - cutting foreign debt, building foreign reserves, increasing taxes and balancing its budget.
But he warned that a deeper slowdown in the U.S. economy would also be felt in neighboring Mexico.
"We may need to revise our estimate for economic growth in Mexico this year," Calderon said.
Earlier this month, Mexico's finance ministry cut its forecast for 2008 growth to 2.4 percent from 2.8 percent.
Fears that the U.S. credit crisis could deepen and stall economic growth have slammed Mexican markets, erasing about 8.0 percent of the peso's MEX01 value so far this month.
At an event in Mexico City on Thursday, Central Bank Governor Guillermo Ortiz said the U.S. credit crisis would have only a minor impact on Mexico's financial system.
"The consequences on the financial system are marginal in as much as the Mexican financial system is well capitalized," Ortiz told reporters.
But Ortiz also warned that any "deepening of the recession" in the United States, Mexico's chief trading partner, would crimp domestic expansion.
"It affects us from the side of exports, from the side of remittances, but it is very difficult at this moment to make a precise projection given the rapidly changing situation," Ortiz said.
The economy of Mexico, which sends around 80 percent of its exports to the United States, is expected by analysts to grow 2.4 percent this year, down from 3.2 percent in 2007.
Mexico's banks, owned by foreign players like Citigroup (C.N: Quote, Profile, Research, Stock Buzz), BBVA (BBVA.MC: Quote, Profile, Research, Stock Buzz) and Santander (SAN.MC: Quote, Profile, Research, Stock Buzz), have largely avoided turmoil from the credit crisis because their focus has been on traditional lending, not dabbling in risky subprime niches or unpredictable derivatives.
Finance Minister Agustin Carstens said the government has reduced foreign debt in recent years to 5.0 percent of gross domestic product, a move meant to keep foreign financial havoc from making its way into Mexico.
"We have managed to block that transmission channel, which in other occasions has hit us very hard," he said at an event in Mexico City.
(Additional reporting by Chris Aspin and Michael O'Boyle in Mexico City) |
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