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MEXLAW > Immigration  > Economic and Investment Certainty

Economic and Investment Certainty

Published: Real Estate Market.com.mx
Monday, 01 October 2018
Written by: Ricardo Vázquez

At the beginning of the last quarter of the year 2018, in economic and financial matters, it stands out that the main factors of uncertainty have been defused and left behind.

The first of these was the federal election, where the broad triumph of Andrés Manuel López Obrador did not generate any post-election conflict, and we are observing a smooth transition so far.

The second element is the signing of a new version of the old North American Free Trade Agreement between the United States, Canada, and Mexico, formerly NAFTA,  now the United States – Mexico – Canada Agreement (USMCA).

On October 30, Canada joined the trilateral agreement. With this, regardless of the final points of the agreement that will be evaluated later, gains in certainty for investment and economic stability. It is expected to be signed on November 29.

In this regard, Banorte analysts believe that “the agreement reached yesterday helps reduce uncertainty about the economic outlook, resulting in a positive reaction from the Mexican peso. In this sense, with the negotiation finished, we believe that the risk premium due to the uncertainty of this event will dissipate completely, which is already reflected in an appreciation of 0.8% of the currency in today’s session. “

After the elimination of this obstacle, in the short term, they expect Banxico to maintain the reference rate unchanged at 7.75% in its next monetary policy decision (previous estimate: 8.00%) and for the rest of the year.

“Although we recognized that this would be a very complicated decision, we are now convinced that the central bank will maintain its position unchanged before the favorable outcome and sooner than expected in the renegotiation. In this sense, we believe that a possible reduction in the volatility of the exchange rate, together with the expectation that additional rates would not be imposed on Mexico, will help to anchor with greater force the expectations of the medium term, “the analysis concluded- Banorte.

Additionally, we must consider that the tariffs imposed on Mexico and Canada by the United States government on steel and aluminum will be pushed back.

Once the two most important factors of uncertainty for Mexico have been defused, we will have to follow the Economic package of 2019 carefully.

Original article  

Certidumbre económica y para la inversión