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BANK ONE ECONOMIC OUTLOOK CENTER ? L. WILLIAM SEIDMAN RESEARCH INSTITUTE ? COLLEGE OF BUSINESS ? ARIZONA STATE UNIVERSITY ? 4TH QUARTER 2000

PRESIDENT VICENTE FOX FACES ECONOMIC CHALLENGES IN 2001

The year 2000 will go on record as one of the best in decades for the Mexican economy. It will be difcult to match in the foreseeable future. The Gross Domestic Product exceeded 7 percent, ination was around 9 percent, and the current account decit remained within reasonable levels, mainly nanced by foreign direct investment. These achievements were possible due to a favorable international situation and sound domestic policies in Mexico. The external environment was among the best Mexico has ever faced. The United States was the leading performer in the world economy, which in turn did wonders for our export sector. The price of oil reached levels not seen since the Gulf war, and oil earnings contributed signicantly to the appreciation of the peso, the ght against ination, and the health of the public sector accounts. Sound domestic economic policy and a political situation better than expected contributed to a favorable external sector. Thus, we were able to reap the benets of the structural changes made during the rst half of the 1990s and, in particular, those from NAFTA. However, things do not look as promising for 2001.The U.S. economy is slowing down, and there are still fears of a hard landing. In addition, a lower price of oil in 2001 may complicate the federal budget and the performance of our economy. There are also some lingering clouds in the international environment, coming either from Argentina or South East Asia, which may unsettle the current relative nancial stability. Domestically, President Vicente Fox in his rst year in ofce will not face the severe crisis Zedillo had to deal with in 1995, but he will have an economy on the brink of overheating within a deteriorating external framework. The labor market for skilled people is very tight, and real wage settlements have gone beyond productivity gains. This cannot go on without igniting inationary pressures, as early as next year, when the peso starts depreciating as a result of lower export growth to the U.S. market and lower oil earnings. The recent good times, then, should not be a reason for complacency. The new administration will surely be tested on the adequacy of its short- and long-run economic decisions. Fox's economic policy and his negotiation skill will be tested earlier than he probably expects. Fox will nd increasingly difcult to attain its economic goals for 2001 and fulll his campaign promises. In particular, we consider feasible the GDP growth rate of around 4 percent, but nd rather optimistic the ination target of 6.5 percent. Our greatest concern, however, lies with Mexico's long-run prospects. The arrival of democracy does not change the medium- and long-term prole of the Mexican economy. Zedillo was able to manage short-run economic policy to properly harvest the benets of the structural changes implemented during the Salinas administration. His contribution in the reform area, however, was almost nonexistent. Therefore, the long-term perspective of the Mexican economy will depend on how far Fox can go in implementing second-generation structural reforms. Progress in this area is not a sure bet. He will be the rst president in modern Mexico to face a totally divided Congress. He will have a hard time trying to convince PRI and PRD members of the benets of his proposals, as early as March 2001. Furthermore, he may not be able to block populist measures coming from those opposition parties. The year 2001 promises to be crucial in dening many of these matters. We nd particularly relevant the tax reform package that will be sent to Congress in March, which will show us very clearly what the new administration will be able to achieve. -- CONSULTORES ECONOMICOS ESPECIALIZADOS, S.A. DE C.V. Dr. Salvador Kalifa-Assad

CONTRIBUTORS

American Chamber Mexico Dr. Deborah L. Riner BANAMEX Lic. Eduardo Gonzalez Lic. Graciela Avila Ledezma BANCOMER Lic. Fernando Gonzales Cant?. Javier Morales Lic. Claudia Torres CAIE Centro de Anᬩsis e Investigaci󮠅con󭩣a Dr. Ignacio Trigueros Legarreta CIEMEX-WEFA Lic. J. Alfredo Couti񯠃onsultores Econ󭩣os Especializados Dr. Salvador Kalifa-Assad GEA Grupo de Economistas y Asociados Lic. Ernesto Cervera G󭥺 Grupo Financiero INVERLAT Lic. Francisco Guti鲲ez GuzmᮠLatin Source Mexico Lic. Ivonne Ord󱥺 Dr. Jonathan Heath

GDP 1993 Peso

Private Consumption

Annual Percent Change 2000 from 1999

Government Consumption Total Investment Exports Imports

Consumer Price Exchange Index Rate

Annual Average

CETES 28 Day

AMERICAN CHAMBER MEXICO BANAMEX BANCOMER CAIE CIEMEX-WEFA CONSULTORES ECONӍICOS ESPECIALIZADOS GEA GRUPO FINANCIERO INVERLAT LATIN SOURCE MEXICO Consensus ? This Quarter Last Quarter (Q3)

7.2 7.3 7.3 7.2 7.1 7.1 6.9 7.1 6.9 7.1 6.6

7.6 8.7 8.6 9.4 7.7 8.6 8.4 8.4 9.1 8.5 7.4

3.9 4.6 5.2 4.7 3.5 4.5 3.6 4.5 4.9 4.4 3.3

8.7 13.6 12.0 11.0 8.5 14.2 11.6 10.8 11.9 11.4 10.0

22.1 22.1 21.3 22.1 17.1 22.7 21.9 21.7 21.9 21.4 19.7

22.7 22.6 21.6 23.0 17.6 23.6 22.6 22.4 22.6 22.1 20.8

8.7 8.8 8.6 8.9 7.5 8.8 8.7 9.2 8.7 8.7 8.8

9.470 9.470 9.500 9.500 9.560 9.480 9.400 9.850 9.510 9.527 9.533

15.2 15.1 16.9 15.2 13.4 15.3 14.7 15.3 14.9 15.1 14.7

GDP 1993 Peso

Private Consumption

Annual Percent Change 2001 from 2000

Government Consumption Total Investment Exports Imports

Consumer Price Exchange Index Rate

Annual Average

CETES 28 Day

AMERICAN CHAMBER MEXICO BANAMEX BANCOMER CAIE CIEMEX-WEFA CONSULTORES ECONӍICOS ESPECIALIZADOS GEA GRUPO FINANCIERO INVERLAT LATIN SOURCE MEXICO Consensus ?This Quarter Last Quarter (Q3)

5.1 5.1 4.6 4.1 4.4 4.0 5.5 4.7 4.9 4.7 4.9

5.2 6.1 5.4 4.4 4.0 4.5 6.2 5.0 5.6 5.2 4.7

2.1 0.6 4.5 3.6 2.8 1.5 2.1 3.0 1.4 2.4 1.6

11.4 6.4 8.2 3.8 6.4 10.2 11.2 12.8 16.7 9.7 8.8

11.5 10.0 N/A 7.5 12.8 11.4 12.1 12.0 7.9 10.7 9.6

14.9 13.0 N/A 9.9 11.5 13.9 12.8 16.0 13.2 13.2 11.5

7.6 7.4 7.0 7.9 6.7 8.4 8.1 9.0 7.3 7.7 8.2

9.870 9.810 9.900 10.100 10.140 10.170 10.100 10.910 10.090 10.121 10.158

14.0 13.9 16.7 14.8 13.2 15.7 12.8 16.3 12.2 14.4 13.7

GDP ? 1993 Pesos (000,000,000s)

Private Consumption 1993 Pesos (000,000,000s)

Government Consumption 1993 Pesos (000,000,000s)

Total Investment* Exports** 1993 Pesos US Dollars (000,000,000s) (000,000s)

Imports** US Dollars (000,000s)

Consumer Price Index Dec./Dec.

Exchange Rate (Pesos/Dollars)

CETES 28 Day

1999 % Change 1998 % Change 1997 % Change 1996 % Change 1995 % Change

1,501,008.2 3.7 1,448,134.8 4.8 1,381,525.2 6.8 1,293,859.1 5.1 1,230,608.0 ?6.2

1,022,799.9 4.3 980,311.8 5.4 930,152.3 6.5 873,655.6 2.2 854,688.4 ?9.5

148,188.3 1.0 146,741.4 2.2 143,648.5 2.9 139,609.8 ?0.7 140,642.6 ?1.3

331,144.0 1.5 326,094.5 9.6 297,447.2 24.9 238,182.1 25.6 189,639.7 ?35.0

136,391.1 141,974.7 16.1 13.2 117,459.4 125,373.0 6.4 14.2 110,431.3 109,807.6 15.0 22.7 95,999.7 89,468.8 20.7 23.5 79,541.6 72,453.0 30.6 ?8.7

308.9 12.3 275.0 18.6 231.9 15.7 200.4 27.7 156.9 52.0

9.6 4.7 9.1 15.4 7.9 4.2 7.6 18.4 6.4 90.2

21.4% 24.5% 19.8% 31.4% 48.4%

Source: INEGI and Banco de M鸩co. *Due to data inavailability, the annual average of the gross xed capital formation was used for 1999 **Trade balance

M鸩co Consenso de Pron󳴩cos Econ󭩣os, a quarterly publication

of the Bank One Economic Outlook Center in the L. William Seidman Research Institute, College of Business, Arizona State University is published on the World Wide Web and is accessed at: http://www.cob.asu.edu/seid/eoc/eocmex.html Paper copies are available upon request from the Bank One Economic Outlook Center, P.O. Box 874011, Arizona State University, Tempe AZ 85287?4011, USA. (480) 965?5543 or (800) 448-0432. Publisher: Larry E. Penley ? Executive Editor: Robert J. Eggert, Sr. Editor: Lee R. McPheters ? Managing Editor: Tracy L. Clark

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TITLE	Mexico, consensus economic forecast = Mexico, consesnso de pronosticos economicos
CREATOR	Arizona State University. Economic Outlook Center.
SUBJECT	Economic forecasting--Mexico--Periodicals; Economic indicators--Mexico--Periodicals; Mexico--Economic conditions--Periodicals;
Browse Topic	Business and industry
DESCRIPTION	This title contains one or more publications. Published quarterly.
Language	English; Spanish;
Publisher	Arizona State University. Economic Outlook Center.
Material Collection	State Documents
Acquisition Note	http://www.cob.asu.edu/seid/eoc/eocmex.html
Source Identifier	ASU 6.3:M 39
Location	27872156
REPOSITORY	Arizona State Library, Archives and Public Records--Law and Research Library.

TITLE	Mexico, consensus economic forecast: 4th quarter 2000
DESCRIPTION	2 pages (PDF version). File size: 375.414 KB.
TYPE	Text
Acquisition Note	reports@lib.az.us
RIGHTS MANAGEMENT	Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution.
DATE ORIGINAL	[2000]
Time Period	2000s (2000-2009)
ORIGINAL FORMAT	Born Digital
DIGITAL IDENTIFIER	Mexico00Q4.pdf
DIGITAL FORMAT	PDF (Portable Document Format)
REPOSITORY	Arizona State Library, Archives and Public Records--Law and Research Library.
Full Text	BANK ONE ECONOMIC OUTLOOK CENTER ? L. WILLIAM SEIDMAN RESEARCH INSTITUTE ? COLLEGE OF BUSINESS ? ARIZONA STATE UNIVERSITY ? 4TH QUARTER 2000 PRESIDENT VICENTE FOX FACES ECONOMIC CHALLENGES IN 2001 The year 2000 will go on record as one of the best in decades for the Mexican economy. It will be difcult to match in the foreseeable future. The Gross Domestic Product exceeded 7 percent, ination was around 9 percent, and the current account decit remained within reasonable levels, mainly nanced by foreign direct investment. These achievements were possible due to a favorable international situation and sound domestic policies in Mexico. The external environment was among the best Mexico has ever faced. The United States was the leading performer in the world economy, which in turn did wonders for our export sector. The price of oil reached levels not seen since the Gulf war, and oil earnings contributed signicantly to the appreciation of the peso, the ght against ination, and the health of the public sector accounts. Sound domestic economic policy and a political situation better than expected contributed to a favorable external sector. Thus, we were able to reap the benets of the structural changes made during the rst half of the 1990s and, in particular, those from NAFTA. However, things do not look as promising for 2001.The U.S. economy is slowing down, and there are still fears of a hard landing. In addition, a lower price of oil in 2001 may complicate the federal budget and the performance of our economy. There are also some lingering clouds in the international environment, coming either from Argentina or South East Asia, which may unsettle the current relative nancial stability. Domestically, President Vicente Fox in his rst year in ofce will not face the severe crisis Zedillo had to deal with in 1995, but he will have an economy on the brink of overheating within a deteriorating external framework. The labor market for skilled people is very tight, and real wage settlements have gone beyond productivity gains. This cannot go on without igniting inationary pressures, as early as next year, when the peso starts depreciating as a result of lower export growth to the U.S. market and lower oil earnings. The recent good times, then, should not be a reason for complacency. The new administration will surely be tested on the adequacy of its short- and long-run economic decisions. Fox's economic policy and his negotiation skill will be tested earlier than he probably expects. Fox will nd increasingly difcult to attain its economic goals for 2001 and fulll his campaign promises. In particular, we consider feasible the GDP growth rate of around 4 percent, but nd rather optimistic the ination target of 6.5 percent. Our greatest concern, however, lies with Mexico's long-run prospects. The arrival of democracy does not change the medium- and long-term prole of the Mexican economy. Zedillo was able to manage short-run economic policy to properly harvest the benets of the structural changes implemented during the Salinas administration. His contribution in the reform area, however, was almost nonexistent. Therefore, the long-term perspective of the Mexican economy will depend on how far Fox can go in implementing second-generation structural reforms. Progress in this area is not a sure bet. He will be the rst president in modern Mexico to face a totally divided Congress. He will have a hard time trying to convince PRI and PRD members of the benets of his proposals, as early as March 2001. Furthermore, he may not be able to block populist measures coming from those opposition parties. The year 2001 promises to be crucial in dening many of these matters. We nd particularly relevant the tax reform package that will be sent to Congress in March, which will show us very clearly what the new administration will be able to achieve. -- CONSULTORES ECONOMICOS ESPECIALIZADOS, S.A. DE C.V. Dr. Salvador Kalifa-Assad CONTRIBUTORS American Chamber Mexico Dr. Deborah L. Riner BANAMEX Lic. Eduardo Gonzalez Lic. Graciela Avila Ledezma BANCOMER Lic. Fernando Gonzales Cant?. Javier Morales Lic. Claudia Torres CAIE Centro de Anᬩsis e Investigaci󮠅con󭩣a Dr. Ignacio Trigueros Legarreta CIEMEX-WEFA Lic. J. Alfredo Couti񯠃onsultores Econ󭩣os Especializados Dr. Salvador Kalifa-Assad GEA Grupo de Economistas y Asociados Lic. Ernesto Cervera G󭥺 Grupo Financiero INVERLAT Lic. Francisco Guti鲲ez GuzmᮠLatin Source Mexico Lic. Ivonne Ord󱥺 Dr. Jonathan Heath GDP 1993 Peso Private Consumption Annual Percent Change 2000 from 1999 Government Consumption Total Investment Exports Imports Consumer Price Exchange Index Rate Annual Average CETES 28 Day AMERICAN CHAMBER MEXICO BANAMEX BANCOMER CAIE CIEMEX-WEFA CONSULTORES ECONӍICOS ESPECIALIZADOS GEA GRUPO FINANCIERO INVERLAT LATIN SOURCE MEXICO Consensus ? This Quarter Last Quarter (Q3) 7.2 7.3 7.3 7.2 7.1 7.1 6.9 7.1 6.9 7.1 6.6 7.6 8.7 8.6 9.4 7.7 8.6 8.4 8.4 9.1 8.5 7.4 3.9 4.6 5.2 4.7 3.5 4.5 3.6 4.5 4.9 4.4 3.3 8.7 13.6 12.0 11.0 8.5 14.2 11.6 10.8 11.9 11.4 10.0 22.1 22.1 21.3 22.1 17.1 22.7 21.9 21.7 21.9 21.4 19.7 22.7 22.6 21.6 23.0 17.6 23.6 22.6 22.4 22.6 22.1 20.8 8.7 8.8 8.6 8.9 7.5 8.8 8.7 9.2 8.7 8.7 8.8 9.470 9.470 9.500 9.500 9.560 9.480 9.400 9.850 9.510 9.527 9.533 15.2 15.1 16.9 15.2 13.4 15.3 14.7 15.3 14.9 15.1 14.7 GDP 1993 Peso Private Consumption Annual Percent Change 2001 from 2000 Government Consumption Total Investment Exports Imports Consumer Price Exchange Index Rate Annual Average CETES 28 Day AMERICAN CHAMBER MEXICO BANAMEX BANCOMER CAIE CIEMEX-WEFA CONSULTORES ECONӍICOS ESPECIALIZADOS GEA GRUPO FINANCIERO INVERLAT LATIN SOURCE MEXICO Consensus ?This Quarter Last Quarter (Q3) 5.1 5.1 4.6 4.1 4.4 4.0 5.5 4.7 4.9 4.7 4.9 5.2 6.1 5.4 4.4 4.0 4.5 6.2 5.0 5.6 5.2 4.7 2.1 0.6 4.5 3.6 2.8 1.5 2.1 3.0 1.4 2.4 1.6 11.4 6.4 8.2 3.8 6.4 10.2 11.2 12.8 16.7 9.7 8.8 11.5 10.0 N/A 7.5 12.8 11.4 12.1 12.0 7.9 10.7 9.6 14.9 13.0 N/A 9.9 11.5 13.9 12.8 16.0 13.2 13.2 11.5 7.6 7.4 7.0 7.9 6.7 8.4 8.1 9.0 7.3 7.7 8.2 9.870 9.810 9.900 10.100 10.140 10.170 10.100 10.910 10.090 10.121 10.158 14.0 13.9 16.7 14.8 13.2 15.7 12.8 16.3 12.2 14.4 13.7 GDP ? 1993 Pesos (000,000,000s) Private Consumption 1993 Pesos (000,000,000s) Government Consumption 1993 Pesos (000,000,000s) Total Investment* Exports 1993 Pesos US Dollars (000,000,000s) (000,000s) Imports US Dollars (000,000s) Consumer Price Index Dec./Dec. Exchange Rate (Pesos/Dollars) CETES 28 Day 1999 % Change 1998 % Change 1997 % Change 1996 % Change 1995 % Change 1,501,008.2 3.7 1,448,134.8 4.8 1,381,525.2 6.8 1,293,859.1 5.1 1,230,608.0 ?6.2 1,022,799.9 4.3 980,311.8 5.4 930,152.3 6.5 873,655.6 2.2 854,688.4 ?9.5 148,188.3 1.0 146,741.4 2.2 143,648.5 2.9 139,609.8 ?0.7 140,642.6 ?1.3 331,144.0 1.5 326,094.5 9.6 297,447.2 24.9 238,182.1 25.6 189,639.7 ?35.0 136,391.1 141,974.7 16.1 13.2 117,459.4 125,373.0 6.4 14.2 110,431.3 109,807.6 15.0 22.7 95,999.7 89,468.8 20.7 23.5 79,541.6 72,453.0 30.6 ?8.7 308.9 12.3 275.0 18.6 231.9 15.7 200.4 27.7 156.9 52.0 9.6 4.7 9.1 15.4 7.9 4.2 7.6 18.4 6.4 90.2 21.4% 24.5% 19.8% 31.4% 48.4% Source: INEGI and Banco de M鸩co. Due to data inavailability, the annual average of the gross xed capital formation was used for 1999 *Trade balance M鸩co Consenso de Pron󳴩cos Econ󭩣os, a quarterly publication of the Bank One Economic Outlook Center in the L. William Seidman Research Institute, College of Business, Arizona State University is published on the World Wide Web and is accessed at: http://www.cob.asu.edu/seid/eoc/eocmex.html Paper copies are available upon request from the Bank One Economic Outlook Center, P.O. Box 874011, Arizona State University, Tempe AZ 85287?4011, USA. (480) 965?5543 or (800) 448-0432. Publisher: Larry E. Penley ? Executive Editor: Robert J. Eggert, Sr. Editor: Lee R. McPheters ? Managing Editor: Tracy L. Clark

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