Mexico’s reform agenda boosts global rank

By:
Matthew Turner
Published on:

Mexico is now safer than Colombia, according to Euromoney Country Risk data, as structural reforms gather pace.

Mexico continued its long-term ascent in the global rankings after rising one place to 39 in Q1, overtaking Colombia in the process for the first time since September 2010.

Mexico is Latin America’s second-largest economy and represents important regional trade and growth.

 

A report by HSBC attributes Mexico’s strong performance this quarter to the country’s reform momentum. “Fiscal and energy reforms are expected to be sent to congress in Q3 2013,” it states. “If approved, they should generate a better outlook for the medium term, fostering the country’s potential growth and perhaps prompting a credit-rating upgrade.”

The Mexican economy expanded 3.8% in 2012, according to the latest IMF World Economic Outlook figures, outperforming Brazil for the third consecutive year in 2013 – a reversal of Latin America’s perceived pecking order of economic might.

Mexico’s strong performance this quarter was underpinned by improved political assessment, according to the latest ECR results. President Enrique Peña Nieto has pledged a host of labour, tax and energy reforms since taking office in December.

The reforms appear to be boosting market confidence and are aiding robust economic growth, according to ECR analysts

ECR analysts have endorsed Nieto’s reform momentum, as well as highlighting the improved domestic business environment. This was reflected in Mexico receiving improved country scores across its government stability (+0.2), regulatory/policy environment (+0.1), institutional risk (+0.1) and transparency (+0.1) indicators.

 

Benito Berber, economist at Nomura and one of ECR’s contributors, says: “The pick-up in the US economy explains the bulk of change in Mexico’s strong performance, given that the economy is strongly tied to trade with the US.”

More generally, he says: “A series of economic reforms and structural changes were passed, which should be long-lasting. The reforms point to more flexible labour market conditions, making it harder for monopolies and allowing more investment in key sectors, such as telecommunications.

“Improvements made in LatAm economies offer a long-term investment climate, which should make most economies strongly supportive of inward foreign direct investment.”

A credit opinion report by Moody’s agrees, stating: “Anticipation of an aggressive reform agenda by the incoming Nieto administration – together with successful efforts by the [Felipe] Calderón administration to pass labour and state/local finance reforms before leaving office – has generated favourable expectations about the possibility that a round of structural reforms could boost potential growth.”