Mexico’s sound business environment and geographic location makes it an important market for many of our clients. The country offers legal certainty to investors and boasts many well-developed industries. Companies located in Mexico benefit from reduced shipping costs, as part of one of the world’s largest free-trade agreements, NAFTA.

Our coverage – using our unique Total Analysis model – ensures that our clients make sound, risk-assessed decisions in Mexico. We keep them informed of the latest market moves and political developments, supported by our interactive data and forecasting. They also benefit from in-depth analysis of 24 of Mexico’s most important industries, as part of our 'top-down' and 'bottom-up' perspective. We want to make you, as our client, feel like it’s always a fiesta in Mexico.

Country Risk

Mexico Country Risk

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Core Views

  • We remain optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics.

  • The passage of energy sector reform will bolster sentiment towards Mexican assets and contribute to stronger real GDP growth in the coming years.

  • The 2015 mid-term elections will be key for the main centre-right opposition party, the Partido Accion Nacional, to position itself to return to the presidency in the next general elections in 2018.

Major Forecast Changes

  • We have revised down our 2014 real GDP growth estimate from 2.6.% to 2.1%, and our 2015 forecast from 3.7% to 3.5%, due to weak private consumption growth in H115.

  • ...

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Mexico Operational Risk Coverage (9)

Mexico Operational Risk

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BMI View: The most significant security risk facing Mexico is its high crime rate, which may be underestimated by official statistics. Mexico's crime rate is elevated by drug cartels, which are responsible for a range of crimes in addition to drug offences, including murder, kidnap, extortion and rape. The majority of these violent crimes are between cartels, but the general public and foreign business travellers have also been targeted. Crimes occur across the country, even in affluent areas. Drug cartels are also responsible for Mexico's high risk from terrorism, as their activities and attacks are often similar to those of terrorist groups. Meanwhile, the country's close relationship with its powerful northern neighbour, the US, and lack of involvement...

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Mexico Crime & Security

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The most significant security risk facing Mexico is its high crime rate, which may be underestimated by official statistics. Mexico's crime rate is elevated by drug cartels, which are responsible for a range of crimes in addition to drug offences, including murder, kidnap, extortion and rape. The majority of these violent crimes are between cartels, but the general public and foreign business travellers have been targeted. Crime occurs across the country, even in affluent areas. Drug cartels are also responsible for Mexico's high risk from terrorism, as their activities and attacks are often similar to those of terrorist groups. On the other hand, the country's close relationship with its powerful northern neighbour, the US, and lack of involvement in international interventions, means that there is a low risk from interstate conflict. Overall, however, the instability created by the drug cartels mean that Mexico is a regional underperformer in the BMI Crime and...

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Mexico Labour Market

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Mexico has a relatively large and flexible labour market, with a significant informal employment sector. The country particularly stands out on a regional comparison in terms of the high quality of tertiary education. Mexico's overall Labour Market Risk score is above the regional and international averages, demonstrating the country's attractiveness to foreign investment. However, there remain a number of risks in Mexico's labour force which investors should be aware of, including expensive labour costs and poor secondary school enrolment rates. These factors contribute to increased overheads for businesses in the form of high minimum wages and extra training which will be necessary for Mexican workers in more formal or technical roles. Mexico scores 54.6 out of 100 for Labour Market Risk, ranked only eighth in Latin America, suggesting that investors may be tempted to opt for other countries in the region, such as Chile or Argentina, which can offer cheaper and...

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Mexico Logistics

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Mexico is a Latin American logistics outperformer. The country's utilities infrastructure and transport network are focused on its role in the global manufacturing supply chain, with Mexico's logistics offerings geared toward meeting the country's trade demands with its main import and export partner, the US. Mexico's developed logistics sector is reflected in the country's overall Logistics Risks score of 64.7 out of 100, which places it in a competitive third position in a regional comparison.

While Mexico's connections with the US have ensured a demand market for its exports and the development of high-quality transport links, this overreliance on one market leaves Mexico's growth outlook exposed. This has been the case in recent years with the US, with the country's economy currently in a recovery phrase and so Mexico experiencing low growth on the back of this. This slow growth outlook in Mexico's Market Size component and the fact that...

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Mexico Trade & Investment

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Investors in Mexico are exposed to relatively heightened trade and investment risks. A weak rule of law, combined with high profit taxes and widespread corruption, depresses the country's overall score in our Trade and Investment Risk Index. However, due to the government's laissez-faire attitude to foreign direct investment and relatively low levels of trade protectionism, Mexico's business environment can still offer a healthy return on investment. Mexico's score of 48.0 out of 100 for Trade and Investment Risks places the country 12th out of 28 Latin American states. That said, due to the country's large economy, any score relative to GDP punishes the largest markets in the region (Mexico, Brazil and Argentina in this case). This means that, in practice, Mexico is likely to have a more open trade and investment environment than appears in our Operational Risk Index.

The main risk to investment in Mexico is the relatively high degree of...

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Mexico Industry Coverage (24)

Agribusiness

Mexico Agribusiness

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BMI View:  Overall, the long-term outlook for the Mexican agriculture sector looks less optimistic than previous years. Consumer demand growth is largely slowing, particularly in key areas like sugar and corn, where per capita consumption is already high. Competitiveness is also an issue, particularly in the grains and livestock sector. Although we forecast a rebound in production for key sectors like corn and meat, we have a largely subdued long-term production outlook for these sectors, as cheap US imports, lower prices, and distortions due to government intervention reduce production incentives. We expect improving growth in the country's sugar sector, as the...

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Autos

Mexico Autos

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BMI forecasts 8.0% growth in vehicle sales in Mexico in 2015 on the back of a 6.5% increase in passenger car sales and 11.0% growth in the commercial vehicle segment. We also forecast production growth to accelerate, growing 7.2% over the year, spurred on by 6.3%, 8.8%, and 5.4% increases in the passenger car, light commercial vehicle (LCV) and heavy truck segments, respectively.

Household spending has continued to grow in recent quarters indicating that private consumption has fully recovered from the shock effect of tax rises in early 2014. Consumer confidence and purchasing power will also be boosted by growing employment created by a resurgence in manufacturing activity and recovery in the country's construction sector.

Owing to this, we see growth in passenger car sales remaining elevated at 6.5% in 2015, averaging 5.1% a year through to 2018. LCV sales, including sport utility...

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Commercial Banking

Mexico Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Mexico Consumer Electronics

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BMI View: Mexican consumer electronics spending growth underperformed many of its Latin American peers in 2013 and 2014 as a result of relatively weak economic performance and peso depreciation against the US dollar. However, from 2015 we expect spending growth will move higher as the economy strengthens, but peso depreciation will continue to squeeze household purchasing power. The focus of a wider range of international vendors will give consumers wider choice and put downward pressure on device prices, helping to deepen the market, particularly as currency performance strengthens. Particular a...

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Defence & Security

Mexico Defence & Security

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BMI View:  During 2014, there has been a significant improvement in the anti-narcotics campaign with the arrest and deaths of several drug cartel leaders and officials. Some of the largest cartels have suffered losses and the campaign has received considerable praise. However, with a lot of civil unrest over the massacre of 43 trainee teachers, the security situation is likely to escalate in 2015, due to the continued corruption amongst the security forces.

Even though the operations against the drug cartels have had significant success over the past year, the corruption and alleged inactivity on certain cases has lead to an increase in civil unrest....

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Food & Drink

Mexico Food & Drink

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BMI View : We believe that household spending in Mexico will recover in the coming months and experience a more notable improvement in 2015. Real private consumption growth slowed from 4.9% in 2012 to 2.5% in 2013, and weakened further to 1.4% year-on-year (y-o-y) in H114, due to poor labour market dynamics and the effects of tax hikes implemented in January 2014. However, strong job generation in the manufacturing and construction sectors will drive a decline in unemployment and support stronger household spending in the coming months.

Headline Industry Data (local currency)

  • 2014 per capita food consumption = +8.7%; forecast 2013 to 2018 = +27.4%

  • 2014 alcoholic drink sales = +7.8%; forecast 2013 to 2018 = +45.9%

  • 2014 soft drink sales = +5.6...

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Freight Transport

Mexico Freight Transport

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BMI View: Following energy sector reform Mexico will garner significant foreign investment. We remain optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics. We forecast real GDP growth of 3.7% in 2015, up from 2.6% in 2014.

We expect real private consumption growth in Mexico to accelerate. After slowing from 3.0% year-on-year (y-o-y) in H113 to 1.4% y-o-y in H114, we forecast real private consumption growth of 3.7% in 2015. New taxes on several consumer goods that took effect on January 1 2014 weighed on private consumption in the first half of the year. However, consumer confidence has been improving, signalling that the effects of the tax hikes are receding.

Mexico's booming...

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Information Technology

Mexico Information Technology

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BMI View: We expect Mexican IT spending growth to accelerate in 2015 as the economic environment strengthens - with our in-house Country Risk team holding a positive outlook for private consumption and enterprise confidence. Our bullish outlook extends over the medium term as we expect a convergence of income growth, declining device prices, a supportive policy environment and the development of a local IT ecosystem to support a CAGR of 7.2% 2015 to 2019. T...

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Infrastructure

Mexico Infrastructure

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BMI View:  We expect the recovery in Mexico's construction sector to continue to gain traction in 2015, with growth of 4.1% forecast. The industry posted positive growth in Q3 2014 in line with our expectation for growth to return from H2 2014, following six consecutive quarters of contraction. Residential and non-residential building will continue to be the immediate driving force behind the recovery, with infrastructure investment providing support to the sector over a five year horizon.

We expect a slow recovery in net output real growth in 2014 and leading indicators continue to support our outlook. In line with this view, industrial production data for construction posted the first month of expansion in June 2014 (and has continue in positive territory), following 19 months of contractions. This follows the first expansion in construction spending (on buildings)...

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Insurance

Mexico Insurance

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BMI View: We expect to see relatively substantial growth in Mexico's insurance market during our current forecast period, with property and motor insurance driving the expansion of the non-life sector as the market benefits from new legislation implementing compulsory third party liability insurance on federal highways and government investments in infrastructure gain ground. While market penetration will remain low, premium growth via product innovation will remain robust.

Mexico's regulatory environment is improving, with a 2015 compliance date set for a Solvency II style capital requirement framework, emulating EU and US regulatory trends, encouraging reform in the market. Over the longer term this may help to encourage growth in domestic insurers, though at present we expect the dominance of international insurance groups such as AXA and MetLife...

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Medical Devices

Mexico Medical Devices

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Espicom Industry View: The Mexican medical device market ranks second in Latin America. Espicom forecasts a high 2013-2018 CAGR of 13.4% in US dollar terms, taking the market to US$6.9bn. Medical device imports remain high but represent half the value of exports, as the country operates intensive maquiladora activities directed to the USA, Mexico's leading trade and investment partner. Mexico has strengthened its regulatory environment in recent years, but its power in Latin America is restricted by Brazil.

Headline Industry Forecasts

  • Mexico is the...

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Metals

Mexico Metals

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BMI View: Expansion in the automotive, manufacturing, construction, and oil and gas sectors, all of which rely on steel and other refined metals for inputs, will encourage steady production and consumption growth in Mexico's metal sector to 2018. Domestic steel producers will contend with cheaper foreign imports and US duties on Mexican exports, yet investment into and output from the sector is unlikely to face...

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Mining

Mexico Mining

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BMI View: We forecast Mexico's mining sector will see steady growth through 2018 as mining companies continue to invest in both base and precious metals mining projects. We forecast the value of Mexico's mining sector to grow to USD16.9bn by 2018, representing average annual growth of 2.7%. The sector will benefit from a stable business environment, though mining royalties pose a downside risk.

Mexico Dominates Global Silver Industry, But Other Metals Increasingly...

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Oil & Gas

Mexico Oil & Gas

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BMI View: Mexico's ongoing and historic energy sector reforms mark the start of a fundamental shift for the country's hydrocarbons sector. Although it will be a number of years before results are felt in the country's production and reserves data, over the long term the reforms will bolster upstream activity and likely reverse a nearly decade-long decline in oil production.

Headline Forecasts (Mexico 2013-2019)
2013e 2014e ...

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Petrochemicals

Mexico Petrochemicals

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Mexican petrochemicals production fell during much of 2014 in spite of rising economic activity, indicating that rising demand was benefiting imports and domestic producers were struggling to compete, according to BMI's latest Mexico Petrochemicals report.

On the upside, interest in investment in Mexican petrochemicals is set to pick up following energy reforms, which open up the upstream sector to private investment. The petrochemicals industry will be primarily focused on the Etileno XXI project which is due on stream in Q415. Etileno XXI will create 1.05mn tpa ethylene capacity, 750,000tpa high-density polyethylene (HDPE) capacity and 300,000tpa low-density polyethylene (LDPE) capacity.

Other expansions include plans to double vinyl chloride production (VCM) output to 400,000tpa, thereby improving cost effectiveness of its PVC operations. Etileno XXI will cut Mexico's...

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Pharmaceuticals & Healthcare

Mexico Pharmaceuticals & Healthcare

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BMI View: Increased trade activity will promote growth in Mexico's pharmaceutical and healthcare markets in 2015. In particular, generic medicine will continue to grow over the forecast period, accounting for a larger percentage of total pharmaceutical spending. Indeed, the country will continue to see positive changes as government regulations improve industry appeal to foreign drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: MXN185bn (USD14bn) in 2014 to MXN192bn (USD15bn) in 2015; +7.2% in local currency terms and +5.8% in US dollar terms. Forecast increased from Q115 due to revised historical data.

  • Healthcare: MXN1,124bn (USD85bn) in 2014 to MXN1,1214bn (USD91bn) in...

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Power

Mexico Power

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BMI View: We maintain our bright outlook for Mexico's power sector, premised on the liberalisation of the Mexican power and hydrocarbon markets and the country's positive macroeconomic trajectory. We forecast total power generation to rise by 3.4% in 2015 and we expect it to expand by an annual average of 3.5% until 2024, driven by growing private...

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Real Estate

Mexico Real Estate

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BMI View:  Mexico's strengthening economy has created a more lucrative business environment which can be expected to generate growth within the commercial real estate market in the near future. The current transition towards a more service-based economy is creating opportunities for retail developers across the country while the robust manufacturing sector is supporting growth within both logistics and warehousing real estate.

Mexico's economy noticeably rebounded during 2014 owing to a recovery in the construction sector, stronger manufacturing exports and an improvement in real private consumption. We are forecasting growth during 2015 to reach 3.7 % and this will prove beneficial for the commercial real estate market in the near future. Similarly, the US growth story is beginning to regain traction, and this will bode...

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Renewables

Mexico Renewables

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BMI View: We have upwardly revised our solar capacity forecasts for Mexico over the next 10 years, due to a significant strengthening of the country's PV project pipeline. This development reinforces our already constructive outlook for the Mexican renewables sector, premised on Mexico's favourable natural conditions, elevated electricity prices and relatively attractive business environment.

Mexico's adoption of the 'General Law on Climate Change' in June 2012 set a target of boosting the renewable industry so that 35% of energy generated comes from alternative sources (including hydropower) by 2024 - an ambitious goal considering the prevalence of thermal energy in its power mix. However, progress has been made, and overall, we expect Mexico's non-hydro renewables industry to continue to expand robustly. Furthermore, we...

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Retail

Mexico Retail

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BMI View: Looking at our forecast period as a whole, total household spending is set to experience a steady growth rate, indicating positive conditions for future foreign investment within the Mexican retail sector between 2015 and 2019. Stronger purchasing power instigated by rising household incomes and rebounding consumer confidence looks to be a key driver of this trend. Moreover, the government's positive attitude towards free trade will allow for greater expediency of foreign investment.

Concentrating on the more immediate term, total household spending is forecast to rise from USD281bn in 2015 to USD301bn in 2016 which will contribute towards the continued development of the Mexican retail sector and provide a fertile environment for investors. Our expectation that household incomes will rise during our period is a key driver behind our...

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Shipping

Mexico Shipping

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BMI remains optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics. As a result, we retain a cautious optimism towards the country's shipping sector. Mexico's real GDP growth will accelerate in 2015, driven by an improvement private consumption, stronger growth of manufacturing exports, and a recovery in public investment. Furthermore, we expect an uptick in private fixed investment into the country's recently liberalised energy sector, as the first oil licensing round begins in H115. We believe real GDP growth in Mexico bottomed in H114, coming in at 1.7% year-on-year (y-o-y), and expect the economy to sustain a recovery in the coming quarters. We forecast real GDP growth of 3.7% in 2015.

Following ongoing contractions in the construction sector and a slump in the growth of exports of manufactured goods in...

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Telecommunications

Mexico Telecommunications

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BMI View : BMI believes that the Mexican mobile market will be the most dynamic in the region in 2015. The mobile penetration in Mexico is relatively low, but intensifying competition is likely to see prices for mobile plans decrease, which in turn will encourage growth. Following the ratification of the new telecommunications law in July 2014, dominant broadband and telephony operator América Móvil and dominant broadcaster Televisa are forced to undertake measures to decrease their respective market shares. The new telecommunications law also increased the powers of the telecommunications regulator Ifetel, who has already imposed three hefty fines on América Móvil since September 2014. BMI believes that this will spur the company to decrease its market share imminently before the financial penalties will start having affecting the profit margins....

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Tourism

Mexico Tourism

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BMI expects tourist arrivals to grow steadily in 2015, albeit slightly below 2014 levels. This is due to falling arrivals from Europe, as well as a slow pickup in arrivals from the US.

As Mexico's tourism industry is heavily dependent on arrivals from the neighbouring US, the outlook for the US has a major impact on our forecasts for Mexican tourism. We are forecasting GDP growth of 2.7% in the US in 2015, up from 2.3% in 2014. We expect that this will feed through into US arrivals of 6.1mn to Mexico in 2015, up from 6.0mn in 2014. We also note that Mexican visitors to the US will grow by a higher rate in 2015, by 5.9% to 21.7mn. We believe that this reflects the growing wealth and middle class in Mexico and the increase in short-term cross-border tourism.

Key forecasts for Mexico's tourism industry:

  • BMI forecasts...

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Water

Mexico Water

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BMI View: This quarter we have expanded and revised our consumption, extraction and sewage forecasts. Overall we hold a relatively positive view of the country's water services and sanitation services sectors, however we continue to highlight that the risk of delays or cancellations of projects due to public protests pose significant threats to infrastructure companies and services. Moreover the constraint on improvements poses a risk to water availability for agriculture and industrial sectors alike. This latter concern is compounded by droughts, water shortages and rationing.

In Mexico, there are a number of issues inhibiting the water industry's full development, including widespread pollution, the over-politicisation of the water sector and the numerous riots and public protests against new water developments. However, progress is being made...

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