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HUH?

9 March 2013

Michael O’Boyle and Krista Hughes at Reuters (“Analysis: Mexico central bank: closet currency warrior and inflation gambler“)

Unlike other Latin American markets, Mexico enjoys a combination of healthy public finances and liquid, open markets, and growth is still seen at 3.5 percent this year.

I don’t think any of the major Latin American economies are having trouble with public finances right now… even Argentina, having shed (or rather disavowed) the debts run up by the dictatorship, isn’t having much trouble finding the money it needs to function. If anything, public expenditures have been increasing, and the usual consensus is that Mexico is lagging behind the rest of Latin America when it comes to growth.

While I wouldn’t want to even try arguing money or economics with Agustìn Carstens, who knows what he wants for the Mexican economy and knows how to achieve his goals, I’m not convinced that either the Peña Nieto administration will be able to push through the “reforms” the foreign investors want… nor even that they should. As it is, I’d expect a PRI administration — even one from the neo-liberal Salinas wing of the party — to invest more in social spending, if nothing else, to distract from their goal of opening PEMEX to foreign capital.

Still, an excellent read… the outside world forgets that Mexico is a major economic power (Brazil comes close, simply because it’s a much larger country) and what happens to the peso does affect the dollar, the Euro and the Swiss Franc (not to mention the Ringgat, the Pound Sterling and the Nuevo Sol).

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