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Statement by the IMF Staff Representative November 5, 2018

Author(s):
International Monetary Fund. Western Hemisphere Dept.
Published Date:
November 2018
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This statement provides information that has become available since the staff report was finalized. This information does not alter the thrust of the staff appraisal.

1. On October 30, the authorities published the 2018:Q3 GDP flash estimate. The

Mexican economy grew 2.6 percent year-on-year in the third quarter of the year. In seasonally adjusted terms, it expanded by 0.9 percent quarter-on-quarter. The flash estimate is broadly in line with staff’s expectations and the annual growth projection of 2.1 percent.

2. President-elect Lopez Obrador announced on October 29 that he would cancel the partially-completed new Mexico City airport project following a public consultation. The consultation was organized by the incoming administration which promised to fully guarantee the rights of investors and bondholders. Nevertheless, the peso lost some 3½ percent the following day.

3. On October 31, Fitch cut the outlook for Mexico’s foreign currency credit rating to ‘negative’ from ‘stable’. Fitch kept Mexico’s rating at BBB+ but revised down the outlook citing risks to the incoming administration’s fiscal stance and the follow-through on previously approved reforms, including the energy reform. On October 19, Fitch had affirmed PEMEX’s rating at BBB+ but similarly cut the outlook to ‘negative’. Fitch added that the revision in the outlook reflects the increasing uncertainty over PEMEX’s future business strategy coupled with the company’s deteriorating Standalone Credit Profile.

4. The U.S. Treasury announced a tripling in the size of an emergency swap line for Mexico. On October 17, the two countries agreed to update their exchange stabilization agreement and increase the swap line from $3 billion to $9 billion. The swap line has been in place since 1994 when NAFTA came into force. Under the agreement, Mexico can temporarily borrow dollars in exchange for pesos at a rate and for an amount to be negotiated at the time of the request. Mexico has also been part of the Federal Reserve System’s swap network since 1967 and has currently access to a $3 billion swap line.

5. Insurer AXA suffered a cyber-attack on October 22 but client resources are said to be safe. AXA Insurance reported inconsistencies in its payment matching system but noted that none of its clients have been affected. The attack follows a series of coordinated attacks on Mexico’s interbank electronic payment system in April and May 2018 as part of which some $15.6 million were stolen.

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