Front Matter

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© 2012 International Monetary Fund

December 2012

IMF Country Report No. 12/327

Mexico: Arrangement Under the Flexible Credit Line and Cancellation of the Current Arrangement—Staff Report; Staff Supplement; and Press Release on the Executive Board Discussion

In the context of the arrangement under the Flexible Credit Line and cancellation of the current arrangement, the following documents have been released and are included in this package:

  • The staff report on the arrangement for Mexico under the Flexible Credit Line and cancellation of the current arrangement, prepared by a staff team of the IMF, based on information available as of November 20, 2012. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • A staff supplement of November 21, 2012, on the assessment of the impact of the proposed Flexible Credit Line arrangement on the Fund’s finances and liquidity position.

  • A Press Release summarizing the views of the Executive Board as expressed during its November 30, 2012 discussion of the staff report that completed the request.

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

Copies of this report are available to the public from

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Arrangement Under the Flexible Credit Line and Cancellation of the Current Arrangement

Prepared by the Western Hemisphere Department

(In consultation with other departments)

Approved by Adrienne Cheasty and Lorenzo Giorgianni

November 20, 2012


  • Background and outlook. Mexico’s growth has remained resilient, supported by both external and domestic demand, nearly closing the output gap opened during the global crisis. Mexico’s strong economic performance, despite the sluggish U.S. recovery and persistent global uncertainty, attests to its strong fundamentals and sound policy management. Economic activity is expected to moderate towards potential growth next year. Inflationary pressures have been contained and expectations remain well-anchored, despite a recent uptick in headline inflation due to food prices. The exchange rate has fluctuated significantly, related to bouts of global risk aversion, but with no major balance sheet or pass-through effects. Policies have aimed to balance supporting the recovery and gradually rebuilding policy buffers. The incoming administration is firmly committed to maintain Mexico’s strong policy frameworks and prudent macro policies.

  • Risks. Since the approval of the current FCL, global risks have remained high, particularly those that could trigger a surge in global risk aversion and generalized financial contagion.

  • FCL. In this context, the authorities are requesting a new two-year precautionary FCL arrangement, maintaining access at SDR 47.292 billion (1,304 percent of quota, from 1,500 percent originally approved in the current arrangement), and the cancelation of the current arrangement approved on January 10, 2011. They consider that, in a context where the external environment has become riskier, the FCL continues to play a critical role in support of their overall macroeconomic strategy and to provide a significant insurance against adverse global risks. The authorities considered the reduction in quota access as appropriate given the current risk balance. They underscored their intention to take further steps towards exit when improved external conditions allow. The staff’s assessment is that Mexico meets the qualification criteria for access to FCL resources, and would recommend the approval of the arrangement on that basis.

  • Fund liquidity. The proposed commitment would have a manageable impact on the Fund’s liquidity.

  • Team. This report was prepared by a team comprising Martin Kaufman (head), Herman Kamil, Esteban Vesperoni (all WHD); Pamela Madrid Angers (MCM); Santiago Acosta Ormaechea (FAD); and Gilda Fernandez (SPR).


  • I. Context

  • II. Recent Developments

  • III. Outlook and Near-Term Policies

  • IV. Role of the Flexible Credit Line

  • V. Access Considerations

  • VI. Review of Qualification

  • VII. Impact on Fund Finances, Risks, and Safeguards

  • VIII. Staff Appraisal

  • Tables

  • 1. Selected Economic, Financial, and Social Indicators, 2008–2013

  • 2. Financial Operations of the Public Sector, 2008–2017

  • 3. Summary Balance of Payments, 2008–2017

  • 4. External Financing Requirements and Sources, 2008–2014

  • 5. Public Debt Sustainability Framework, 2007–2017

  • 6. External Debt Sustainability Framework, 2007–2017

  • 7. Indicators of Fund Credit, 2012–2018

  • 8. Financial Soundness Indicators

  • 9. Proposed Access

  • 10. FCL for Mexico—Impact on GRA Finances

  • Figures

  • 1. Real Sector, 2007–2012

  • 2. Prices and Monetary Policy, 2007–2012

  • 3. Financial Sector, 2007–2012

  • 4. External Sector, 2007–2012

  • 5. Fiscal Sector, 2007–2012

  • 6. Qualification Criteria

  • 7. External Debt Sustainability: Bound Tests

  • 8. Metrics of Reserve Coverage in a Cross-Country Perspective, 2011

  • 9. Public Debt Sustainability: Bound Tests

  • A1. Empirical Adverse Shock Distributions

  • Box

  • 1. Illustrative Adverse Scenario

  • Appendix

  • 1. Rollover Rates in the Adverse Scenario

  • Attachments

  • 1. Letter from the Authorities Requesting FCL

  • 2. Letter from Transition Team for New Government Endorsing Authorities’ Request

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Mexico—Assessment of the Impact of the Proposed Flexible Credit Line Arrangement on the Fund’s Finances and Liquidity Position

Prepared by the Finance and Strategy, Policy and Review Departments (In consultation with other Departments)

Approved by Andrew Tweedie and Lorenzo Giorgianni

November 21, 2012

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Press Release No.


November 30, 2012

International Monetary Fund

Washington, D.C. 20431 USA

Telephone 202-623-7100

Fax 202-623-6772

Mexico: Arrangement Under the Flexible Credit Line and Cancellation of the Current Arrangement—Staff Report; Staff Supplement; and Press Release on the Executive Board Discussion
Author: International Monetary Fund. Western Hemisphere Dept.