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backLATINtalk April, 2012

Mexico’s Economy Targeted to Grow at 4.5% Rate this Year

Mexico’s economy may grow at least 4.5 percent in 2012 and may surpass 5 percent thanks to the spending boom caused by the country’s presidential election campaign, an analyst said.

“I believe that even if we are using a conservative forecast we are going to see the economy grow by at least 4.5 percent, and it is very likely it could be even higher and grow more than 5 percent,” Alfredo Coutino, chief Latin America economist for Moody’s Economy.com, told Xinhua in an exclusive interview on Monday.

“The Mexican economy is going to be better this year, both because the U.S. is recovering in a much better way than anticipated, and also because the economy is benefiting from the political spending,” Coutino said.

Moody’s forecast is significantly better than a growth of 3 to 4 percent projected by other financial experts, a view which has been supported by Mexico’s central bank.

But these forecasts are not taking into account Mexico’s traditional extra massive spending during presidential elections by individual candidates, their parties, and the government, which has approved an additional budget of hundreds of million of U.S. dollars for the country’s electoral institute, Coutino said.

“I think they are wrong when they are reporting only 3 percent growth, or they are simply forgetting to take into account the significance of the elections,” Coutino said.

He said that the huge spending is going to stimulate the Mexican economy on multiple fronts, from job creation to the booming transport sector, because of the increased chatering of private planes and buses, to spending in print, publications and even the textile industry.

Mexico will hold general and presidential elections on July 1 this year, during which the candidates and parties will spend their own money. Meanwhile, the Mexican Federal Electoral Institute (IFE) also has been allocated massive funds from the national budget to hold the elections.

“It stimulates spending on so many fronts, because first of all both the IFE and the campaigns will be hiring a lot of people, which is very good for job creation, and the government will also be spending a huge amount of money on the operations of the IFE,” Coutino said.

He said data from the previous elections have proved that Mexico’s slowdown in growth last year, a 4 percent growth in gross domestic product compared with 5.4 percent in 2010, was normal and in line with electoral seasons.

“Historically, the engines of growth tend to cool off in the fifth year of the six-year presidential term, not only to correct incipient or potential imbalances, but also to leave the economy in shape for the electoral year,” Coutino said.

He said this seasonal slowdown “was designed to leave the economy ready for a strong rebound during the election year,” and that is why Mexico’s slower economy last year came as no surprise.

“Certainly a stronger U.S. recovery can help Mexico’s performance, but it will not be the main reason for the economy to expand above its potential rate this year. Growth will continue to have politics as one of its main determinants, at least this and next year,” Coutino said.

Source: NearShoreAmericas.com - GAI

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