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Mexico continues to suffer from high dollar and low oil prices

MILLENNIUM consulting experts ensure that good economic management has been helpful.

Experts believe that, judging by the latest data, continued positive financial management on a national level is the only lifeline sustaining the Mexican economy, which remains under attack by the US dollar against the peso, spiking an oil free-fall.

Analysts like Rafael Camarena, of Santander Securities, stresses that maintaining macroeconomic fundamentals can preserve or even strengthen internal and external perception of the strength of the economy.

Recent confirmation of the $70 US billion credit from the International Monetary Fund by Central Bank and Finance was seen as a hedge against the volatility of the uncertain global economic outlook.

In recent days, two of the problems that have for decades continually plagued economic indicators, came together to create a wave of negative feelings about the short and long-term future of the country.

On one hand, the peso lost ground against the dollar and depreciated 5.9 percent, its lowest level in two years, according to the Bank for International Settlements.

On the other hand, the fall of oil prices in international markets was the leading factor for Pemex to not publish the price of the Mexican mix. However, Finance Minister Luis Videgaray, believes that “it will be close to $66.”

The outlook has been made even bleaker by OPEC’s decision to not lose production but instead, continue producing 30 million barrels per day, leaving fate to the market. This decision can be seen as a reason the price of oil continues to decline.

On Friday, secretary Videgaray said that the effect for Mexico is not visible due to certain oil hedges contracted by the government. Thus, although the mix of Mexican crude is quoted between 65 and 66 dollars per barrel, $770 million are to be paid from the Stabilization Fund to protect the country if the barrel remains at $79.

However, Miguel Labardini, specialist energy consultancy Marcos and Associates, said the low prices does bring pressure in the short-term since the contracted coverage does not reach such low levels. Last Friday, US crude WTI closed at $ 66.15 a barrel and Brent at $60.15.

In response, Videgaray expected the price to stabilize, but that being “a variable out of control” make it appropriate to have the coverage.


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