Mexico’s sound business environment and geographic location makes it an important market for many of our clients. The country offers legal certainty to investors and boasts many well-developed industries. Companies located in Mexico benefit from reduced shipping costs, as part of one of the world’s largest free-trade agreements, NAFTA.

Our coverage – using our unique Total Analysis model – ensures that our clients make sound, risk-assessed decisions in Mexico. We keep them informed of the latest market moves and political developments, supported by our interactive data and forecasting. They also benefit from in-depth analysis of 24 of Mexico’s most important industries, as part of our 'top-down' and 'bottom-up' perspective. We want to make you, as our client, feel like it’s always a fiesta in Mexico.

Country Risk

Mexico Country Risk

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Core Views

  • We remain optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics.

  • The passage of energy sector reform will bolster sentiment towards Mexican assets and contribute to stronger real GDP growth in the coming years.

  • The 2015 mid-term elections will be key for the main centre-right opposition party, the Partido Accion Nacional, to position itself to return to the presidency in the next general elections in 2018, though we expect the ruling Partido Revolucionario Institucional to retain dominance in the lower house.

Major Forecast Changes

  • We have revised down our 2015 real GDP growth estimate from 3.5% to 3.3%, mainly due to...

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Mexico Operational Risk Coverage (9)

Mexico Operational Risk

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BMI View: Mexico boasts a large and relatively flexible labour market, with a significant informal employment sector. The country particularly stands out on a regional comparison in terms of the high quality of tertiary education. In addition, low minimum wages and high productivity of the workforce make it an attractive location for labour-intensive industries in comparison to its global peers. Consequently, the country is a Latin America outperformer in BMI' s Labour Market Risk Index, with a score of 61.5 out of 100 placing it third in the region, behind only Chile and Bermuda. However, there...

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Mexico Crime & Security

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The most significant security risk facing Mexico is its high crime rate, which may be underestimated by official statistics. Mexico's crime rate is elevated by drug cartels, which are responsible for a range of crimes in addition to drug offences, including murder, kidnap, extortion and rape. The majority of these violent crimes are between cartels, but the general public and foreign business travellers have been targeted. Crime occurs across the country, even in affluent areas. Drug cartels are also responsible for Mexico's high risk from terrorism, as their activities and attacks are often similar to those of terrorist groups. On the other hand, the country's close relationship with its powerful northern neighbour, the US, and lack of involvement in international interventions, means that there is a low risk from interstate conflict. Overall, however, the instability created by the drug cartels mean that Mexico is a regional underperformer in the BMI Crime and...

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Mexico Labour Market

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Mexico has a relatively large and flexible labour market, with a significant informal employment sector. The country particularly stands out on a regional comparison in terms of the high quality of tertiary education. Mexico's overall Labour Market Risk score is above the regional and international averages, demonstrating the country's attractiveness to foreign investment. However, there remain a number of risks in Mexico's labour force which investors should be aware of, including expensive labour costs and poor secondary school enrolment rates. These factors contribute to increased overheads for businesses in the form of high minimum wages and extra training which will be necessary for Mexican workers in more formal or technical roles. Mexico scores 54.6 out of 100 for Labour Market Risk, ranked only eighth in Latin America, suggesting that investors may be tempted to opt for other countries in the region, such as Chile or Argentina, which can offer cheaper and...

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Mexico Logistics

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Mexico is a Latin American logistics outperformer. The country's utilities infrastructure and transport network are focused on its role in the global manufacturing supply chain, with Mexico's logistics offerings geared toward meeting the country's trade demands with its main import and export partner, the US. Mexico's developed logistics sector is reflected in the country's overall Logistics Risks score of 64.7 out of 100, which places it in a competitive third position in a regional comparison.

While Mexico's connections with the US have ensured a demand market for its exports and the development of high-quality transport links, this overreliance on one market leaves Mexico's growth outlook exposed. This has been the case in recent years with the US, with the country's economy currently in a recovery phrase and so Mexico experiencing low growth on the back of this. This slow growth outlook in Mexico's Market Size component and the fact that...

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Mexico Trade & Investment

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Investors in Mexico are exposed to relatively heightened trade and investment risks. A weak rule of law, combined with high profit taxes and widespread corruption, depresses the country's overall score in our Trade and Investment Risk Index. However, due to the government's laissez-faire attitude to foreign direct investment and relatively low levels of trade protectionism, Mexico's business environment can still offer a healthy return on investment. Mexico's score of 48.0 out of 100 for Trade and Investment Risks places the country 12th out of 28 Latin American states. That said, due to the country's large economy, any score relative to GDP punishes the largest markets in the region (Mexico, Brazil and Argentina in this case). This means that, in practice, Mexico is likely to have a more open trade and investment environment than appears in our Operational Risk Index.

The main risk to investment in Mexico is the relatively high degree of...

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Mexico Industry Coverage (24)

Agribusiness

Mexico Agribusiness

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BMI View: While we expect solid growth for the Mexican agricultural sector out to our forecast period to 2019, growth will be weaker than in previous years. Consumer demand growth will slow, particularly in key areas such as sugar and corn, where per capita consumption is already high. Competitiveness is also an issue, particularly in the grains, livestock and sugar sector. This said, Mexico's agricultural industries will be forced to expand over the long term as consumption trends dictate.

Agribusiness Market Value
BMI Market Value By Commodity (2011-2019)
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Autos

Mexico Autos

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BMI forecasts a 12.2% growth in vehicle sales in Mexico in 2015 on the back of 13.0% increase in passenger car sales and 10.7% growth in the commercial vehicle segment. We also forecast production growth to accelerate, growing 7.2% over the year, spurred on by 6.3%, 8.8% and 5.4% increases in the passenger car, light commercial vehicle (LCV) and heavy truck segments, respectively.

Household spending has continued to grow in recent quarters, indicating that private consumption has fully recovered from the shock effect of tax rises in early 2014. Consumer confidence and purchasing power will also be boosted by growing employment created by the resurgence in manufacturing activity and recovery in the country's construction sector.

A government ban on used car imports has also provided a strong boost to new vehicle sales by pushing would-be pre-owned vehicle buyers into the new vehicle...

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Commercial Banking

Mexico Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Mexico Consumer Electronics

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BMI View: An uptick in consumption is expected to drive the Mexican economy over 2015, which will see it become one of the better performers in Latin America. This has spillover effects for the Consumer Electronics industry, which stands to benefit from higher levels of spending. Computer sales will drive the market over the next five years, as adoption remains less than 50% across the country. Particular areas of opportunity include tablet and hybrid notebooks, smartphones and digital TV set upgrades. The focus of a wider range of international vendors will give consumers wider choice and put downward pressure on device prices, helping to deepen the market, particularly as currency performance strengthens. While Latin American currencies are expected to...

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Defence & Security

Mexico Defence & Security

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BMI View:  During 2014, there has been a significant improvement in the anti-narcotics campaign with the arrest and deaths of several drug cartel leaders and officials. Some of the largest cartels have suffered losses and the campaign has received considerable praise. However, with a lot of civil unrest over the massacre of 43 trainee teachers, the security situation is likely to escalate in 2015, due to the continued corruption amongst the security forces.

Even though the operations against the drug cartels have had significant success over the past year, the corruption and alleged inactivity on certain cases has lead to an increase in civil unrest. Reports of 43...

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Food & Drink

Mexico Food & Drink

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BMI View: We remain optimistic toward Mexico's long-term growth outlook on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics. Mexican economic activity will pick up in the coming quarters, as private consumption continues to recover from a weak performance in 2014, and manufactured goods exports to the US continue to expand. We forecast real GDP growth of 3.3% in 2015 and 3.5% in 2016, from 2.1% in 2014.

Headline Industry Data (local currency)

  • 2015 per capita food consumption = +3.5%; compound annual growth rate (CAGR) forecast 2014 to 2019 = +4.5%

  • 2015 alcoholic drink sales = +4.4%; CAGR forecast 2014 to 2019 = +5.8%

  • 2015 soft drink sales = +5.2%; CAGR forecast 2014 to 2019 = +5.8%

  • ...

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Freight Transport

Mexico Freight Transport

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BMI View: Economic growth in Mexico will accelerate in 2015, driven by stronger private consumption, an uptick in fixed investment and robust US demand for the country's manufactured goods exports. This will drive up demand across all freight modes, with 6.4% growth in rail freight tonnage, 3.2% growth in road freight and 3.8% growth in airfreight over 2015.

The Mexican economy will improve significantly in 2015, following sluggish growth in the last couple of years. We forecast real GDP growth of 3.5% in 2015, up from projected 2.1% in 2014 and 1.4% in 2013. This will boost demand for imported goods, while a similarly positive outlook for the US will drive up the volume of Mexican exports transported to the US. These complementary trends offer significant advantages for the road and rail freight...

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Information Technology

Mexico Information Technology

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BMI View: Just as in the telecommunications industry and the overall economy, we expect spending on IT to pick up significantly in 2015. Growth will be driven by increasing telecoms services penetration, such as the internet through smartphones, as well as stronger private consumption, bolstered by declining unemployment and to greater consumer confidence. Our bullish outlook extends over the medium term as we expect a convergence of income growth, declining device prices, a supportive policy environment and the development of a local IT ecosystem to support a CAGR of 7.2% 2015-2019. In particular, growth in cloud computing, smartphones, tablets, e-commerce and cybersecurity software will be among the fastest growing segments.

...

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Infrastructure

Mexico Infrastructure

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BMI View: We are maintaining our outlook for Mexico's construction sector to see an acceleration in growth in 2015 to 3.1% y-o-y. Growth will be driven by a recovery in the housing market, while the infrastructure sector will continue to see weak growth weighed down by budget cuts in the transport segment.

We expect a continued recovery in real net output growth for the construction sector in 2015. Growth of 1.95% was recorded for 2014, in line with our expectation of 1.99% growth for the year, our expectation of growth to recover from H214 was also correct, with positive growth having returned from Q314. Our view that this recovery will continue, is supported by higher frequency indicators. Construction Industrial Production has increased 4.2% on average in the first three months of the year, with building registering the strongest...

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Insurance

Mexico Insurance

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BMI View: We have a positive outlook for Mexico's insurance sector throughout our five-year forecast period, with both life and non-life insurance growing at medium single-digit rates. In light of the declining unemployment, improving consumer sentiment, increasing household spending, and measured developments in other sectors of the economy (such as Autos and Pharmaceuticals), we highlight significant opportunities for domestic and foreign investors in both segments of the country's insurance sector.

Although Mexico's insurance sector is well-balanced in size between life and non-life insurance, the life segment accounts for the smaller share of 45% of total written premiums in 2015 - this...

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Medical Devices

Mexico Medical Devices

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BMI Industry View: We forecast a high 2013-2018 CAGR of 13.4% in US dollar terms, taking the medical device market to USD6.9bn. Mexico will remain the second largest market in Latin America. Imports remain high but represent half the value of exports, as the country operates intensive maquiladora activities directed to the USA, Mexico's leading trade and investment partner. Mexico has strengthened its regulatory environment in recent years, but its power in Latin America is restricted by Brazil.

...

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Metals

Mexico Metals

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BMI View: Expansion in the automotive, manufacturing, construction, and oil and gas sectors, all of which rely on steel and other refined metals for inputs, will encourage steady production and consumption growth in Mexico's metal sector to 2018. Domestic steel producers will contend with cheaper foreign imports and US duties on Mexican exports, yet investment into and output from the sector is unlikely to face significant...

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Mining

Mexico Mining

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BMI View: Mexico's mining industry will experience steady growth due to the sector's solid project pipeline and continued investment. The sector will benefit from a stable business environment, though continued mineral price weakness and violent conflicts pose a downside risk.

Solid Growth Ahead
Mexico - Mining Industry Value (USDbn) & Growth y-o-y (%)
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Oil & Gas

Mexico Oil & Gas

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BMI View: Mexico's historic energy sector reforms mark the start of a fundamental shift for the country's hydrocarbons sector. Although it will be a number of years before results are felt in the country's production and reserves data, over the long term the reforms will bolster upstream activity and will reverse a decade-long decline in oil production.

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Headline Forecasts (Mexico 2013-2019)
2013 2014e

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Petrochemicals

Mexico Petrochemicals

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Mexican petrochemicals production fell during much of 2014 in spite of rising economic activity, indicating that rising demand was benefiting imports and domestic producers were struggling to compete, according to BMI's latest Mexico Petrochemicals report.

On the upside, interest in investment in Mexican petrochemicals is set to pick up following energy reforms, which open up the upstream sector to private investment. The petrochemicals industry will be primarily focused on the Etileno XXI project which is due on stream in Q415. Etileno XXI will create 1.05mn tpa ethylene capacity, 750,000tpa high-density polyethylene (HDPE) capacity and 300,000tpa low-density polyethylene (LDPE) capacity.

Other expansions include plans to double vinyl chloride production (VCM) output to 400,000tpa, thereby improving cost effectiveness of its PVC operations. Etileno XXI will cut Mexico's...

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Pharmaceuticals & Healthcare

Mexico Pharmaceuticals & Healthcare

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BMI View: Robust trade relations with the US will promote growth within Mexico's pharmaceutical and healthcare markets in 2015. In particular, generic medicine sales will grow over the next 10 years to become the largest proportion of total pharmaceutical spending. The government's increased focus on anti-counterfeit medicine measures will improve the country's appeal to foreign drugmakers over the long term.

Headline Expenditure Projections

  • Pharmaceuticals: MXN184.9bn (USD13.9bn) in 2014 to MXN196.0bn (USD13.3bn) in 2015; +6.6% in local currency terms and +6.1% in US dollar terms. Forecast revised upwards from Q115 due to revised historical data.

    ...

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Power

Mexico Power

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BMI View: Our outlook for Mexico's power sector remains bright; a view based on the liberalisation of the Mexican power market, the country's positive macroeconomic trajectory and strong investor interest in the market. We forecast total power generation to rise by 3.6% in 2015 and we expect it to expand by...

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Real Estate

Mexico Real Estate

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BMI View:  Mexico's strengthening economy has created a more lucrative business environment which can be expected to generate growth within the commercial real estate market in the near future. The current transition towards a more service-based economy is creating opportunities for retail developers across the country while the robust manufacturing sector is supporting growth within both logistics and warehousing real estate.

Mexico's economy noticeably rebounded during 2014 owing to a recovery in the construction sector, stronger manufacturing exports and an improvement in real private consumption. We are forecasting growth during 2015 to reach 3.7 % and this will prove beneficial for the commercial real estate market in the near future. Similarly, the US growth story is beginning to regain traction, and this will bode well...

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Renewables

Mexico Renewables

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BMI View: Mexico's renewables industry is facing mounting headwinds in the form of falling electricity prices, which threaten to erode the sector's cost competitiveness relative to thermal power generation. Overall, however, we believe that the positive fundamentals of the market, including the conducive policy environment, outweigh the risks; a view supported by the strong investor interest in the market and continued strengthening of the project pipeline.

Mexico's adoption of the 'General Law on Climate Change' in June 2012 set a target of boosting the renewable industry so that 35% of energy generated comes from alternative sources (including hydropower) by 2024 - an ambitious goal considering the prevalence of thermal energy in its power mix. However, progress has been made, and overall, we expect Mexico's non-hydro renewables industry to...

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Retail

Mexico Retail

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BMI View: Between 2015 and 2019, rising total household incomes, falling unemployment and the relative stability of the economy will continue to provide opportunity for foreign investment within the retail sector. The growing affluence of the population is a key driver behind our forecast that sub-sectors comprised largely of non-essentials will experience strong rates of growth, as demand increases, throughout the forecast period.

Total household spending is forecast to experience steady growth rates throughout our period, accelerating slightly towards the end, which will have positive implications on the Mexican retail sector, as well as on the economy as a whole. As the population as a whole become more affluent, the proportion of the population now meeting the middle-class earning criteria is rising, creating difference investment opportunities within the retail sector. Recreation and culture...

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Shipping

Mexico Shipping

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BMI View: We forecast total tonnage growth of 4.8% at the port of Manzanillo in 2015, to 29.9mn tonnes. For the port of Veracruz, total tonnage growth is forecast to be 3.5%, reaching 20.5mn tonnes.

Mexican economic activity will pick up in coming quarters, as private consumption continues to recover from a weak 2014 and manufactured goods exports to the US continue to grow. We remain optimistic toward Mexico's shipping sector on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics The construction sector, especially the residential segment, will also continue to recover from an 18-month recession that ended in June 2014, further contributing to stronger real GDP growth this year. A contraction in oil exports and a reduction in fixed public investment will be the main headwinds for the economy, though they will not be enough to...

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Telecommunications

Mexico Telecommunications

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BMI View : The entrance of AT&T into Mexico through its acquisitions of Iusacell and Nextel , is the start of a new chapter for the Mexican mobile market growth story. Should its merger with DirecTV be approved by the FCC, AT&T will also hold a strong presence in Mexico's pay-TV market. This will bring real competition from an established player into Mexico, helping to break the hold of America Movil over the market. America Movil is also creating a new company Telesites , to open up its towers infrastructure to rent to AT&T and...

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Tourism

Mexico Tourism

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BMI View: Stronger economic growth in the US in 2015 will drive higher tourist arrivals to Mexico. European arrivals will also hold up despite economic uncertainty in the region, demonstrating the growing attractiveness of Mexico as a tourist destination.

BMI is positive about the prospects for Mexico's tourist industry in 2015, with higher GDP growth in the US feeding through into rising numbers of US tourists visiting Mexico. At the same time, Mexico is diversifying its tourism source markets through a number of marketing campaigns, and we note that its southern coast is becoming a popular alternative to Caribbean destinations given the Caribbean's relative expensiveness. In this regard, the fact that European tourism to Mexico is forecast to grow in 2015, albeit...

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Water

Mexico Water

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BMI View: This quarter we have expanded and revised our consumption, extraction and sewage forecasts. Overall we hold a relatively positive view of the country's water services and sanitation services sectors, however we continue to highlight that the risk of delays or cancellations of projects due to public protests pose significant threats to infrastructure companies and services. Moreover the constraint on improvements poses a risk to water availability for agriculture and industrial sectors alike. This latter concern is compounded by droughts, water shortages and rationing.

In Mexico, there are a number of issues inhibiting the water industry's full development, including widespread pollution, the over-politicisation of the water sector and the numerous riots and public protests against new water developments. However, progress is being made,...

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