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.
Mexico Country Risk
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.
Major Forecast Changes
We have revised down our 2016 real GDP growth estimate from 3.1% to 2.8% as weak oil exports weigh on trade dynamics and the impact of rates hikes coupled with elevated inflation eat into consumer spending.
We have revised down our 2016 forecast for the Mexican peso, from MXN16.20/USD to MXN17.50/USD. Increased global risk aversion given tighter global liquidity...
Mexico Operational Risk Coverage (9)
Mexico Operational Risk
Mexico Operational Risk
BMI View: Mexico is among the logistics outperformers in the Latin America region. The country's utilities infrastructure and transport network are focused on its role in the global manufacturing supply chain, with its logistics offerings geared toward meeting trade demands from its main import and export partner, the US. Mexico's developed logistics sector is reflected in the country's overall Logistics Risks score of 63.0 out of 100, which places it in third position out of 42 countries in the Latin America region....
Mexico Crime & Security
Mexico Crime & Security
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...
Mexico Labour Market
Mexico Labour Market
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...
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...
Mexico Trade & Investment
Mexico Trade & Investment
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...
Mexico Industry Coverage (22)
BMI View: We have revised our forecasts for the Mexican agricultural sector in our Q1 2016 report as we are now anticipating solid growth for the various segments of the industry out to the end of our forecast period in 2019. Growth rates will begin to weaken compared with previous years, but we foresee positive trends in domestic production and consumption in the dairy, sugar, livestock and coffee segments. We hold a subdued forecast for the grains market. Rising per capita disposable incomes will continue to deliver demand-side growth, but we hold our opinion that competitiveness remains an issue for the Mexican agricultural sector as a whole, particularly in the grains, livestock and sugar subsectors.
|Agribusiness Market Value|
|BMI Market Value By Commodity (2011-2019)|
BMI View: Import restrictions on used cars will continue to limit the supply of second hand cars into Mexico, pushing more households into the new car market and spurring new car sales.
|Passenger Car And Light Commercial Vehicle Sales|
|f = BMI forecast. Source: National sources, BMI|
|* Production growth will be sustained over the next five years as large-scale OEM investments...|
Mexico Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Mexico Consumer Electronics
BMI View: The consumer electronics market is forecast to move to a much stronger footing in 2016 with growth of 7.8% forecast, a turnaround from the contraction in spending in 2015 when peso depreciation eroded Mexican household purchasing power for imported devices. We expect the PC and AV markets to benefit most from the improved economic backdrop as deferred purchases from 2015 are unlocked. Over the medium term, income growth will increase the spending potential of households, both deepening the market through new entrants and reducing the price sensitivity that characterised the mass market in 2015 - and therefore offering vendors the opportunity increase volumes and sell a greater share of higher margin devices. BMI forecasts total consumer electronics device spending will increase at a CAGR of 7.3%...
Defence & Security
Mexico Defence & Security
BMI View: 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. Nonetheless, civil unrest is likely to escalate in the short to medium term due to both corruption and cartel violence. While the defence budget is now tied to GDP, and is thus unlikely to fall relative to other elements of government expenditure; the peso's loss of value, combined with other macroeconomic factors, is likely to hold down any big ticket procurement items in the short term. From 2016 to 2019, the defence budget will count for just 0.5% of Mexico's GDP.
Despite the success of the...
Food & Drink
Mexico Food & Drink
BMI View: Mexico remains our favourite consumer market in Latin America, despite headwinds to consumer spending in late 2015 and early 2016. Improving consumer confidence and favourable demographic dynamics will fuel the development of the food and drink sector. The expansion of the upper-middle class will drive sales of branded and premium items, while there are also opportunities in grocery retail to penetrate suburban and rural areas. On the other hand, sugary drinks sales will continue to be affected by the tax on unhealthy food and drinks products.
Headline Industry Data (local currency)
2015 food consumption = +3.1%; compound annual growth rate (CAGR)...
Mexico Freight Transport
BMI View: We forecast positive growth across Mexico's freight sector in 2016, with the rail mode showing the rosiest signs of growth both in 2016 and in the medium term to 2019. While our forecasts show significant drops in indicators such as real trade growth from 2015 to 2016, growth remains positive and key macroeconomic figures such as real GDP and GDP per capita growth are on a solid upward trajectory, which will filter through the increasingly powerful Mexican consumer to continue driving the economy and freight sector volumes.
Mexico's freight sector stands to benefit from a boosted economy and healthy, albeit modest, growth figures in road, rail and air freight tonnage. Rail freight will be the highest-performing mode to 2019, as well as leading the way in 2016, although it should be noted that drops in y-o-y growth in 2016 come off the back of higher growth rates in...
Mexico Information Technology
BMI View: Mexican IT spending growth has been limited in recent years by economic challenges, but we expect the market to move to a higher spending growth trajectory from 2016 as the economic backdrop becomes more supportive, including peso appreciation against the US dollar. Our Country Risk team has a bullish outlook for changes in household income in Mexico over 2016-2019, which, along with the relatively low device and solution penetration rate, underpins our forecast for robust spending growth in the retail market. Meanwhile, enterprise spending should accelerate as sentiment strengthens, with areas of outperformance expected to include cloud computing, enterprise applications, outsourcing, and - in the latter years of our forecast - ...
BMI View: Driven by strong growth in the residential, non-residential and energy sectors, the Mexico construction industry will continue its recovery in 2015 and 2016. On the other hand the infrastructure sector will continue to struggle as budget cuts weigh on growth. However, we expect this to be increasingly offset by successful government strategies to attract private investment.
Latest Updates And Structural Trends
We expect the Mexican construction industry to post 3.4% real growth in 2015 driven by a recovering housing sector and the newly liberalised energy sector. This is a slight uptick from our previous forecast of 3.1% growth, as a contraction in...
BMI View: We have revised our outlook for the Mexican insurance sector in the Q1 2016 report update. We hold a positive outlook for the Mexican insurance industry as a whole for 2016 and beyond, over the course of our forecast period out to 2019. We believe that the strongest growth in 2016 and over the forecast period will come from the life insurance sector. The life insurance sector is set to grow by 11.3% in dollar terms in 2016 whereas the non-life sector will grow by 10.8% this year. Premiums will reach USD11.3bn and USD14bn respectively. Over the medium term, we forecast the growth rate to slow down slightly, but we still anticipate strong single digit growth in both sectors, both primarily driven by a strong economy, a robust...
Mexico Medical Devices
BMI View: Mexico will remain the second largest Latin American market, recording moderate growth in US dollar terms in 2016. Imports will remain high but still represent half the value of exports, due to intensive maquiladora activities directed to the USA, Mexico's leading trade partner. Market competition will drive prices down and increase access to the latest medical devices.
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 (%)|
Oil & Gas
Mexico Oil & Gas
BMI View: Mexico's historic energy sector liberalisation marks 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 reverse a decade-long decline in oil production.
Braskem Idesa's Ethylene XXI complex is due to begin commercial operations in Mexico in 2016, which marks the first new major petrochemicals facility in Latin America for many years and likely to be the only one before the end of the decade. Meanwhile, upstream liberalisation and import gas pipeline expansion will boost the availability of feedstock, ensuring competitiveness in Mexico's petrochemicals industry over the foreseeable future.
In the first nine months of 2015, production indices show that the volume of chemicals output declined 1.2% y-o-y while plastic and rubber production rose 4.5% over the same period. This is partly explained by the lack of feedstock supply to basic chemicals facilities, even in a market that is growing.
When it comes into full commercial operation in 2016, Braskem Idesa's Ethylene XXI will create 1.05mn tpa ethylene capacity, 750,000tpa...
Pharmaceuticals & Healthcare
Mexico Pharmaceuticals & Healthcare
BMI View: The government's efforts to improve competitiveness in Mexico's pharmaceutical sector combined with the country's economic outperformance over large countries like Brazil in 2015 will improve Mexico's attractiveness to drugmakers. As such, Mexico's consumer demand growth has started to pick up, which could be a substantial driver of a more consumer-driven economy. However, overdependence on US economic cycles has held down investment in the domestic pharmaceuticals market.
Headline Expenditure Projections
Pharmaceuticals: MXN172.6bn (USD13.0bn) in 2014 to MXN177.3bn (USD11.4bn) in 2015; +2.8% in local currency terms and -12.0% in US dollar terms....
BMI View: We maintain our positive outlook for the Mexican power sector - with robust power consumption growth, vast public investment and the implementation of a wholesale electricity market to create significant business opportunities in the generation and the power infrastructure sectors. We expect gas power to outperform in terms of installed capacity over our forecast period, but we also anticipate strong growth in...
Mexico Real Estate
BMI View: In the medium term, Mexico's commercial real estate sector is expected to benefit from a strengthening economy. The growing service sector will drive demand in the office and retail markets, pushing rental rates up, while a robust manufacturing and logistics sector will support growth in warehousing real estate.
The economy in Mexico is one of the most stable in Latin America, and is forecast to maintain steady growth over the medium term, with real GDP growth expected to average at 3.7% a year between 2016 and 2019. This growth will supported by the expansion of the manufacturing sector, with electronics and automotive remaining key sectors, particularly in Monterrey, and the growth of the services industry. With all...
BMI View: This quarter we retained our optimistic outlook for Mexico's renewables industry. We believe the country's attractive regulatory environment, strong government support for renewable energy and good natural conditions for renewables generation will be the key drivers of growth for the sector. The positive investment sentiment and strengthening project pipeline ensures Mexico's renewables industry will be a strong performer in Latin America.
BMI View: Growing household income will continue to drive growth in the middle class and uplift the Mexican population over the 2016-2020 forecast period. Rising employment and a stable political and economic outlook will dampen volatility in the country and foster steady growth in household spending, as more disposable income becomes available to consumers, despite the effect of recent interest rate hikes. Together, these factors will expand the consumer market and bolster consumer confidence, creating a favourable environment for retailers as internal consumption and economic activity expand. Growth across all sub-sectors will be strong,...
BMI View : Regulatory changes against America Movil's domination have made the Mexican market more attractive to investors, as highlighted by AT&T's entry into the mobile market. It will also compete with Telefonica, bringing three international players into competition. The main areas of competition will be LTE services, with extra investments, and a North American single market. On the fixed side, convergence will be the core driver, especially if America Movil convinces the regulator to let it offer pay-TV. Unbundling its network should help drive competition for broadband, but the quality of service remains an issue. Furthermore, making the incumbent's share drop below 50% will need some more regulatory work, such as divestments.
The Mexican mobile market has suffered...
BMI View: Mexico's tourism sector will grow slowly in 2016, with arrivals rising by just 0.18%. However, this reflects a return to trend growth years after two years of anomalous double-digit growth and we do not believe that the lower 2016 growth figure marks a change in any of Mexico's positive fundamentals.
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,...