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.
Energy sector and other structural reforms 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 2.8% to 2.6% as greater-than-anticipated fiscal and monetary tightening look poised to weigh on growth substantially in the year ahead.
We have revised our policy rate forecast after a surprise 50 basis point hike in February. We now expect the policy rate will end the year at 4....
Mexico Operational Risk Coverage (9)
Mexico Operational Risk
Mexico Operational Risk
BMI View: The activities of entrenched and powerful drug cartels in Mexico represent the key security risk facing businesses and their staff, and severely undermine the country's appeal as an investment destination. Drug cartels are responsible for a range of crimes, in addition to their traditional area of drug trafficking, including murder, kidnapping, extortion, cargo theft, cybercrime and money laundering. In the past, the majority of these crimes have been between cartels, but the intensification of violence and the diversification or criminal operations is increasingly exposing civilians and legitimate businesses to criminal activity. This therefore requires extensive security measures to be undertaken by companies and leads to significant revenue losses,...
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 (31)
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: A stronger economic outlook coupled with peso appreciation against the US dollar envisaged for 2017-2020 underpin our bullish forecast for Mexican consumer electronics device spending growth over the medium term. We expect a CAGR of 6.4% over 2016-2020 as household income growth deepens the market to first-time buyers in categories such as PCs and flat-screen TV sets, while in the mid-range and premium market there should be an easing of price sensitivity that allows for shorter replacement cycles and higher margin volume growth for vendors. There is, however, downside for the local electronics industry as a result of intense competition from East Asian production centres, but the industry is embedded in Mexico and the advantages of NAFTA participation should exports continue to contribute to...
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 Freight Transport
BMI View: We forecast healthy growth in throughput volumes at Mexico's main ports and across the freight sector in 2016, with road freight maintaining its leading role in terms of tonnage transported but the rail mode displaying stronger growth both this year and over the medium term to 2020. Our positive outlook is supported by favourable economic conditions with low unemployment and inflation increasing consumer buying power and consequently domestic demand while increased exports to the US, Mexico's key import and export destination, also boosting trade.
Mexico is taking measures to enhance international trade relations with the South Korean President visiting the country in April to discuss a potential free trade deal while in the same month, the UK's Minister of Trade visited Mexico with...
Mexico Information Technology
BMI View: IT spending growth slowed in Mexico in 2013-2015 as weaker economic growth and then peso depreciation dragged on performance - but we have a stronger outlook for the economy and IT market over the medium term. We forecast IT spending will increase at a CAGR of 8.1% over 2016-2020, with even stronger growth in USD terms as a result of peso appreciation. Our bullish retail market outlook is based on a positive assessment of medium term household income trends while enterprise spending should accelerate as sentiment strengthens, and the outlook for cloud computing, enterprise applications, and outsourcing are especially bright.
Latest Updates & Industry...
BMI View: Driven by strong growth in the residential, non-residential and energy sectors, the Mexico construction industry will continue its recovery into 2016. The infrastructure industry, particularly transport, will lag behind as public-sector budget cuts weigh on growth; however we expect increased private sector investment to help to offset these cuts and expect growth rates to accelerate over our forecast period.
Latest Updates And Structural Trends
We expect the Mexican construction industry to post 3.2% real growth in 2016, driven by continued strength in the housing sector and...
BMI View: We have made some forecast adjustments this quarter to adjust for the peso currency fluctuations against the US dollar. We hold a strong and positive outlook for the Mexican insurance industry as a whole for 2016 and over the course of our forecast period to 2020. We believe that both the life and non-life segments will grow on par in 2016. Beyond that, the non-life sector will outpace growth in the life sector. In 2016, we are expecting total Mexico insurance industry premiums of MXN379bn y-o-y growth of 6.7% (USD23.4bn, up 4.4% y-o-y). Out to 2020, we believe that premiums will reach MXN487.5bn...
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: We have increased our 2016 tin price forecast to USD16,500/tonne owing to a stabilisation in the Chinese economy over Q116 that has boosted all industrial metal prices significantly over January-April. While we expect consolidation over the remainder of 2016, tin prices will continue to recover beyond 2016 as the global market posts sustained market deficits and inventories dwindle.
BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.
BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.
BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.
BMI View: We have raised our gold price forecast for 2016 to USD1,275/oz and have a new five-year price target of USD1,400/oz. We have turned more positive towards prices due to rising inflation pressures and our view that real rates will remain depressed in developed markets beyond 2016. A modest rise in prices will be insufficient to reverse the trend of weak mine investment and industry consolidation.
BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.
BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.
BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.
BMI View: We maintain a positive outlook for Mexico's mining industry growth, predicated on a strong project pipeline, low operating costs and vast mineral reserves. Nonetheless, elevated cartel violence will remain a key downside risk.
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. Whilst it will be a number of years before results are seen 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. Pemex's upstream activity will remain limited over the next two years amid the broad industry downturn.
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: Mexico is one of the largest consumers of generic medicines in the world and is home to the second largest pharmaceuticals market in Latin America. The market size combined with an improving business environment makes the country an attractive prospect for foreign drugmakers
Headline Expenditure Projections
Pharmaceuticals: MXN177.3bn (USD11.2bn) in 2015 to MXN182.8bn (USD10.3bn) in 2016; +3.1% in local currency terms and -7.6% in US dollar terms.
Healthcare: MXN1,126.7bn (USD71.0bn) in 2015 to MXN1,194.0bn (USD67.5bn) in 2016; +6.0% in local currency terms and -5.0% in US dollar terms.
BMI View: The launch of a wholesale power market and the success of the first long-term energy auction in Mexico underscore the multiple business opportunities that will be on offer in the country's reformed power sector. Coupled with robust macroeconomic prospects, significant public investment and our forecast for strong growth in power consumption, these regulatory advancements support our positive outlook for the Mexican power sector over the coming decade - with natural gas and renewables to outperform.
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: The outlook for the Mexican consumer and retail spending as a whole continues to look promising, as a result of improved employment dynamics. Following the release of historical data from the statistics office, we have upgraded our 2014 data, and this has improved the total level of household spending for our forecasts over the next five years. Rising disposable incomes will see the non-essentials segment outperform essentials spending in terms of growth rates, and this has already begun to attract investment from international players looking to capitalise on the opportunities, especially in the clothing & footwear segment. Premiumisation is key in lower growth segments such as food & drink and housing & utilities,...
BMI View: Mexico's telecoms market has been steadily increasing its attractiveness to investors, thanks partly to regulatory efforts to increase the competitiveness of the sector. In January 2016, regulator IFETEL formally awarded Telecomm a 30-year concession to operate a nationwide wholesale telecommunications network. Recent regulatory moves have aimed to weaken the dominance of incumbent telco America Movil. The arrival of AT&T in the market and its subsequent launch of LTE services in October 2015 promises to create a more competitive and dynamic market. One of the main areas of wireless competition will be LTE services, while in the wireline sector, convergence will be a core driver, especially if America Movil convinces th...
BMI View: Mexico's tourism sector will grow by 4.6% in 2016, reflecting stronger economic growth north of the border in the US and steady arrivals from Europe. However, we caution that the outbreak of the Zika virus in late 2015 could have a deterrent effect on 2016 arrivals.
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,...