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: 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 also been targeted. Crimes occur 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. Meanwhile, the country's close relationship with its powerful northern neighbour, the US, and lack of involvement in...

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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

Autos

Mexico Autos

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BMI forecasts 8.0% growth in vehicle sales in Mexico in 2015 on the back of a 6.5% increase in passenger car sales and 11.0% 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 a resurgence in manufacturing activity and recovery in the country's construction sector.

Owing to this, we see growth in passenger car sales remaining elevated at 6.5% in 2015, averaging 5.1% a year through to 2018. LCV sales, including sport utility...

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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: Mexican consumer electronics spending growth underperformed many of its Latin American peers in 2013 and 2014 as a result of relatively weak economic performance and peso depreciation against the US dollar. However, from 2015 we expect spending growth will move higher as the economy strengthens, but peso depreciation will continue to squeeze household purchasing power. 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. Particular areas of...

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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: 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 a projected 2.1% in 2014 and 1.4% in 2013. Lower oil prices will contribute to a stronger US consumer, resulting in greater demand for Mexican manufactured goods exports. Mexico's manufacturing sector accounts for over 17.0% of GDP and is a main generator of employment. As a result, more favourable labour market dynamics, combined with the diminishing effect of tax hikes on consumer goods that were implemented in January 2014, will lead to significantly stronger household spending in 2015.

Headline Industry Data (local currency)

  • 2015 per capita food consumption = +3.5...

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Freight Transport

Mexico Freight Transport

Information Technology

Mexico Information Technology

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BMI View: We expect Mexican IT spending growth to accelerate in 2015 as the economic environment strengthens - with our in-house Country Risk team holding a positive outlook for private consumption and enterprise 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 to 2019. The government...

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Infrastructure

Mexico Infrastructure

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BMI View: The recovery in Mexico's construction sector will continue in 2015, driven primarily by residential construction. Growing headwinds from lower oil prices - through direct sector investment and cuts to fiscal spending have caused us to downgrade the pace of this recovery in 2015 from 4.1% to 3.1%.

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 entered positive territory in June 2014 and has gathered pace over the latter six months of the year, expanding 6.8%...

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Insurance

Mexico Insurance

Medical Devices

Mexico Medical Devices

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BMI Industry View: The Mexican medical device market ranks second in Latin America. We forecast a high 2013-2018 CAGR of 13.4% in US dollar terms, taking the market to USD6.9bn. Medical device 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: We forecast Mexico's mining sector will see steady growth through 2018 as mining companies continue to invest in both base and precious metals mining projects. We forecast the value of Mexico's mining sector to grow to USD16.9bn by 2018, representing average annual growth of 2.7%. The sector will benefit from a stable business environment, though mining royalties pose a downside risk.

...
Mexico Dominates Global Silver Industry, But Other Metals Increasingly Prominent

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Oil & Gas

Mexico Oil & Gas

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BMI View: Mexico's ongoing and 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 likely reverse a nearly decade-long decline in oil production.

Headline Forecasts (Mexico 2013-2019)
2013e 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: Increased trade activity will promote growth in Mexico's pharmaceutical and healthcare markets in 2015. In particular, generic medicine will continue to grow over the forecast period, accounting for a larger percentage of total pharmaceutical spending. Indeed, the country will continue to see positive changes as government regulations improve industry appeal to foreign drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: MXN185bn (USD14bn) in 2014 to MXN192bn (USD15bn) in 2015; +7.2% in local currency terms and +5.8% in US dollar terms. Forecast increased from Q115 due to revised historical data.

  • Healthcare: MXN1,124bn (USD85bn) in 2014 to MXN1,1214bn (USD91bn) in 2015...

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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: We have upwardly revised our solar capacity forecasts for Mexico over the next 10 years, due to a significant strengthening of the country's PV project pipeline. This development reinforces our already constructive outlook for the Mexican renewables sector, premised on Mexico's favourable natural conditions, elevated electricity prices and relatively attractive business environment.

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 continue to expand robustly. Furthermore, we...

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Retail

Mexico Retail

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BMI View: Looking at our forecast period as a whole, total household spending is set to experience a steady growth rate, indicating positive conditions for future foreign investment within the Mexican retail sector between 2015 and 2019. Stronger purchasing power instigated by rising household incomes and rebounding consumer confidence looks to be a key driver of this trend. Moreover, the government's positive attitude towards free trade will allow for greater expediency of foreign investment.

Concentrating on the more immediate term, total household spending is forecast to rise from USD281bn in 2015 to USD301bn in 2016 which will contribute towards the continued development of the Mexican retail sector and provide a fertile environment for investors. Our expectation that household incomes will rise during our period is a key driver behind our...

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Shipping

Mexico Shipping

Telecommunications

Mexico Telecommunications

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BMI View : BMI believes that the Mexican mobile market will be the most dynamic in the region in 2015. The mobile penetration in Mexico is relatively low, but intensifying competition is likely to see prices for mobile plans decrease, which in turn will encourage growth. Following the ratification of the new telecommunications law in July 2014, dominant broadband and telephony operator América Móvil and dominant broadcaster Televisa are forced to undertake measures to decrease their respective market shares. The new telecommunications law also increased the powers of the telecommunications regulator Ifetel, who has already imposed three hefty fines on América Móvil since September 2014. BMI believes that this will spur the company to decrease its market share imminently before the financial penalties will start having affecting the profit margins. ...

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Tourism

Mexico Tourism

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BMI View : We have revised our forecast for tourism arrivals growth in Mexico in 2015 and are now expecting 4.6% growth, with European arrivals holding up better than expected. We believe that this will feed through to increased investment into hotels and restaurants over the short-to-medium term.

BMI is encouraged that both European and US arrivals are forecast to perform solidly in 2015, although US arrivals remain below historical trends. With the US economy now firmly returned to growth, we believe that this will provide a solid foundation for Mexico's tourist industry over the forecast period. While tourism from European is currently growing strongly, we...

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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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