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Mexico
cancels remaining debt with IMF.
Amid the
robust economic outlook, the outgoing administration under President
Zedillo decided to cancel Mexico’s total of around US· 3.0 billion in
outstanding debt with the International Monetary Fund (IMF). The
advanced cancellation of the liabilities eliminates all obligations Mexico
has with the IMF. The decision was motivated by the wish to reduce
the external liabilities faced by the incoming administration of President
Fox and to allow the next government to determine freely the nature and
scope of its future relationship with the Fund. As a consequence,
international reserves have fallen from US$ 33.0 billion on 25 August to
US$ 30.5 billion on 31 August. (note that not all panellists have
incorporated the unanticipated measure into their forecasts yet).
However, more important than the financial aspects of the government’s
decision is the signal of confidence sent to the market that should help
to further strengthen Mexico’s reputation among international investors.
Current
account deficit in the second quarter lower than expected.
In the second quarter 2000, the current account deficit reached US$ 3.7
billion. While the deficit is far higher than the US$ 2,9 billion
incurred in the same period last year, it remained below market
expectations, which stood at US$ 4.0 billion according to last month’s
Consensus Forecast, and considerably below the US$ 4.4 billion registered
in the first quarter this year. The impact of the current account
deficit on international reserves, which dropped US$ 2.1 billion, was
partly mitigated by a net inflow of capital in the order of US$ 1.7
billion.
Inflation
surprises on the upside.
In August,
consumer prices increased 0.55% over July 2000. While the rise was
the lowest increase for the month of August since a 0.47% climb in 1994
the reading exceeded market expectations of 0.44%. The annual rate,
however, remained stable at 9.1%. The August increase in consumer
prices was mainly due to strong spikes in tomato prices. Without
tomatoes, the rate would have been precisely in line with the forecasts.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Mexico and includes information available up to 10 September
2000. For more details please click here.
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