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Interest
rates rise to highest level in a year. In
an effort to bring down inflationary expectations, the Central Bank has
raised the “corto”, i.e. restricted the amount of credit available to
local banks, two times sine last month’s edition. On 10 November,
the Bank raised the corto from 310 million pesos to 350 million pesos (the
sixth increase this year and the second within one month). So far,
attempts to tighten monetary policy have had little impact on interest
rates. However, since the end of July, interest rates have come up
significantly in the wake of inflationary concerns and the weaker peso.
The peso weakened from 9.44 pesos to the US$ at the end of September to
9.56 at the end of October but has subsequently regained all territory
lost and closed at 9.44 pesos to the US$ on 10 November.
The
woes related to uncertainty over Argentina have raised concerns about
potential contagion effects in the region and have provided further upside
pressures on the interest rate. As a consequence, the benchmark
28-days Cetes rate rose to 17.3% on 9 November, the highest level in a
year.
Consumer
imports keep surging. According to revised
numbers, the trade deficit reached US$ 669 million in September, US$ 119
million below the August figure. The trend of a widening gap in the
trade balance, however, remains. The annual trade deficit stands at
US$ 6.9 billion, US$ 371 million above the deficit registered the month
before and US$ 1.5 billion above the 1999 deficit. In September,
exports increased by 18.0% over the same month last year, driven by a
45.7% increase in oil exports. Non-oil exports increased by 15.3%.
However, imports increased at an even faster 20.6% rate, as consumer good
imports (+34.7% year-over-year) profited from strong domestic demand.
Intermediate goods, which account for the bulk of imports, grew by 20.8%
over the same month last year and capital goods exhibited 10.9% growth.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Mexico and includes information available up to 12 November 2000. For more details please click here.
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