Mexico fears the lack of investment in the country
During their interventions on El Financiero's programme La Silla Roja, in which they discussed Mexico's economic situation, Leonardo Kourchenko, journalist and presenter of the programme, Víctor Piz, journalist for El Financiero, and José Ángel Gurría, former Mexican Secretary of Foreign Affairs and former Secretary of the Organisation for Economic Co-operation and Development (OECD), highlighted the lack of confidence that Mexico has suffered in terms of foreign investment, which in turn will translate into low economic growth. Together with the uncertainty of the closure of at least nine projects of major German energy developers such as BayWa, the experts predict an uncertain future for Mexicans.
Mexico has to create the conditions to attract investment and grow at more than 2% in the medium term, said José Ángel Gurría. Investment shows a lack of dynamism in the medium term, with a significant delay with respect to its trend trajectory, said Gerardo Esquivel, deputy governor of the Bank of Mexico, on 25 August at the Seminar on the Mexican Economy at the Institute of Economic Research (IIEc), UNAM.
"The lack of clear rules on the part of the Mexican authorities has led to a loss of private financing for the development of renewable energy generation projects. What has happened is that all the private companies have been pushed out of the market and the CFE has been given a monopoly on renewables," explained Íñigo Segura, CEO of ZGR Mexico, a company specialising in the electricity sector. However, Gurría delved even deeper into the problem, denouncing that "the big problem is investment, and where does investment come from? From confidence, when there is confidence there is investment, and, above all, in a country like Mexico, a neighbour of the United States and with so many trade and investment agreements".
Alejandra Marcos, Intercam's chief economist, added that, since the end of the previous administration, investment in Mexico has declined due to the high level of uncertainty in the business climate. She stressed that the lack of rule of law has been exacerbated in this administration, which impacts on the attraction of foreign investment to Mexico.
The Bank of Mexico's decision to increase its reference rate by 0.75% was not surprising. The problem comes when in September it reaches 9.25%. On recent occasions when monetary policy decisions have been taken, the Bank of Mexico has decided to mirror what the US Federal Reserve has done and in this way has managed to maintain relative financial stability in the country.
"How much more would investment have to grow to aspire to 4% growth? At least 5 additional percentage points of what investment is currently representing as part of the Gross Domestic Product (GDP)," he confirmed.
On the other hand, Gurría indicated that Mexico should not miss the opportunity to attract investment, as the COVID pandemic has led to a phenomenon of relocation of companies (nearshoring), and he explained that Mexico has competitive advantages, the most obvious of which is its geographical position with the United States, its main trading partner. This requires a new public-private effort to encourage long-term investment and, with it, guarantee a scenario that will make it possible to overcome the weakness in growth observed in the country. It is time to build the Mexico 2050 scenario, which implies rethinking the rules of the game, in order to guarantee sustained economic growth, and thus overcome the scenario of conflict that prevails today in the national economy.
Coordinator for the Americas: José Antonio Sierra.