Today, Mexico’s GDP growth data for the third economic quarter will be released.
Latin America’s second-largest economy contracted by 0.3% in the first quarter but then expanded by 0.1% from April to June, narrowly missing a technical recession. Weakness in exports makes another quarter of stagnation likely.
Likewise, investor confidence in the country has been shaken by a number of President Andres Manuel Lopez Obrador’s (AMLO’s) policies. His refusal to entertain the participation of private firms in ventures with Pemex, the state-run oil company, is of particular concern. In an attempt to woo investors, AMLO has pledged to revive the world’s most indebted oil company by upping production, which many analysts view as futile without private sector collaboration. He has also vowed to balance the country’s budget by leaning heavily on government austerity, rather than desperately needed tax reforms.
Expect a negligible Q3 growth posting today, around 0.3%, as sluggish global trade continues to play a role in Mexico’s slow economic growth. Regardless, AMLO will likely continue pouring funds into Pemex’s loss-making ventures, such as an $8 billion downstream refinery, and shirking tax reform into at least the medium term, meaning expectations for Q4 growth postings should be similarly low.
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Max is Foreign Brief's Chief Executive Officer. A Latin America specialist, Max is an expert in regional political and economic trends, focusing particularly on the Southern Cone.