Studi Economici
Mexico

Mexico

Population 121.3 million
GDP 8,562 US$
B
Country risk assessment
A4
Business Climate
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2015 2016 2017(f) 2018(f)
GDP growth (%) 2.6 2.3 2.2 2.2
Inflation (yearly average, %) 2.7 2.8 5.9 3.0
Budget balance (% GDP) -3.5 -2.6 -1.5 -2.4
Current account balance (% GDP) -2.5 -2.2 -1.4 -1.6
Public debt (% GDP) 53.7 58.4 53.3 52.4

(f): forecast

 

SECTOR RISK ASSESSMENTS

 

STRENGTHS

  • High dependence on the United States economy; vulnerable to changes in the NAFTA agreement
  • Rising criminality rate
  • Infrastructure and education weaknesses
  • Oil sector undermined by years of underinvestment

WEAKNESSES

  • Dependence on the United States economy
  • Low oil and gas dominated government revenues
  • Infrastructure and education weaknesses
  • High crime rate 

RISK ASSESSMENT

Continued subdued growth in 2018

As in 2017, economic activity is likely to remain subdued in 2018. In 2017, GDP growth contracted in the third quarter (the weakest outcome since the fourth quarter of 2015), partly due to the effects of the damages caused by the two major earthquakes that hit Mexico City and nine of the country’s states. Oil activity and services were particularly affected. In 2018, activity is expected to benefit from reconstruction work and by the generally positive fundamentals of domestic demand. The latter should be driven by a relatively strong job market and by the expected deceleration of inflation (6.4% in 12 months accumulated until October 2017). Moreover, manufacturing output has also benefited from a strong US industrial activity.

However, some downside risks will weigh on activity. Investment growth is set to remain weak, due to the pending presidential elections and the doubts brought by the extension of the NAFTA renegotiation talks (to be concluded in early 2018). Despite the difficulties of reaching an agreement, the most likely scenario is that NAFTA will make only small changes to the current treaty. Monetary policy is expected to ease once uncertainties regarding the Mexican economy have ceased (probably during the second half of 2018).

 

Budget deficit is expected to remain sustainable

Fiscal policy has remained prudent, despite the slump in oil prices. Oil revenues account for roughly a third of government revenue. As such, the drop in its prices has prompted a tightening of the fiscal policy that has been well executed. Fiscal deficit improved to 2.6% of GDP in 2016, from 3.5% in 2015, and is set to reach 1.5% of GDP by the end of 2017 at the time of writing. As recognition of the efforts done, Standard & Poors raised its outlook on Mexico’s credit rating to stable from negative, arguing that it doesn’t expect a material worsening in the country’s debt levels. They praised Mexico’s prompt reaction to recent negative shocks, such as the depreciation of the currency in late 2016. They expect the country to be able to diminish the rapid pace of debt accumulation seen in previous years, helping to stabilize the government’s debt burden.

 

Presidential elections will ensure a heated political environment in the first half of 2018

Mexico will hold presidential elections in July 2018. Mexicans will have to choose the successor of unpopular President Enrique Peña Nieto (Institutional Revolutionary Party, PRI). After taking office in December 2012, President Peña Nieto signed an agreement with the two main opposition parties (PAN and PRD) to promote political cooperation. Called the “Pact of Mexico”, the agreement allowed the government to pass an ambitious constitutional reform agenda, including reforms for both energy and telecommunications. The reforms aimed to substantially boost the potential GDP. However, the results have been disappointing, and the GDP annual growth rate is expected to average at only 2.3% during President Peña Nieto’s five-year term.

However, the president’s feeble popularity is not only related to sluggish activity: the population is angry about widespread corruption and rising violence. The extension of the NAFTA talks may also disturb the PRI’s presidential campaign in 2018. This scenario creates opportunities for non-traditional candidates in the presidential elections. Although candidates have not yet been officially confirmed, late 2017 polls portray left-wing populist candidate Andrés Manuel López Obrador (MORENA party), also known as ALMO, as the frontrunner. In addition, the candidate Margarita Zavala resigned from the PAN after 35 years to run as an independent. This decision may split the PAN votes and, as the country does not have run-off, a more divided centre-right could benefit AMLO. However, a tactical vote cannot be ruled out: voters may choose to support the candidate who has the best chance of beating AMLO.

 

Last update : January 2018

PAYMENT

The common habits of payment in Mexico are basically by checks of wire transfer and in some special cases by credit card.

 

The process that involves the payment depends of the internal rules of the companies, in this country usually the  company’s request some documentation to proceed to made the payment, the documentation will be, as a example:

 

-The articles of incorporation of the company;

-The Tax identification named “Registro Federal de Contribuyentes”;

-The purchase order;

-the approbation of the purchase from the company;

-the proof of delivery and reception of the product and/or service;

- The invoices.

-The information of the bank account;

-The state of the bank account that will be made the payment.

 

Once that the buyer has all the correct information proceed to made the payment by a wire transfer or by check; the check can be post dated in the cases that the companies don’t have enough Money to make the payment; the process of payment will take approximately ten to fifteen days; and is common that the pay is made by a wire transfer.

 

a) COMMERCIAL DOCUMENTS.

 

In Mexico, this are the most common documents related to a commercial act:

 

-INVOICES: Is a commercial document issued by a seller to a buyer, indicated the quantities, products and agreed prices for products or services that the seller has provided the buyer.

 

In terms of debt and collection the invoices with its proper order and proof of the reacceptance of the merchandise proof the commercial relationship between the parties and in terms of the commercial law and agreements regulations the sale agreement  is completed with the object, in this case the product  or the service, and the price agreed by the parties; also in the cases that we do not have a written agreement; so the invoices are the perfect proof in lawsuit that the parties have a sale agreement and the buyer has a pending payment of the debt, that is object of the legal process.

 

-PROMISSORY NOTES:  (CERTIFICATE OF INDEBTEDNESS)is an unconditional promise in writing to pay a person a sum of Money. In Mexico that document usually is use to have a guarantee of payment from the buyer; and is sign by the legal representative of the debtor for an amount that is superior of the total amount of the debt.

 

-CHECKS- (CERTIFICATE OF INDEBTEDNESS): an order for payment of Money on demand, drawn on a banker, and expressed as being payable either to bearer or to (the order of) a named person.

 

Checks can be post dated; it means that the payment will be in the next days that the invoice was delivery to the seller.

 

 

DEBT AND COLLECTION

 

In the pre legal phase the process that is use here in Mexico is initiate with telephone contact, and a written letter send to the debtor in which we notify the debtor about amount of the debt and the intentions that the creditor has to negotiate the payment of the total amount.

 

The next step is visit the debtor personally; in the visit the person who made the managing of the collect, have a better perspective of the situation of the debtor because of the results of that visit we can see if the company still in business, if they have real states, assets, merchandise and rights that can be able to seize in the case that the legal process takes place; and the main purpose is, to know the real reason why they didn’t paid the invoices on time.

 

LEGAL PROCESS PHASE.

 

In terms of Commercial law, we have three types of process that we can initiate against the Debtor.

 

1. PRE-LEGAL PROCESS (MEDIOS PREPARATORIOS A JUICIO EJECUTIVO MERCANTIL).

 

This pre –legal process takes place when we have as a document to proof the pending payment and commercial relationship only INVOICES; we request to the judge the citation of the debtor or its legal representative; then we get the confession and acceptance from the debtor about the debt and the pending payment of it, once we have the confession before the judge as a executive document we are able to initiate legal process named Summary Business Proceeding.

 

This pre –legal process takes approximately two or three months.

 

 

 

2. Summary Business Proceeding.

 

This legal process takes place when we have a Certificate of Indebtedness (Promissory notes, checks, legal confession before the judge of the debtor or its legal representative); in this process when we initiate the lawsuit in the phase of citation we request to the debtor the payment of the total amount of the debt, if the debtor don’t have enough money, we may be able to seize some assets, it could be real states, merchandise, bank accounts, industrial property rights of its trademarks, etc., as a guarantee of the total amount of the debt.

 

Once we seize assets as a guarantee of the debt, the legal process continues until we get the final resolution from the judge, then if we don’t negotiate with the debtor or get the payment of the debt; we initiate the auction of the assets in order to get the recovery f the debt.

 

This legal process takes approximately six to eighteen months, it depends of the case.

 

3. Ordinary Business Proceeding.

 

This is the largest process that establishes our Commerce Law, it takes place when we don’t have any Certificate of Indebtedness, it means we only have a commercial agreement with invoices and all the documents that proof the commercial sale and relationship between the parties.

 

In this types of process we only be able to seizure assets to guarantee the total amount of the debt until we get final sentence that condemn the debtor to pay the total amount of the debt.

 

This legal process takes approximately one to two years.

 

4. Oral Proceeding.

 

This process takes place when the total amount of the debt does not exceed the amount of31,856.68 EUR, as the Ordinary Business Proceeding we only can seizure assets as a guarantee of the debt when we get final sentence that condemn the debtor to pay the total amount of the debt.

 

This process was established by the commerce law since January 11th, 2013 and it takes approximately four to six months.

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