Mexico News- Feb.28

Posted by the generals on February 28, 2011, 11:47 am
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Subject: Mexico News DAILY February 28, 2011 LatinNews Daily - 28 February 2011 Mexico frets about speculative inflows Development: On 25 February, the Banco de México reported that financial inflows exceeded foreign direct investment (FDI) in 2010. Significance: This was the first time in 17 years that speculative inflows (which the central bank put at US$23.8bn) exceeded FDI (US$17.2bn). The inflow has contributed to a strengthening peso, which has appreciated 5.5% against the US dollar in the past 12 months. Key points: • Businessmen in Mexico fear that the peso strength is pricing them out of export markets. They note that while the peso appreciated, the Brazilian Real has barely budged against the dollar over the past 12 months, while the Chilean peso and the Peruvian Sol have both fallen marginally. • Local economists claim that the financial inflows have mostly gone to support domestic bank liquidity, so if the money were to be yanked out, some Mexican banks could face problems. • The other potential economic danger is that inflation could jump in Mexico if the capital flows reverse and the peso comes under pressure. • Historically, the final two years of the six-year Mexican presidential administrations have created economic problems which, either detonate before the elections (1982) or immediately after (1994). There are elections in July 2012.

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