Risks to Mexico's banking sector

When the official body charged with assessing the stability of Mexico's financial system (Consejo de Estabilidad del Sistema Financiero) issued its first report yesterday, it gave Mexico's financial system a clean bill of health. The Council (CESF) is presided over by Hacienda and its members include Banco de Mexico, the CNBV (National Banking and Securities Commission), the CNSF (National Insurance and Bond Commission), the Consar (National Commission for Retirement Savings), and the IPAB (Institute for the Protection of Savings in Banks).

The CESF, the latest in the string of anacronyms overseeing the financial system, did observe that "an abrupt reversion of capital flows toward Mexico" could have have "unfavorable impact" but that it would be limited, thanks to actions taken by the government in recent years. The CESF also stated that "the Mexican economy has been capable of absorbing in an orderly manner the elevated capital inflows it has received recently and without generating distortions in the principal financial variables". The CESF goes on to assure us that "(T)he underlying conditions of the Mexican economy are solid and growth perspectives, favorable."

Finally, the CESF concludes that although "the indebtedness of states and municipalities does not presently represent an important problem for Mexico's financial system, it is necessary to generate adequate incentives to improve transparency and promote prudent fiscal policies by states and municipalities." Amen.

Maps, maps and more maps

A fascinating series of maps based on the results of the 2010 US census, from changes in vacant housing units to population and more...

http://projects.nytimes.com/census/2010/map?nl=todaysheadlines&emc=thab1

Who holds a passport in the US?

The following picture shows passport ownership by state in the US. It's worth bearing in mind when assessing declarations on US foreign policy made by governors, senators and representatives...
http://www.creativeclass.com/creative_class/_wordpress/wp-content/uploads/2011/03/passport1.jpg

Fallout is not limited to Japan

A UN forecast projects that the radioactive plume from Japan could reach southern California by late tomorrow, Friday. For more, see the following article from the New York Times.

http://www.nytimes.com/2011/03/17/science/17plume.html?nl=todaysheadlines&emc=tha22

Investment

The gross fixed investment (GFI) figures for December were published today, ten weeks after the year ended. GFI rose a less than impressive 2.3% last year. While GDP (in current pesos) might have recovered its 2008 by the final quarter of 2100, GFI certainly wasn't driving the recovery. Last year's meager gain only barely began to make inroads against 2009's 10.1% fall. 

GFI in machinery and equipment began to recover from its 21.0% plunge in 2009, rising 4.3% last year. Construction, the other main component of GFI, gained 1.2% in 2010, after falling 2.3% in 2009.

GFI in machinery and equipment is divided into imported and nationally-produced machinery and equipment. Nationally-produced machinery and equipment climbed 13.3% in 2010, its fastest growth rate in seven years; in 2009, it dropped 18.7%. Imported machinery and equipment inched up a mere 0.8% in 2010 after plummeting 22.0% in 2009. It will be interesting to see if this is a one-time effect or presages a switch in sourcing.

Interview with Ambassador Davidow

On Tuesday I gave a "Tequila Talk" at the Institute of the Americas. (Yes, they did serve tequila.) To see the interview, just click on the following link:

http://www.iamericas.org/en/ioa-videos/Tequila-Talk-with-Deborah-Riner/0/35/1

Monetary policy...

As expected, Banco de Mexico held the Mexican reference rate steady at 4.50% last Friday, the level at which it has stood since August of 2009. Although the one-month Cete rate popped up to 4.22% in the weekly primary auction six days ago, it remains well below the reference rate. It's worth bearing in mind that the level of average weekly demand has declined noticeably as the one-month rate has hovered closer to 4.0% than 4.5%.