Bad economic news continues to stall Mexico’s growth and undermine government efforts to portray the country’s financial situation as robust as it heads toward a major expansion of the oil-exploration industry.
Oil exports and production fell in the first four months of the year, forcing Mexico for the first time to import more petroleum products from the United States than it exported northward, officials said.
Bank of America Merrill Lynch Global Research announced that Mexico was mired in recession in the first part of the year, news reports said, despite Mexican government claims to the contrary.
Finance Minister Luis Videgaray acknowledged that growth was slower than the government had predicted but rejected the characterization of a recession. He cited the government’s statistics agency as saying the economy was merely stagnant.
“So the problem is that Mexico is growing at a lower rate than it should be, and continues to grow at the rates it has been growing, on average, for the last three decades,” Videgaray told journalists.
“Mexico is growing,” he said, but “it is definitely not the growth that Mexico needs.… Our rhythm of growth must accelerate.”
The government has been forced repeatedly to dial down its growth predictions, with the economy generally on an underperforming pace for years.
The 18-month-old government of President Enrique Peña Nieto had predicted growth this year at 2.7%; instead, the economy has grown by 1.8%, Videgaray said. At one point, the government predicted rates of 5% or 6%, closer to those in some of Latin America’s more prosperous economies, such as Chile.
The immediate future does not seem particularly bright, experts said.
To reach growth of 2.7%, the gross domestic product would have to soar 3% each of the following three quarters, said Juan Pablo Castañon, president of an association of business executives representing 36,000 Mexican firms.
“We do not see that as possible,” Castañon said Friday in a meeting with the international news media.
Because Mexico’s economy is so intertwined with that of the United States, it is still recovering from its northern neighbor’s financial downturn. In addition, the Peña Nieto government has been widely criticized for failing to spend money in its first months, contributing to sluggishness.
Videgaray and other government officials insist that a battery of major reforms, including the opening of the oil and gas industry to foreign investment, is essential to improving the picture.
The Mexican Congress is about to debate so-called secondary legislation that will lay down the rules for opening the energy sector. Already, Peña Nieto has managed to change the constitution to allow this. Mexico’s state oil-and-gas monopoly has floundered in its exploration efforts and is badly in need of outside expertise to recover hard-to-reach deep-water deposits and other resources.
“The idea is to change the rules of the game,” Virgilio Andrade, head of a government transparency organization, told a television interviewer. “We need more players in the energy and telecommunications sector.”
The government is also pushing through reforms in the telecommunications industry, designed, in theory, to increase competition in a heavily monopolized business.
“The good news for Mexico is that fundamental changes are being made … changes, reforms that will permit us to speed up our growth in the years and decades to come,” Videgaray said.