A challenging external environment, including global oil slump, a tightening of monetary policy in the United States, and a slowdown of growth perspectives in emerging market economies (like China, Brazil, and Russia) has significantly battered Mexican peso causing the country to reduce government spending. Pablo Soria de Lachica, a published expert in international trading and business analyst, gives insights into Mexico’s budget plans for the upcoming fiscal year.

When oil prices tumbled in 2014, Mexican government decided to open up its state-run oil and gas industry to private sector investment hoping to encourage foreign expertise and capital flow to develop new fields of crude oil and gas. Many believed the new reforms to stimulate liberalization of the petroleum industry and boost the country’s economy by doubling the share of foreign investment in Mexico. However, earlier this year the finance ministry forecast the energy production would remarkably reduce in 2017, adding to considerable cutback on financing of over 50 government projects in this year’s budget. As seen from the annual budget report released in September, the initial 132 billion pesos spending cut was to impact major programs in the area of infrastructure, water treatment, and agriculture. With economic turbulence continuing to upset global markets, Latin America’s second largest economy estimates an additional $10 billion budget cut in 2017. Overall, the country will see a fairly slower economic growth, estimated at 2.6 percent to 3.6 percent next year, down from the 3.5 percent to 4.5 percent range forecast for the current year.

Amid modest economic growth, lowered oil output and dip in oil prices, Mexico has recently been hit by yet another global challenge. In the wake of Britain’s vote to leave the European Union, Mexico announced $1.68 billion cut to reduce its financing needs. As international markets turn more volatile, Pablo Soria de Lachica warns that Mexico will continue to limit government spending in order to meet its zero deficit target. The move is largely informed by a decision to boost the national currency defense, reduce risks of fueling inflation and increase the country’s capacity to respond to negative external shocks. Mexican peso is one of the most traded emerging-market currencies. Traders use peso to hedge against other market uncertainties, because it trades all day, has high volumes and is cheap to borrow. Consequently, it becomes very vulnerable to market volatilities, once investors decide to flee riskier assets. For that reason, the Mexican government’s recent resolution to implement budget cuts is welcome news for foreign investors, who own 60 percent of the country’s fixed-rate government peso bonds.

Pablo Soria de Lachica is an acclaimed international broker and self-taught Forex authority, currently collaborating with Kartoshka, a global company at the forefront of the latest technologies in sales, telemarketing, and customer support. An author of instructional books on investment principles and techniques, he oversees multiples of international transactions every year, offering his clients an impressive range of trading options combined with competitive terms that meet the needs of new investors.

 

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Pablo Soria De Lachica — Outlines Consequences of Mexican Loan to Pemex: http://finance.yahoo.com/news/pablo-soria-lachica-outlines-consequences-034249342.html

Pablo Soria de Lachica – Predicts Impact of China Crisis on World Economy: http://www.marketwatch.com/story/pablo-soria-de-lachica—predicts-impact-of-china-crisis-on-world-economy-2015-10-15