Exclusive: Mexico's Videgaray defiant on growth and reforms

Exclusive: Mexico's Videgaray defiant on growth and reforms

Mexico Economy & Policy Corporate & Sovereign Strategy


Mexican finance minister Luis Videgaray
Source: SHCP

Mexico’s finance minister Luis Videgaray has hit back against mounting domestic criticism that the benefits of last year’s historic economic reforms are nowhere to be seen.

Domestic confidence remains fragile following a year in which growth significantly undershot official estimates, while consumers and businesses have started to feel the squeeze from tax reforms.

But in an exclusive interview with LatinFinance , Videgaray struck a defiant note, arguing that the reform agenda was a long-term effort to transform the economy. “We’re not doing these reforms to increase the growth rate of the next quarter or even the next year. These reforms are designed to have a long lasting effect for two years, three years, decades to come,” he said.

“The common denominator of these reforms is to increase our productivity to make us more competitive and therefore to increase the growth rate.”

The minister said that the energy reform will see $50 billion in fresh investment in the sector. He added that bids for contracts will start “early next year” in the first round of the energy reform. Overall, the reform package should add two percentage points to Mexico’s annual output by the end of the decade “so that we can have a sustainable growth rate around 5% [of GDP],” he said.

The government has come under increasing fire following disappointing results, with the economy growing just 1.3% in 2013, significantly below expectations. In recent weeks, Mexico has seen investment banks lowering estimates, moving closer to the lower end of the 3% to 4% range.

Videgaray however insisted that growth is on track to hit 3.9% this year. He added that Mexico’s economic fundamentals were stronger than at any point in recent years.
“The market is already treating Mexico a little differently, acknowledging that we have stronger fundamentals,” he said, noting that the country was better prepared to withstand turmoil hitting emerging markets. The gulf in perception between foreign and domestic observers of Mexico’s economy has also been an issue: record FDI went to the country last year but domestically the mood remains subdued.

Videgaray acknowledged that consumer confidence is “still low.” But he said: “We've already seen an improvement from last month. It's a process – we're going to have better growth this year. Along with growth and as we start to see the first effects of the reforms we expect that the environment will be much more positive.” LF

See also:

Volatility the “great challenge” for emerging markets, says Mexico’s Videgaray
Mexico shows resilience to pressures on global emerging markets, Mexican finance minister Luis Videgaray says

Investors impatient for Mexican progress, Banxico urges patience
Capital markets participants need to be patient to see the benefits of Mexico’s structural reforms, Ana Maria Aguilar, director of economic studies at Banco de Mexico, has said

Volaris has no plans to raise capital
Volaris said IPO was "a success", no need to raise more capital for the time being.