September 1, 2009
by Jonathan Roeder
The outlook is certainly grim for Mexico, in the midst of its worst recession in at least 14 years, and faces the threat of its biggest slump since the Great Depression. The central bank in late July slashed its 2009 GDP forecast to a 6.5%-7.5% contraction, from a 3.8%- 4.8% decline previously. With economic activity moribund, tax revenue is declining. But while non-oil tax income has always been weak in Mexico, oil production is falling too bad news for a government that regularly finances close to 40% of its budget with revenue from crude. Further complicating the scenario is a bloody war on drug traffickers that spooks tourists and investors. The out
Even if Mexico does survive its biggest test in over a decade, the recovery will be muted pending real reforms. There are numerous short term hazards to overcome.