Forecasts for this year range from 3.9 percent to an optimistic 5.5 percent

by Peter Davies

It’s official – Mexico recorded its worst economic contraction since the Great Depression in 2020 as the coronavirus pandemic and associated restrictions ravaged the economy.

GDP plunged 8.5 percent last year, according to final, revised data published Thursday by the national statistics agency Inegi.

The figure, which represents the worst economic result since GDP slumped more than 14 percent in 1932, is the same as the one published by Inegi in January based on preliminary data.

Mexico’s economy has now contracted during two consecutive years after GDP declined 0.1 percent in 2019.

It is the second time this century that Mexico has suffered back-to-back annual contractions as the economy also shrank in 2001 and 2002. Before that the most recent consecutive contractions were in 1982 and 1983 when Mexico was mired in a debt crisis.

President López Obrador took office in late 2018 promising average annual growth of 4 percent during his six-year term. That outcome now looks almost impossible to achieve, although GDP is forecast to bounce back strongly in 2021 – at least compared to the economic nightmare of 2020.

The president himself is predicting a 5 percent rebound this year, a forecast more optimistic than most but not beyond the realms of possibility.

The newspaper El Financiero reported that López Obrador’s prediction appears based on optimistic forecasts from institutions such as the rating agency Moody’s, which is forecasting 5.5 percent growth this year.

The International Monetary Fund and the World Bank are both more pessimistic, forecasting GDP expansion of 4.3 percent and 3.7 percent, respectively, while Citibanamex’s latest survey found a consensus for 3.9 percent growth.

All of those forecasts are more optimistic than the organizations’ previous predictions, indicating that there is growing confidence in the Mexican economy’s capacity to recover in 2021.

The strength of the recovery, however, will depend to a large extent on Mexico’s ability to inoculate the population against Covid-19, which remains a significant threat despite the pandemic waning considerably this month compared to January.

The government has agreements to secure more than 234 million vaccine doses – enough to inoculate the entire population – but has so far only received about 2.5 million doses and administered 1.9 million.

Another factor that could weigh on growth is the government’s plan to overhaul the electricity market to favor the state-owned Federal Electricity Commission. Several analysts have said that the proposed reform to the Electricity Industry Law will scare off foreign and domestic investment.

The bill is the 15th government initiative that undermines investor confidence, according to CEESP, a private sector think tank.

“All the changes being made in the sector are a very bad sign for future investment in the energy sector and especially in renewable energy,” said Ariane Ortiz-Bollin, assistant vice president-analyst at Moody’s.

“This will affect the supply of energy … in Mexico and will also affect economic growth in the medium term.”

Mexico News Daily

General calls them ‘ungoverned areas’ and one element behind migrant flows

by Mexico News Daily

President López Obrador has rejected a United States government claim that criminal organizations control “ungoverned areas” that account for about onethird of Mexico’s territory.

The commander of the United States Northern Command made the claim Tuesday at a U.S. Department of Defense press conference in response to a question about the situation on the Mexico-U.S. border. “I would say that [the  recent influx of migrants to the border] is a symptom of a broader problem that … manifested itself over the last year or so. …Two major hurricanes, Covid, instability created by transnational criminal organizations, all of these are indicators and reasons why people want to leave Central America, South America and Mexico to come to our nation,” General Glen D.

VanHerck said. “… Counternarcotics, migration, human trafficking, they’re all symptoms of transnational criminal organizations who are opeTodas las entradasrating oftentimes in ungoverned areas – 30% to 35% of Mexico – that is creating some of the things we’re dealing with at the border,” he said.

“And so, we need to take a whole-of-government look at that problem. I think it’s a national security imperative that we must look at.” At his regular news conference on Thursday, López Obrador dismissed the general’s territorial control claim as untrue. “But we respect the opinion of everyone,” he added. “We’re going to continue having good relations with the United States government, we’re not going to argue with the United States government. [President Joe Biden] is very respectful with us.”

According to the news magazine Proceso, it was the first time since the 2006-2012 presidency of Felipe Calderón that a high-ranking United States military leader publicly enunciated the scale of the Mexico’s drug trafficking and territorial control problem. However, the United States Drug Enforcement Administration (DEA) has acknowledged the sway cartels hold in Mexico, and the U.S. drug market.

“Mexican TCOs [transnational criminal organizations] are the greatest drug trafficking threat to the United States; they control most of the U.S. drug market and have established varied transportation routes, have advanced communications capabilities, and hold strong affiliations with criminal groups and gangs in the United States,” the DEA said in its 2020 National Drug Threat Assessment report.

It said that Mexican cartels continue to control lucrative smuggling corridors, primarily across the United States’ southwestern border. “The two largest organizations, the Sinaloa Cartel and the Jalisco New Generation Cartel (CJNG), show signs of expansion in Mexico, demonstrating their continued influence even compared to other Mexican TCOs,” the DEA said.

“These TCOs expand their criminal influence by engaging in business alliances with other organizations, including independent DTOs [drug trafficking organizations], and working in conjunction with transnational gangs, U.S.based street gangs, prison gangs, and Asian money laundering organizations.”

In addition to the Sinaloa Cartel and the CJNG, the DEA identified seven other Mexican criminal groups that have a significant drug trafficking impact on the United States. They are the Beltrán Leyva Organization, the Northeast Cartel/Los Zetas, the Guerreros Unidos, the Gulf Cartel, the Juárez Cartel/La Línea, the Familia Michoacana, and Los Rojos.

Mexico has long been considered to have a territorial control problem, especially in rural areas where there is evidence that cartels control large swathes of land in several states. Source: Reforma (sp), El Financiero (sp), Infobae (sp)