manattjones – mexico’s economic and political outlook · …non-oil exports and private...

ManattJones – Mexico’s Economic and Political Outlook

August 2015

1

•  Growth and Main Drivers

•  Business Opportunities

•  Monetary and Fiscal Policies

•  Regional Growth and Poverty

2

I. Economic Outlook

The Mexican economy is still growing at less than 3% annually…

According to the most recent poll conducted by Mexico’s Central Bank, private sector specialists expect 2.53% growth in 2015. They attribute the slow growth to: •  Crime, •  A weak global economy, •  Declining oil production, •  International financial volatility, •  Low oil prices, and •  A sluggish internal market.

Business environment: 58% of experts think it will improve in the coming 6 months. This percentage was about 90% one year ago. Investing: 41% of experts believe it is a good time to invest (vs. 47% in June); 56% are skeptical (vs. 56% in June).

Source: Banco de México 3

- 2.5

…manufacturing is consistently driving industrial growth, construction shows signs of strong recovery…

During the first quarter of 2015, Mexican GDP registered an annual growth of 2.5% in real terms. Seasonally adjusted figures show that GDP increased at a quarterly rate of 0.4%:

•  Agricultural production increased at an annual rate of 6.8%. The seasonally adjusted increase is 3.0% compared with the previous quarter •  Industrial production recorded an annual increase of 1.4%* mining activities (including oil) decreased by 5% annually. Seasonally adjusted figures

indicate that industrial production slowed to a quarterly rate of 0.2% •  The range of services expanded at an annual rate of 2.9%** by eliminating the seasonal effect, services grew at a quarterly rate of 0.5%

4 *Mainly from the increased production of transportation equipment; building; industry food; and manufacture of computer equipment, communication, metering and other electronic components. **Driven by performance of trade activities; mass media information; real estate and rent; and the legislative, governmental activities of law enforcement agencies.

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Quarterly)GDP))growth)by)sectors))201382015)

GDP# ##Agriculture# ##Industrial# ##Services#

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Quarterly)GDP)growth,)Industrial)Sector))2013=2015)

##Industrial# ####Mining# ####Elec8ricity# ####Construc8on# ####Manufacturing#

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Quarterly)GDP)growth,)Services)Sector))2013;2015)

##Services# ####Commerce# ####Transporta:on# ####Media#

####Financial#services# ####Real#estate# ####Rest#

…non-oil exports and private investment have powered economic activity…

•  Aggregate supply increased by 3.5% due to the high growth of imports following a recent trend (0.5% after seasonal adjustment).

•  Growth of exports (12.1%) and private investment (6.3%) were the main factors behind aggregate demand increase. Non-oil exports (12.7%), and machinery and equipment investment (8.7%) were the main drivers of growth.

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I" II" III" IV" I" II" III" IV" I"

Consump(on)Quarterly)Economic)Growth)(%))2013>2015)

""Consump2on" """"Private" """"Public"

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15$

I$ II$ III$ IV$ I$ II$ III$ IV$ I$

Investment(Quaterly(Economic(Growth((%)(2013=2015(

Investment$ $$$$Private$ $$$$Public$

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Quarterly)Economic)Growth)(%))2013:2015)

Demand# ##Consump6on# Investment# ##Exports# Supply# ##Imports# ##GDP#

…and Mexican non-oil exports have registered a robust growth attributed to the dynamism of the American market.

Manufactured Exports by Destination

Index

Oil and Non-oil Exports Index

United States Non-U.S.

Non-oil exports

Oil Exports

6 Source: Banco de México and INEGI

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

Jan-

07

May

-07

Sep

-07

Jan-

08

May

-08

Sep

-08

Jan-

09

May

-09

Sep

-09

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

Jan-

15

May

-15

Oil vs. Non-Oil Exports (2008=100)

Oil exports Non-Oil Exports

0"

20"

40"

60"

80"

100"

120"

140"

Jan+13"

Feb+13"

Mar+13"

Apr+13"

May+13"

Jun+13"

Jul+13"

Aug+13"

Sep+13"

Oct+13"

Nov+13"

Dec+13"

Jan+14"

Feb+14"

Mar+14"

Apr+14"

May+14"

Jun+14"

Jul+14"

Aug+14"

Sep+14"

Oct+14"

Nov+14"

Dec+14"

Jan+15"

Feb+15"

Mar+15"

Apr+15"

May+15"

Jun+15"

Total" Istmo" Mayan" Olmecan"

Export Oil Price (USD)

The automotive industry will remain an engine of Mexican growth for years to come.

•  According to the Mexican Association of Automobile Manufactures, the industry will continue an aggressive path of increasing installed capacity for at least the next four years

•  By 2018, Mexico will be capable of producing an estimated extra million vehicles a year

7

Opportunities: A New Law for the Development of the Merchant Marine and Naval Industry in Mexico?

•  The Chamber of Deputies (the lower house of Congress) recently passed the Law for the Development of the Merchant Marine and Naval Industry. It has now been turned over to the Senate for review, debate and approval.

•  The new law aims to provide special instruments to promote and incentivize the Mexican merchant marine industry, especially for vessels engaged in international trade and shipyards operating within Mexican territory.

•  Of special importance is the stipulation that Mexican vessels and foreign-flagged vessels registered in the Folio Especial will have preference in respect of all government cargo.

•  Key provision: creation of a Committee in Support of the Merchant Marine and Naval Industry, whose private sector participants will participate in policy formation.

8

Source: Info-Transportes

The Mexican Peso is losing ground against the U.S. dollar notwithstanding the country’s robust macro fundamentals…

The Mexican peso continued its slide toward 17 per 1 U.S. dollar, breaking a psychological barrier of 16.5 per USD on July 23. This seems surprising given Mexico’s low inflation, healthy and stable debt profile, and relatively strong economy (the strongest among Latin America’s seven largest economies). Mexico’s liquid currency market in the context of global currency market fluctuations may explain the peso’s recent depreciation. As the date of the Fed’s coming interest rate increase approaches, traders want to lessen their exposure to emergency markets, so investors may be selling the more liquid Mexican peso. The Bank of Mexico has taken advantage of low inflation to prioritize growth over the exchange rate, it being reluctant to raise rates. It is expected to raise rates in tandem with the Fed. Exchange rate expectations by the end of 2015: 15.60 pesos per USD (vs. 15.25 in June), according to the latest expert’s poll by Banco de Mexico.

Source: Banco de México

9

…reflected in Mexico’s risk stability, especially as compared to other important Latin American economies.

•  Mexico's country risk* is a few points above the level reported at the end of 2014, following an stable trend with marginal increases.

•  Mexico's country risk index closed 2014 at 182

basis points. Its record low was 71 points on June 1, 2007, and its maximum was 624 basis points, reached on October 24, 2008.

10

*Country risk is the difference between the yield on the U.S. dollar-denominated public debt of an emerging nation and that of U.S. Treasury bonds, considered free of risk.

0

200

400

600

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Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Emerging Market Bond Index (EMBI)

Argentina

Brasil

México

600

340 203

Inflation is at record-low levels due to lower prices of services, regardless of tax increases…


Underlying Variability Interval

Non-Underlying

Food, Drinks and Tabaco

Merchandise

Non-Food Merchandise

Services not including education and housing

Education

Services

Housing

Merchandise Services

11

Inflation: General, Underlying and Non-Underlying

…but interest rates have been increasingly volatile, even as they remain near historic lows.

Source: Banco de México and U.S. Treasury Department

Mexico United States •  Factors that have generated increasing interest rate volatility in 2015:

•  Changing expectations about the pace of reform implementation, with education as a key proxy for other reforms

•  Electoral process •  Uncertainty about the

Fed’s interest rate policy

•  Changing market sensitivity reflecting the Greek crisis and Chinese stock market developments

12

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

June-11 April-12 February-13 December-13 October-14 August-15

U.S. Treasury Bond Yields

1 Mo

3 Mo

6 Mo

1 Yr

2 Yr

3 Yr

5 Yr

7 Yr

10 Yr

20 Yr

30 Yr 2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11/18/2010 01/17/2012 03/17/2013 05/16/2014 07/15/2015

Mexican Treasury Bonds

28 days 91 days 182 days

364 days 20 years 30 years

With unprecedentedly high levels of international reserves, Mexico is ready to meet any contingency.

Factors supporting a relatively stable market value for the Mexican peso in comparison with currencies of other emerging economies: •  Access to a Flexible Credit Line with the IMF of

USD 70 billion

•  December 2014: daily auctions of up to 200 million dollars at a minimum exchange rate equivalent to the exchange rate of the FIX previous business day plus 1.5 percent

•  March 2015: from 11 March, daily auctions of USD 52 million without minimum price

•  July 2015: From July 31, daily auctions of USD 200 million at the exchange rate of the FIX previous business day plus 1 percent


International Reserves

IMF Flexible Credit Line

13

On the fiscal side, the January-May public sector deficit surpassed the same period in 2014…

•  Two phenomena explain the increase in the deficit:

•  Contributions to the stabilization funds only in January (increasing spending)*

•  Low levels of oil income, which do not include hedging benefits to be received by the end of the year

•  Net domestic debt of the public sector was 4,764 bop (USD 307.4 billion**), 40.3 billion pesos (USD 2.6 billion) lower than the amount recorded at the end of 2014

•  Net external debt of the public sector was USD 158.6 billion, 13 billion dollars higher than in 2014

Source: Ministry of Finance (SHCP)

Income Spending

14

*Stabilization funds were established by the recent energy reform to allow the government to save for long-term objectives **Assuming 15.5 pesos per USD

…to strengthen its public finances, the federal government is implementing a new budgeting model.

•  On June 30, the Finance Ministry presented a zero-based budget structure to the Chamber of Deputies to guide their drafting of the 2016 budget to break historical inertia in the budgeted spending.

•  The new structure seeks not to reduce spending but to redirect it to government priorities.

•  It proposes a 22.4% reduction in programs by eliminating duplications and program reallocations. The main objectives of the zero-based budget are to: a)  Improve spending efficiency b)  Reduce government’s operational costs c)  Align resources with the National Development Plan d)  Prioritize social and productive programs e)  Promote infrastructure investment

15

Meager growth is reflected in increasing poverty levels, creating pressure on the government.

•  The National Council for the Evaluation of the Social Development Policy (CONEVAL) reported on July 23 that 55.3 million people (46.2% of the population) lived in poverty in 2014* an increase of 2 million with respect to 2012.

•  Extreme poverty declined slightly though, from 11.5 million people in 2012 to 11.4 million in 2014 (9.5% of the population).

16

Poverty and extreme poverty with respect to disposable income 1992-2014

(Percentage of population)

Source: CONEVAL *Measured by disposable income and access to basic needs

Regional pockets of growth have been able to reduce poverty significantly.

•  Poverty and extreme poverty increased in eight states with modes t g rowth : Mo re los , Veracruz, Oaxaca, State of Mexico, Sinaloa, Coahui la , Hidalgo and Baja California Sur.

•  I n con t ras t , pover ty was significantly reduced in states with high growth such as Aguascal ientes, Chihuahua, Querétaro and Quintana Roo reflecting:

•  Poverty has a regional element

•  Main engine to reduce poverty is economic activity rather than social policy

17 Source: CONEVAL and INEGI

2012 2014 2012 2014Aguascalientes 37.8 34.8 -3.0 6.94 Morelos 45.5 52.3 6.8 2.15Baja California 30.2 28.6 -1.6 1.70 Nayarit 47.6 40.5 -7.1 3.34

Baja California Sur 30.1 30.3 0.2 1.57 Nuevo León 23.2 20.4 -2.8 3.29

Campeche 44.7 43.6 -1.1 -1.63 Oaxaca 61.9 66.8 4.9 2.37Coahuila 27.9 30.2 2.3 2.92 Puebla 64.5 64.5 0.0 2.32Colima 34.4 34.3 -0.1 2.53 Querétaro 36.9 34.2 -2.7 5.52

Chiapas 74.7 76.2 1.5 1.24 Quintana Roo 38.8 35.9 -2.9 4.82

Chihuahua 35.3 34.4 -0.9 4.80 San Luis Potosí 50.5 49.1 -1.4 2.84

Distrito Federal 28.9 28.4 -0.5 2.28 Sinaloa 36.3 39.4 3.1 2.66Durango 50.1 43.5 -6.6 2.53 Sonora 29.1 29.4 0.3 3.35Guanajato 44.5 46.6 2.1 4.95 Tabasco 49.7 49.6 -0.1 0.83

Guerrero 69.7 65.2 -4.5 2.67 Tamaulipas 38.4 37.9 -0.5 2.31

Hidalgo 52.8 54.3 1.5 2.64 Tlaxcala 57.9 58.9 1.0 2.14Jalisco 39.8 35.4 -4.4 2.94 Veracruz 52.6 58 5.4 1.89México 54.4 49.6 -4.8 1.86 Yucatán 48.9 45.9 -3.0 2.67Michoacán 54.4 59.2 4.8 3.53 Zacatecas 54.2 52.3 -1.9 3.36

National 45.5 46.2 0.7 2.79

State StatePoverty (%) Average Growth Rate 2012-2014

Poverty (%) Average Growth Rate 2012-2014

Change (pp) Change (pp)

•  Electoral Outcomes

•  Key Headlines of the Campaign

•  Challenges and Opportunities for the Peña Nieto

Administration

18

II. Political Outlook

June’s midterm election reflects increasing electoral competition… ü  PRI (ruling party) and PVEM Green Party,

(allied to PRI) held their majority in the Chamber of Deputies

ü  PAN (center-right party) down to 21% from 25.9% in 2012

ü  PRD (traditional left party) collapsed to 10.9% from 19.4% with Morena (nascent left party founded by former presidential candidate Andrés Manuel López Obrador) achieving 8.37%

ü  The Pacto por México parties (PRI/PVEM PAN and PRD) lose 14 percentage points to smaller parties

ü  Null voting stable at 5%

ü  Although fragmented, the left grew 3 percentage points, achieving a share of 30% among five medium and small parties

58.5%

48.7%

38.0% 38.2% 36.8%

28.2%

36.9% 34.0%

29.2%

16.8%

25.9% 25.8% 36.7% 30.7%

33.4%

28.0% 25.4%

21.0%

7.9%

16.6% 24.9% 18.9% 17.6%

29.0%

12.2%

19.4%

10.9%

1.4% 1.4% 3.8% 4.0%

0.0% 0.0%

6.7% 6.1% 6.9%

1991 1994 1997 2000 2003 2006 2009 2012 2015

National Votes for Deputies

PRI PAN PRD PVEM

19

…but a PRI-based alliance is expected to maintain a majority in the Chamber of Representatives

Working Majorities:*

•  PRI+PVEM: ~250

•  PRI+PVEM+PANAL: ~260

Possible Legislative Agenda:

•  Zero-Based Budget: Once approved, the 2016 Budget will not be modified to include additional spending. Additionally, programs with similar objectives will be combined or terminated.

•  Anticorruption System Implementation: A constitutional reform to expand transparency and the anticorruption agency has been strengthened. Never the less , spec i f i c gu ide l i nes fo r the implemenation are pending.

•  State Police Forces: Presidential initiative to reform the police to replace municipal corps with state police forces.

Seats 2012 2015 Change PRI 212 203 -9 PAN 114 108 -6 PRD 104 56 -48 MORENA 0 35 35 PVEM 29 47 18 MC 16 26 10 PANAL 10 10 0 ES 0 8 8 PT 15 6 -9 Humanist Party

0 0 0

Independent 0 1 1 *Final results pending legal challenges under analysis by the Federal Electoral Court. Some marginal changes may apply

20

Key Headlines from the Campaign (1/2)

•  First independent governor elected: Jaime “El Bronco” Rodriguez, former mayor of García and previously a

member of the PRI for 33 years, won the governorship of Nuevo León, an industrial powerhouse in northern

Mexico. He promised to fight crime and end corruption in political parties. Advised by former governor

Fernando Elizondo, “El Bronco” still must present his plan for government. Responding to his victory, Veracruz,

Chihuahua, Tamaulipas, Durango and Sinaloa passed laws limiting independent candidates in future elections.

Quintana Roo and Coahuila are considering similar action even as the Veracruz law is being challenged in

court.

•  Campaign finance irregularities: Most parties in the election were fined for violating campaign finance laws, but

the actions of the Green Party (PVME) were particularly egregious, resulting in over $20 million in fines.

Although campaign finance regulations require that all candidates report their spending, it is not clear that the

INE (National Electoral Institute) has the capacity to verify the income sources or uncover nonreported

spending. 21

Key Headlines from the Campaign (2/2)

•  Electoral boycott that was not: Although widely covered in the news, efforts led by the CNTE, the rebellious

teacher union, to sabotage the election had little impact at a national level. The boycott and electoral

violence were mostly concentrated in the state of Guerrero.

•  Organized crime: During the campaign, Mexico registered the killing of 21 politicians, and about 20 more

candidates withdrew from the race in fear of their lives. These cases were concentrated in a handful of

states like Guerrero where organized crime is determined to control local government.

•  Two small parties lost their registration: The Worker’s Party (PT) and Humanist Party didn’t reach the 3%

threshold needed to maintain their registration as national political parties. They will lose public funding, and

their nominally elected deputies and sitting senators will have caucuses with other parties.

22

Challenges and Opportunities for Last Three Years of Peña Nieto’s Term (1/2) Postelection environment is challenging, to say the least:

•  Enrique Peña Nieto’s approval rate in July was 39%, just below the continent’s current average of 42%, including the United States and Canada (Source: Consulta Mitofsky). The latest poll by Reforma newspaper on July 31 gave him a 34% approval rate.

•  Early presidential race? With EPN’s political capital deteriorated by recent developments, PRI presidential politicians are quietly positioning themselves, and PRI politicians are beginning to weigh with whom they should form an alliance. There is no clear front-runner. Senator Manlio Fabio Beltrones, an outsider of the President’s network of close allies, will be the next president of the party.

Main challenges: •  EPN capacity to lead diminished: Joaquín “El Chapo” Guzmán’s July 11 prison break severely undermined

confidence and the credibility of the EPN government according to polls, effectively erasing any increase in political capital the administration might have obtained from the midterm election results.

•  Limited ability to generate consensus in the legislative arena: •  PAN (center-right) smells blood in the water. They are unlikely to support any legislation that does not

advance the party’s presidential ambitions in 2018, assuming the party’s two warring factions can remain unified. Undergoing internal elections may increase current leader’s (Gustavo Madero) hopes for 2018.

•  PRD’s (left) poor electoral performance undermined the position of party leaders. When combined with the gains of the Morena party to their left, this will dramatically limit the PRD’s willingness to cooperate with the EPN government. PRD is also starting an internal process to replace Carlos Navarrete after a very short and unfruitful time as president of the party. 23

Challenges and Opportunities for Last Three Years of Peña Nieto’s Term (2/2) Opportunities:

•  Prove his capacity to implement economic reforms: •  Albeit with a disappointing outcome, the auction process surrounding the first phase of the

Round One oil field licensing process was conducted effectively and sent investors the right signals

•  Recent crackdown on dissident teachers (the CNTE) in Oaxaca suggests that EPN’s government is serious about implementing education reform

•  Demonstrate his responsiveness to criticism- cabinet changes (rather than reshuffle): Although it can be interpreted as a cosmetic measure, moving key pieces can change the perception of an unyielding president committed more to results than to his network of close allies

•  Show he is serious about tackling corruption: Going after high-profile politicians involved in corruption, especially from PRI, would help EPN regain some credibility

24

•  Near-Term Risk Indicators

•  Selected Economic Indicators: Mexico and the

United States

•  Upcoming Events

25

III. Snapshots

Near-term Risk Indicators

•  Domestic risks: •  Impact on national governance of President Peña Nieto’s weakened political position •  Potential unstable political transition in Nuevo León, weakening governance in an important state and

increasing tension between states and the central government •  Likely increase of localized violence following Joaquín “El Chapo” Guzmán’s prison escape •  Protest and possible conflict following government attack on radical teacher union (CNTE) power base •  Disappointing results in remaining Round One oil field auctions, reducing expected investment for 2016 •  Sustained budget deficits and increasing public debt due to persistently low oil revenues and insufficient

cuts to the 2016 budget

•  External risks: •  Rate of U.S. economic recovery, especially in manufacturing •  International financial market instability, driven by Chinese market turmoil and Greek-EU debt restructuring

negotiations •  Low and potentially lower oil prices •  Federal Reserve’s monetary policy decisions 26

Selected Economic Indicators by July 31 Most recent 2015 accumulated change

Economic Activity Fiscal Deficit (Jun/15) -161.6 billion pesos +48 (Jan-Jun)*

Production of vehicles (Jun/15) 306,694 +8.1% (Ene-Jun)* Fixed Gross Investment (Apr/15) - +5.3% (Jan-Apr)*

Construction Sector Production - +2.4% (Jan-Apr)* Mining production - +0.4% (Jan-Apr)*

External Sector Remittances USD 2.198 billion +3.6% (Jan-May)*

Mexican Export Mix (31 Jul/2015) USD 45.63 +0.40% (USD +1.18) Financial Markets

Private to private borrowing 2.832 trillion pesos +4.5% (Dic 14–Jun 15) International Reserves USD 192.403 billion USD -833 million

Mexican Treasury Bonds (Cetes 28 days) 3.01% +0.27 percentage points Mexican Stock Market Index 44,249.49 units +2.56%

Exchange Rate 16.2364 $/pesos +1.495 pesos (+10.1%)

Country Risk-JP Morgan EMBI+ 203 points +21 points Inflation (Jul 15) 2.76% -0.03%

Sources: Ministry of Finance, Banco de México, INEGI, PEMEX, JP Morgan

27 *Variation with respect to same period of previous year

GDP (real growth %) Inflation (%, Dec/Dec) Current Account (GDP%)

2015 2016 2015 2016 2015 2016 Banamex 2.5 3.5 2.87 3.64 -2.5 -2.3

Encuesta-Banamex (Mean) 2.60 3.2 2.9 3.44 -- -- Bancomer 2.5 2.7 2.60 3.29 -1.8 -2

IMF 3 3.3 3.1 3 -2.2 -2.2 World Bank 2.6 3.8 -- -- -2.4 -2.2

OCDE 2.9 3.5 3.5 3.1 -2 -2.1 Banco de México Poll 2.60 3.20 2.91 3.36 -- --

Banco de México 2.0-3.0 2.5-3.5 Below 3.00 Close to 3.00

-2.3 -2.3

Ministry of Finance (SHCP) 2.2-3.2 3.3-4.3 3.00 3.00 -2.3 -2.4 Sources: Ministry of Finance, Banco de México, IMF, JP Morgan, World Bank, Bancomer

Mexico: Expectations about Growth, Inflation and Current Account Deficit by July 31

28

United States: Expectations about Growth, Inflation and Public Deficit by July 31

Most recent Change from previous report 2015 accumulated change

House Prices FHFA (May) - +0.4% +5.7% Sales of Existing Houses – St. Louis Fed

(Jun) 5.49 million +3.2% +9.6%

National Activity – Chicago Fed (Jun) +0.08 points +0.16 points - Leading Indicators- The Conference Board

(Jun) - +0.6% Forward

+0.2% quotient +0.7% lagging -

Unemployment Insurance Claims (Jul 18) 255,000 -9.2% (-26mil) --

Bloomberg Consumer Index 40.5 points -2.7 points Manufacturing Activity – Kansas City Fed -7 points +2 points

New Houses Sales 482,000 -11.7%

Sources: Federal Housing Finance Agency, St. Louis Fed, The Conference Board, U.S. Labor Department, Bloomberg Business, Kansas City Fed, U.S. Department of Commerce

29

United States: Expectations about Growth, Inflation and Public Deficit by July 31

GDP (real growth %) Inflation (%, Dec/Dec) Public Deficit (GDP%)

2015 2016 2015 2016 2015 2016 Budget Congressional Office 4.2% 4.6% 1.4% 1.9% 2.79% 2.5%

Federal Reserve 1.8%-2% 2.4%-2.7% 0.6%-0.8% 1.7%-1.9%

-- --

Treasury Department 3.3% 3.1% 0.2% 1.4% 2.1% (accum)

2.63%

Sources: Budget Congressional Office, Federal Reserve, U.S. Treasury Department

30

Gubernatorial Inauguration Calendar

States Governor’s Inauguration Baja California Sur September 10, 2015

Sonora September 13, 2015 Campeche September 16, 2015 San Luis Potosí September 26, 2015 Michoacán October 1, 2015 Querétaro October 1, 2015 Nuevo León October 4, 2015 Guerrero October 27, 2015 Colima November 1, 2015

31

Round One Bid Calendar, First Auction: Shallow Water Exploratory Fields

32 Source: Ministry of Energy

Round One Bid Calendar, Second Auction: Shallow Water Production Fields


Round One Bid Calendar, Third Auction: Onshore Fields


Upcoming Events

2015 2015 Aug Sep

Banco de México Quarterly Report 8/12/2015

Banco de México will announce monetary policy 8/26/2015

Chamber of Depu@es Inaugura@on and State of the Union 9/1/2015

Elected Governor of Baja California Sur takes office 9/10/2015

Elected Governor of Sonora takes office 9/13/2015

Elected Governor of Campeche takes office 9/16/2015

Elected Governor of San Luis de Potosí takes office 9/26/2015

8/27/2015 Federal Open Market CommiQee

35

Contact Info

For further information about this presentation, please contact: Dr. José Carlos Rodríguez Pueblita ManattJones Global Strategies Campos Elíseos 385, Torre B, Piso 8 Col. Chapultepec Polanco México, D.F., C.P. 11560, México

Off. +52 (55) 5281-8296 +52 (55) 5280-5609 +52 (55) 5281-2928 [email protected] www.manattjones.com

Dr. Rodríguez Pueblita is a Mexico City-based Senior Director with ManattJones Global Strategies, where he leads the firm's Financial Services consulting practice. He has extensive experience in the areas of finance, economic analysis and development, and policy across a range of industries in both the private and public sectors. Before joining ManattJones, Dr. Rodríguez Pueblita was a senior official at the Ministry of Finance in Mexico. He served as the Director General of programs evaluation at the Ministry of Social Development, where he designed and implemented impact evaluations and was part of the core team that handled the AH1N1 influenza crisis in 2009. He was Senior Advisor to the Secretary of Finance, where he handled issues related to fiscal, health and agricultural reforms as well as health care spending and financing, cost analysis and premium estimation. In 2014, the Secretary assigned Dr. Rodríguez Pueblita to lead the federal government’s efforts to restore fiscal integrity in the State of Michoacán, first as a high-ranking federal envoy and later as the state’s Secretary of Finance and Management. As Secretary, Dr. Rodríguez Pueblita focused on debt restructuring and refinancing, budget planning, cash management, risk analysis and transparency. In the private sector, Dr. Rodríguez Pueblita has worked at Protego Asesores (now Evercore), McKinsey & Co., and Cuasar Capital in the financial and public sector practices. He has collaborated as senior consultant with the World Bank and the Inter-American Development Bank on projects in Latin America, Asia and Africa. Dr. Rodríguez Pueblita has been an adjunct lecturer at the Harvard Kennedy School of Government and a research fellow at Harvard’s Center for International Development, teaching quantitative methods, public finance and development policy. He has also lectured at the Instituto Tecnológico Autonómo de México (ITAM) on the topics of institutional economics, political economy and macroeconomics. See his profile at https://www.manatt.com/Jose-Carlos-Pueblita.aspx

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About ManattJones Global Strategies

ManattJones Global Strategies LLC (ManattJones or MJGS) provides strategic business advice and advocacy to companies operating in, investing in, or exporting to Mexico and the main markets in the Americas. The firm helps clients identify and take advantage of opportunities and address strategic, political, and market access challenges. With years of experience, we offer unmatched regional knowledge and experience and a deep network of relationships with senior business, government, and civic leaders. ManattJones also assists non-U.S. companies interested in doing business or investing in the United States.

Our Chairman, Ambassador James R. Jones, and our President, Michael C. Camuñez, lead our firm. Ambassador Jones is a past United States Ambassador to Mexico, who participated in the negotiation, passage, and implementation of NAFTA. He also helped formulate the United States government’s rescue package for Mexico during the Peso crisis that prevented bankruptcy of the Mexican government. A former Member of Congress, and International President of a Fortune 500 company, Ambassador Jones has remained deeply involved in and connected to Mexico since leaving his post as ambassador.

Mr. Camuñez served as Special Counsel to the President at the White House and, most recently, as Assistant Secretary of Commerce in the International Trade Administration, where he led the Market Access and Compliance Division and was one of the Obama Administration’s top trade officials. While at the Department of Commerce, he managed a global portfolio and was deeply engaged in managing U.S.-Mexico economic and trade relations. He led numerous trade and policy missions to Mexico, and was the principal proponent and architect of the U.S.-Mexico High Level Economic Dialogue established by Presidents Obama and Peña Nieto in 2013.

ManattJones is a consulting subsidiary of Manatt, Phelps & Phillips, LLP, a leading United States-based law firm. ManattJones’ headquarters are in Washington, D.C., and the firm has offices in Los Angeles, Mexico City and Monterrey (Nuevo León).

For more information visit our website: https://www.manatt.com/ManattJonesGlobalStrategies.aspx

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manattjones – mexico’s economic and political outlook · …non-oil exports and private...

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