MAJOR MACRO ECONOMIC INDICATORS
|GDP growth (%)||1.3||2.3||2.5||2.3|
|Inflation (yearly average) (%)||3.8||4.0||2.8||4.0|
|Budget balance (% GDP)||-3.7||-4.5||-4.0||-3.5|
|Current account balance (% GDP)||-2.4||-1.9||-2.4||-2.0|
|Public debt (% GDP)||46.3||49.7||51.9||52.0|
(e) Estimate (f) Forecast
- Geographically close to North American market
- Member of NAFTA, OECD, G20 and the Pacific Alliance
- New IMF credit line running until January 2017
- Large industrial base
- World scale player in cement, beer, télécommunications
- Dependence on state of US economy
- Public revenues low and linked with oil
- Infrastructure and education weaknesses
- High crime rate
Moderate growth supported by US demand
Growth in the Mexican economy in 2016 should be around the same level as in 2015, boosted essentially by sustained economic activity in the United States: Its leading export destination, source of tourist income and émigré labour remittances, as well as the top investor in the country. The geographic proximity of the two countries and the trade agreements between them have helped stimulate private investors, mainly in the automotive sector. The competitiveness of its manufacturing production is also expected to improve as a result of the depreciation of the Mexican currency. Private investments in the oil and gas sector following the opening up of the energy market is however likely to be disappointing thanks to continuing weak oil prices. The maintenance of budget restrictions is also reducing the possibilities of a boost to economic activity through public investment. Household consumption should however hold up thanks to the increase in remittances from migrants, benefiting from the upturn in the US employment market, and which will partly offset the loss in purchasing power due to higher inflation. Inflation remained fairly low in 2015 thanks to falling energy and telecommunications costs, but should increase in 2016, with the depreciation of the peso under the impact of the tightening of US monetary policy.
Spending cuts to be the main driving force for budget consolidation
The efforts of the government to reduce the public deficit are likely to continue in 2016. Despite the ongoing weakness in the price of oil, which generates almost a third of budget receipts, the reduction in investment spending linked with increasing non-oil and gas receipts should contribute to reducing the deficit. The tax reforms implemented in 2014 should continue to bring in additional income for the government, estimated at 3% of GDP by 2018. This is based essentially on a tax on capital gains and dividends, the harmonisation of VAT rates in the northern states and the rest of the country, an extension of the income tax base as well as a tax on sales of foods causally linked with obesity (in particular soft drinks). The increase in tax receipts should help to offset the decline in receipts from the energy sector whilst the reduction in spending should be the main element in the consolidation of the budget. The government is planning on cutting its current and capital spending by 1.2% of GDP in 2016. A number of investment projects have had to be delayed, as can be seen with the suspension of the construction project for the high speed rail line between the cities of Mexico and Queretaro. In addition, the adoption of the “zero-base budgeting” plan which states that every expenditure item must be justified instead of simply having to justify the variation in the budget from one year to the next, should also play a role in limiting spending. The implementation of the prudent budgetary policy is also likely to help limit recourse to borrowing.
Towards a reduced current account deficit
Foreign trade should continue to benefit from improving US demand. Exports, consisting mainly of manufactured goods, and to a lesser extent, oil, will continue to be shipped mainly to the United States. Mexico is also the leading trading partner of the United States in Latin America thanks to its geographic proximity and membership of the NAFTA (North American Free Trade Agreement). Almost half of its manufactured exports are produced in ‘Maquiladoras’, factories located in free-trade areas near the US border, using imported components (usually from the north of the continent) before being re-exported once assembled as finished products. Its close links with the US economy will thus be beneficial for Mexican exports in 2016. Imports (capital and consumer goods) are however expected to slow slightly as a result of the knock on of lower investments and the possible depreciation of the Mexican peso (making imports more expensive) because of tightening US monetary policy. Remittances from Mexicans working abroad, mainly in the United States, as well as tourism receipts are expected to increase and help reduce the current account deficit, alongside the reduction in imports. This deficit should mainly be financed by foreign investments, the arrival of which will depend in particular on the outcome of the energy sector privatisation process, with the majority hoped for in 2016.
A government weakened by corruption scandals
The President, Enrique Peña Nieto, of the centre PRI party (Partido Revolucionario Institucional) is expected to continue focusing on the realisation of his programme of structural reforms before the end of his term of office in 2018. Despite the success of many of the reforms, popular discontent is growing. A series of corruption scandals, embracing some of those close to the President, and the ongoing scale of criminality and criminal impunity (the enquiry into the disappearance of 43 students in 2014 was reopened after pressure from the international community), are factors contributing to undermine Mexicans’ trust in their government. The country is therefore likely to remain vulnerable to social unrest during 2016.
Last update : January 2016
The common habits of payment in Mexico are basically by checks of wire transfer and in some special cases by credit card.
The process that involves the payment depends of the internal rules of the companies, in this country usually the company’s request some documentation to proceed to made the payment, the documentation will be, as a example:
-The articles of incorporation of the company;
-The Tax identification named “Registro Federal de Contribuyentes”;
-The purchase order;
-the approbation of the purchase from the company;
-the proof of delivery and reception of the product and/or service;
- The invoices.
-The information of the bank account;
-The state of the bank account that will be made the payment.
Once that the buyer has all the correct information proceed to made the payment by a wire transfer or by check; the check can be post dated in the cases that the companies don’t have enough Money to make the payment; the process of payment will take approximately ten to fifteen days; and is common that the pay is made by a wire transfer.
a) COMMERCIAL DOCUMENTS.
In Mexico, this are the most common documents related to a commercial act:
-INVOICES: Is a commercial document issued by a seller to a buyer, indicated the quantities, products and agreed prices for products or services that the seller has provided the buyer.
In terms of debt and collection the invoices with its proper order and proof of the reacceptance of the merchandise proof the commercial relationship between the parties and in terms of the commercial law and agreements regulations the sale agreement is completed with the object, in this case the product or the service, and the price agreed by the parties; also in the cases that we do not have a written agreement; so the invoices are the perfect proof in lawsuit that the parties have a sale agreement and the buyer has a pending payment of the debt, that is object of the legal process.
-PROMISSORY NOTES: (CERTIFICATE OF INDEBTEDNESS)is an unconditional promise in writing to pay a person a sum of Money. In Mexico that document usually is use to have a guarantee of payment from the buyer; and is sign by the legal representative of the debtor for an amount that is superior of the total amount of the debt.
-CHECKS- (CERTIFICATE OF INDEBTEDNESS): an order for payment of Money on demand, drawn on a banker, and expressed as being payable either to bearer or to (the order of) a named person.
Checks can be post dated; it means that the payment will be in the next days that the invoice was delivery to the seller.
DEBT AND COLLECTION
In the pre legal phase the process that is use here in Mexico is initiate with telephone contact, and a written letter send to the debtor in which we notify the debtor about amount of the debt and the intentions that the creditor has to negotiate the payment of the total amount.
The next step is visit the debtor personally; in the visit the person who made the managing of the collect, have a better perspective of the situation of the debtor because of the results of that visit we can see if the company still in business, if they have real states, assets, merchandise and rights that can be able to seize in the case that the legal process takes place; and the main purpose is, to know the real reason why they didn’t paid the invoices on time.
LEGAL PROCESS PHASE.
In terms of Commercial law, we have three types of process that we can initiate against the Debtor.
1. PRE-LEGAL PROCESS (MEDIOS PREPARATORIOS A JUICIO EJECUTIVO MERCANTIL).
This pre –legal process takes place when we have as a document to proof the pending payment and commercial relationship only INVOICES; we request to the judge the citation of the debtor or its legal representative; then we get the confession and acceptance from the debtor about the debt and the pending payment of it, once we have the confession before the judge as a executive document we are able to initiate legal process named Summary Business Proceeding.
This pre –legal process takes approximately two or three months.
2. Summary Business Proceeding.
This legal process takes place when we have a Certificate of Indebtedness (Promissory notes, checks, legal confession before the judge of the debtor or its legal representative); in this process when we initiate the lawsuit in the phase of citation we request to the debtor the payment of the total amount of the debt, if the debtor don’t have enough money, we may be able to seize some assets, it could be real states, merchandise, bank accounts, industrial property rights of its trademarks, etc., as a guarantee of the total amount of the debt.
Once we seize assets as a guarantee of the debt, the legal process continues until we get the final resolution from the judge, then if we don’t negotiate with the debtor or get the payment of the debt; we initiate the auction of the assets in order to get the recovery f the debt.
This legal process takes approximately six to eighteen months, it depends of the case.
3. Ordinary Business Proceeding.
This is the largest process that establishes our Commerce Law, it takes place when we don’t have any Certificate of Indebtedness, it means we only have a commercial agreement with invoices and all the documents that proof the commercial sale and relationship between the parties.
In this types of process we only be able to seizure assets to guarantee the total amount of the debt until we get final sentence that condemn the debtor to pay the total amount of the debt.
This legal process takes approximately one to two years.
4. Oral Proceeding.
This process takes place when the total amount of the debt does not exceed the amount of31,856.68 EUR, as the Ordinary Business Proceeding we only can seizure assets as a guarantee of the debt when we get final sentence that condemn the debtor to pay the total amount of the debt.
This process was established by the commerce law since January 11th, 2013 and it takes approximately four to six months.