News, Insights and Best Practices for Manufacturing in Mexico

Mexico's inflation in July could indicate expansion

28 Jul 2014

Category: Labor & Economics, Taxes & Finance

Mexico's inflation rate increased to 3.95 percent in early July, according to Reuters. Policymakers were divided, but the majority believe this indicates that growth in the country is starting to pick up and that Mexico might end the year in a more expansionary position than it had begun. At the beginning of the year , Mexico's economy was stagnant due to the unusually cold weather during the winter. The U.S. imported far fewer products from Mexico than it usually did, and business came to a standstill in many of the manufacturing communities in Mexico.

However, now that it is summer and the U.S. is importing Mexican goods again, the economy is starting to improve and show signs that Mexico is growing in power and will continue to be a manufacturing giant.

It was only one month ago in June, according to Reuters, that Mexico's central bank cut interest rates to 3 percent due to the slow growth in the first quarter. In a poll conducted by Reuters, consumer prices rose by 0.15 percent in the first half of July. In early June, it was only 0.08 percent.

Mexican central bank working hard to keep economy going
So far, the central bank has been able to keep the country from deflation or stagflation, and furthermore, since July, the country is poised to hit its ceiling for growth by reaching almost 4 percent of inflation. One way the central bank does this is by making sure that other banks play by the rules.

In an example of this, Mexican financial authorities closed down the minor bank Banco Bicentenario after it failed to meet the necessarily capitalization level, according to The Wall Street Journal. Because the bank was so small, this will have no impact on the rest of the economy. However, it demonstrates that Mexican financial officials are not afraid to do what is necessary to protect the country's financial assets.

The government has not had to shut down a bank since the fiscal crisis of 1994-1995, according to the Journal.

The Mexican equivalent of the Federal Deposit Insurance Corporation (FDIC), the IPAB (Instituto para la Protección al Ahorro Bancario) will ensure that 267 of the 670 depositors will have their money back. The rest of the depositors were partners or officials of the bank and therefore did not fall under IPAB protection.

Those who wish to take advantage of Mexico's current economic expansion can talk to Mexican shelter company, which will enable a fast and easy transition to running a factory in Mexico.


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