Mexico 2020 | ECONOMY | B2B

International organizations will come to play a significant role in Mexico's recovery via programs focusing on better governance and greater investment in infrastructure and education.

Ary Naïm
Country Manager
Roberto Martínez Yllescas
Head of the Mexico Center

What numbers are you forecasting in terms of GDP and economic recovery after the COVID-19 pandemic?
ARY NAÏM Our forecast is that in the COVID-19 crisis, Mexico's GDP growth in 2019 will be as low as -6.6%, which is meaningful. This crisis is the perfect storm for Mexico, given that the current situation impacts the country's most important economic sectors, starting from tourism, and also due to the country's dependence on the US and its economy. Another strain is the enormous weight of the informal sector in Mexico. Low penetration of banking services in Mexico is also a great challenge ahead, along with the current drop of the oil prices. It is indeed a perfect storm for Mexico, but I see many opportunities in the future as well. In particular, let us hope Mexico seizes this opportunity to recover in the context of USMCA and the revision the global supply change in this current crisis. Let us hope for a better integration of the region toward a strong recovery.

ROBERTO MARTÍNEZ YLLESCAS We have shared our estimates, and they are not too different from the estimates emerging from different stakeholders in different multilateral organizations. We estimate it to be around -5% of GDP, which is a contraction similar to many other countries. We also have an economic cycle that is synchronic with that of the US. Despite the halt in economic activity, there are still things happening that we are keeping an eye on, such as the rearrangement and reorganization of supply chains in global production chains, which means there might be a shifting of some supply from Asia into Mexico. We need to always keep an eye on the possibility that Mexico might win something out of the reorganization of global supply chains coordinated by American global corporations. That would be a ray of hope on the horizon that would put Mexico back on its feet after the strong and challenging economic contraction now being seen by economic and financial analysts.

What will be your areas of focus moving forward?
AN In a large economy such as Mexico, we have ample room for high-quality projects. We will close our fiscal year with more than USD800 million in new investment, which adds to another USD800 million from the previous year. We intend to continue on that trend and do even more in the context of the crisis recovery, since public finances are constrained in Mexico, like in many other emerging markets, and private investments will only increase over time. IFC is focused on three key things for Mexico: improving productivity through investing in infrastructure, technology, finance, and education; inclusion via projects in microfinance, financial inclusion, fintechs, and others that reach the most secluded people and poorest territories; and sustainability and climate change. We focus on renewable resources and resource efficiency in the industrial sector, as well. It is extremely important for Mexico, going forward, to participate in the smart cities agenda, which is all about sustainability in cities. It is also important to keep in mind the new political paradigm. The administration is focused on better governance, investment in infrastructure, and fiscal austerity. With this agenda being implemented, Mexico can be a great country to invest in.

RMY We have seen a dramatic reset of our daily operating environment because the sanitary emergency taking most of our attention, which is absolutely normal and reasonable. In general, the priority of my office is to make sure that we have global OECD technical expertise nested in our office in three areas. To do this, I have a core mandate to promote these three technical teams that work from my office. One team is the area of regulatory improvement. Within this subtopic, there is competition policy, which levels the playing field and is a key enabler of private investments and new investments, creating certainty for investors. The second team is working on what we call public integrity, which encompasses the rule of law, the fight against corruption, and the transparency of public procurement. A third technical team works on competition policy, which is key to any effort of economic reactivation. These teams make sure we reinforce our dialogue not only with Mexico's federal government but also state governments to ensure that Mexico as a whole and federal states can rely on best global practices, especially now that they need to maintain their attractiveness to international investors.