Mexico’s Economy in Clear Recovery, Says Finance Minister

Mexico’s finance minister said on Wednesday Latin America’s No. 2 economy is recovering after a weak start to the year and that recent social unrest due to the disappearance of 43 students had yet to hit growth.

Finance Minister Luis Videgaray said at an event in Mexico City that the economy had entered a “clear recovery phase” after a slow start to the year pushed the government to revise down its forecast for growth in 2014 to 2.7 percent from 3.9 percent.

On top of stronger exports, construction and public spending, “we have other indicators of the domestic market that indicate a recovery”, he said.

Analysts see Mexico’s economy growing around 2.5 percent this year after expanding 1.4 percent in 2013.

Mexico’s central bank on Friday flagged the risk that social unrest in the country could dampen the modest recovery, but Videgaray said that so far he had not seen any “concrete sign of an impact” on growth from widespread demonstrations.

Protesters have taken to the streets in the past month since 43 students were abducted by police in southwest Mexico on Sept. 26. The search for the missing students has derailed President Enrique Pena Nieto’s efforts to focus public attention on economic reforms.

“The most important thing now is the search for … the missing youths and that the investigation continues in order for there to be justice,” Videgaray said. “It is a fact that the perception of Mexico has changed.”

Videgaray also said that the country could use derivatives to shore up this year’s budget if the price for Mexican crude falls much below $70 per barrel.

“In order that we would have to execute the hedge for this year, the oil price would need to fall far below 70 dollars,” Finance Minister Luis Videgaray said at an event in Mexico City.

Mexico’s crude mix MEX-OSP traded around $74 on Wednesday. The federal government relies on oil income to fund about one-third of its budget. The 2014 budget projected an average price of $85 per barrel of Mexican crude. (Writing by Michael O’Boyle; Editing by Bernard Orr)

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