Mexico girds up to deal with market turmoil, US slowdown

August 11th, 2011 - 11:38 am ICT by IANS  

Mexico City, Aug 11 (IANS/EFE) Mexico can draw on more than $200 billion as it prepares to cope with current market turmoil and insulate its economy from external shocks, Finance Secretary Ernesto Cordero said.

“Unfortunately, all of the world’s economies, including Mexico’s, will be affected to a greater or lesser degree” by the crisis, and therefore the challenge “is to mitigate the degree of the impact”, he said in a message intended to calm financial markets.

The country has learned its lesson from various past crises and now is in a better condition to blunt the effects of an economic collapse, he said.

Cordero, one of the main contenders for the governing party’s 2012 presidential nomination, said a series of actions are needed to restore confidence in financial markets and overcome economic uncertainty in both the US and Europe.

“A much more decisive response than what’s been seen so far is needed to completely solve these problems,” he said.

Referring to Mexico, the secretary said consensus must be reached on a priority agenda for the country and that “a package of additional measures and proposals” will therefore be unveiled soon.

Financial turmoil is the result of “serious problems in the industrialised countries that still have not been fully solved”, he noted.

Mexico rebounded from a steep recession in 2009 to post growth of 5.4 percent in 2010 and more than 4 percent in the first half of 2011, according to the secretary, who attributed the strong performance to good macroeconomic policy.

He pointed to increased tax revenues, moderate deficits, manageable public debt of 30.7 percent of gross domestic product and debt restructuring as factors that have put the country on a sound financial footing.

The government also has succeeded in safeguarding the financial system’s stability, Cordero said.

Mexico has $130 billion in foreign-exchange reserves, as well as a more than $70 billion line of credit with the International Montetary Fund.

“That means we have more than $200 billion to ensure we can respond in an orderly fashion to any external shock,” the finance secretary said, adding that Mexico must improve its competitiveness amid a slowdown in the US, the country’s No. 1 trade partner.

He said President Felipe Calderon’s administration will remain committed to responsible policies and a long-term vision and will apply “countercyclical stimulus” measures consistent with an approved 2011 budget deficit equal to 0.5 percent of GDP and public-sector spending growth of 6.1 percent.

As a part of a globalised economy, Mexico does not have the luxury of isolating itself from unforeseen events, said Cordero, who noted that the government must respond to those challenges by “protecting our resources and redoubling our efforts”.

–IANS/EFE
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