Background on Banxico and its Role
Banxico, or the Bank of Mexico, is the country’s central bank and is responsible for managing monetary policy. It plays a crucial role in maintaining price stability, promoting sustainable economic growth, and ensuring the smooth functioning of financial markets in Mexico.
Banxico’s Recent Growth Projections
In its January-March Quarterly Report, Banxico has revised its growth projections for Mexico’s economy downwards. The bank now anticipates that the Gross Domestic Product (GDP) will only advance by 0.1% in 2025 and 0.9% in 2026.
Historical Context and Implications
If Banxico’s forecast materializes, it would mark eight consecutive years of annual growth below 1%. This period would encompass six years under the Lopez Obrador administration, which has already recorded annual growth below 1%, as well as the first two years of President Claudia Sheinbaum’s term.
Banxico, however, does not predict a recession but rather anticipates economic stagnation or atonía in Mexico.
Factors Contributing to Slower Growth
Banxico attributes the downward adjustment to its forecast of sluggish economic activity for the remainder of the year and into the next. The central bank has highlighted weak consumer spending and investment in the early months of the year, suggesting lower-than-expected internal demand growth.
Moreover, investment remains affected by the high uncertainty surrounding it. Both domestic factors and global economic challenges, such as shifts in U.S. trade policies and tariffs imposed on most of Mexico’s imports, contribute to this slowdown.
Reserves as an Anchor for Investment
Despite the gloomy growth outlook, there is positive news regarding Mexico’s international reserves. Banxico’s foreign exchange reserves reached a new historical high, standing at 239.885 billion dollars in the week of May 19-23.
These reserves have been steadily increasing in 19 out of the past 21 weeks, with total assets rising by approximately 10.895 billion dollars. Over 60% of this increase can be attributed to gains in the investment of these assets.
According to analysts, the growing amount of reserves acts as an anchor for Mexico’s investment grade.
Ongoing Negotiations Between Government and CNTE
Background: The National Coordinator of Education Workers (CNTE) is a union representing teachers in Mexico. They have been engaged in negotiations with the government regarding educational reforms.
Stalemate in Negotiations
After five hours of discussion, the government and CNTE failed to reach an agreement. The teachers maintain their demands: the repeal of the 2009 ISSSTE Law and the elimination of the pension system (afores).
CNTE asserts that the government’s proposals are repetitive and lack progress in addressing their demands. Government representatives, including Secretary of Governance Rosa Isela Rodríguez, Education Secretary Mario Delgado, and ISSSTE Director Martí Batres, along with Hacienda representatives, have remained firm in their stance against repealing the 2009 ISSSTE Law and eliminating the pension system.
Instead, they offered to further reduce the retirement age outlined in the 2007 ISSSTE Law.
Polarized Positions
As the positions of the government and CNTE remain entrenched, with neither side conceding, the situation appears to be at a standstill.
