Mexico Overview

  • The Mexican economy expanded at a modest pace of 2% annually during the first half of 2018, below its potential growth, as uncertainties around North American Free Trade Agreement (NAFTA) renegotiations and the Presidential elections weighed on investment. Private consumption continued to be the main driver of growth on the demand side, including on the back of real wage growth turning positive in the first half of 2018. Oil production, which had declined to 1.9 million barrels per day (bpd) by end-2017, from 2.6 million bpd five years earlier, had shown no sign of a trend reversal by mid-2018, as large investments in extraction are progressing slowly.

    Consumer price inflation moderated in early 2018, from the 16-year peak of 6.8% reached in December 2017. However, the pass-through from currency depreciation and increases in energy prices stalled convergence towards the 3% target rate, prompting the Central Bank to hike its policy interest rate in June by a further 25 basis points to a 10-year high of 7.75%.

    With the elections behind, and the trilateral US-Mexico-Canada Agreement (USMCA) on trade, past uncertainty factors should fade, helping to support a further, albeit moderate, rebound in investment. A resumption of the downward trend in consumer price inflation is expected to support growth in real incomes, thereby bolstering consumption and reducing monetary poverty.

    Weakness in the currency and asset markets in advance of the July Presidential election had been more than reversed by early August, with the incoming administration’s economic team signaling its commitment to prudent fiscal and monetary policies implying continued adherence to the Fiscal Responsibility framework as well as the principle of Central Bank independence.

    Last Updated: Oct 04, 2018

  • The Country Partnership Strategy (CPS) FY14-FY19 for Mexico—which was jointly prepared with the government—set out a country engagement based on a development solutions approach that delivers a customized package of WBG financial, knowledge and convening services. It focuses on the World Bank Group twin goals (ending extreme poverty and promoting shared prosperity) and is fully aligned with Mexico's National Development Plan for 2013–18.  The four key areas of engagement supported by the CPS are:

    ·         unleashing productivity;

    ·         increasing social prosperity;

    ·         strengthening public finances and government efficiency; and

    ·         promoting green and inclusive growth.

    The Bank’s financial engagement focuses mainly on: social protection and education programs — from early childhood development to upper secondary level; a green and inclusive growth agenda integrated by energy, environment, water, agriculture, and transport projects; and financial inclusion programs. The active portfolio as of end-August 2018, was comprised of 16 projects (including 4 stand-alone Global Environmental Facility [GEF] projects), totaling around US$2.38 billion in net commitments. This includes four operations approved by the Board in FY18 totaling US$406 million: Strengthening Entrepreneurship in Productive Forest Landscapes (US$56 million), an Additional Financing for the Social Protection System Project (US$300 million), an Additional Financing operation in the energy sector (US$50million IBRD + US$5.8 million GEF), and a stand-alone GEF project, supporting productive landscapes (US$21.9 million).

    The Bank has a grant portfolio of approximately US$245 million that comprises 46 active grants supporting mainly activities in the areas of environment and energy. This portfolio includes, among others, a large Clean Technology Fund (US$200 million) implemented in conjunction with the national Urban Transport Transformation Project, and a Recipient Executed Trust Fund to strengthen the capacity for forestry dependent people – Mexico Dedicated Grant Mechanism for Indigenous People and Local Communities (US$6 million). Through a strategically aligned knowledge program, the WBG also provides support to Mexico and timely inputs have been provided in areas such as climate change, urban development, water, transport, among others.

    Last Updated: Oct 04, 2018

  • A few examples of the work of the World Bank in Mexico are:

    Subnational development. The World Bank is working closely with the Government of Oaxaca, one of the poorest States in Mexico, supporting the water sector through the first Program for Results approved for the country, which also happened to be the first sub-national loan to Oaxaca.

    Education. The World Bank has a broad engagement with Mexico on education and labor market issues, one example being the support of an early education program in rural areas, implemented by the National Council of Education Development (CONAFE in Spanish).

    Climate Change. The Coastal Watersheds Conservation Project aims to promote integrated environmental management of selected coastal watersheds as a means to conserve biodiversity, contribute to climate change mitigation, and enhance sustainable land use. The project currently supports the implementation of 28 Sustainable Forest Management sub-projects in the Gulf of Mexico region and three sub-projects in the Gulf of California region.

    Social Protection. In response to the Government’s intention to better link its social protection system to productive programs, the Bank has contributed to the re-design of Mexico’s conditional cash transfer program, PROSPERA. The Bank’s contribution refers to: linking the poor to a broader set of income generating programs and to better targeting of the supply of social programs to areas and beneficiaries with the greatest needs.

    Financial Inclusion. The Expanding Rural Finance Project promotes the strengthening of financial institutions in Mexico known as financial intermediaries to facilitate loans in remote or difficult to access areas where traditional banking has weak or no presence. Through them credits are given to producers and entrepreneurs who live in rural areas of under 50,000 inhabitants. More than 142,000 loans have been delivered, 80% to women, boosting the family and local economy of these communities.

    Last Updated: Oct 04, 2018

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LENDING

Mexico: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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Additional Resources

Country Office Contacts

MEXICO +5255 5480-4200 (Visits by appointment)
Insurgentes Sur No. 1605, Piso 24 Col. San José Insurgentes, México 03900, D. F.
bmmexico@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
bmmexico@worldbank.org