Carlos Capistrán's perspective: Slowdown in Mexico is temporary; a future of sustainable growth is foreseen

Carlos Capistrán, regional director of Bank of America, has shared his perspective on the current economic slowdown in Mexico, ensuring that it is a temporary phenomenon. Capistrán, who has accumulated extensive experience in the financial sector both in Mexico and abroad, highlights that the Mexican economy showed above-average growth last year, reaching 3%, but in recent months it has evidenced a clear deceleration. According to Capistrán, one of the factors contributing to this slowdown is the strength of the Mexican peso during the first quarter of the year, which has impacted exports and led to an increase in imports. Despite the fiscal measures implemented, it is expected that the economy will continue to grow below 2% in the second quarter and that this trend will persist in the coming year, with growth close to 1%. Inflation in Mexico has remained above 4%, which, according to Capistrán, could be a concern if not controlled in the short term. Although inflation has decreased from its peak during the pandemic, the Bank of Mexico faces the challenge of bringing it down to its 3% target, especially considering the current interest rate of 11%, which could affect economic growth and public finances. Capistrán emphasizes the importance of communication by the Bank of Mexico to generate confidence in the population regarding price stability and convergence towards the inflation target. In this regard, he compares it to the case of Canada where effective communication has contributed to maintaining favorable expectations regarding inflation control. Regarding the possibility of interest rate cuts, Capistrán mentions that the Federal Reserve in the United States has expressed its intention to reduce rates due to the expected slowdown in that country. This raises the possibility that the Bank of Mexico may also consider cuts, although uncertainty persists as long as inflation does not clearly converge towards its target. Regarding Mexico's economic outlook in the current context, Capistrán highlights achievements in terms of macroeconomic stability and economic diversification. However, he points out that the country faces the challenge of increasing productivity to achieve stronger and sustainable growth. He emphasizes the importance of seizing the nearshoring opportunity to attract investments and improve productivity, as well as the need to efficiently reduce the fiscal deficit. In summary, Carlos Capistrán's vision offers a detailed analysis of the challenges and opportunities facing the Mexican economy amid the current slowdown. His optimism lies in the belief that this situation is temporary and that, with the right measures, Mexico could resume a path towards sustainable growth in the near future.