MEXICO

The Balance of Payments

Mexico will show continued improvement in her balance of pay-
ments during 1979 and 1980. Both export and import receipts increase,
but deficits in the trade balance and the current accounts will continue
to exist.

Exports of $5.8 billion and imports of $8.0 billion yielded a trade
deficit of $2.2 billion in 1978 according to data recently released by
the Banco de Mexico. Last year's current account deficit of $2.4 billion
was more than offset by capital inflows of $2.6 billion and the overall
balance of payments was positive in 1978 in sharp contrast with the $500
million deficit recorded in 1977. Mexico's accelerating growth rates
have increased the demand for imports, mostly in the form of heavy equip-
ment and industrial goods. It will still be several years before exports
catch up. Trade deficits of $1.8 billion and $1.7 billion are forecast
for 1979 and 1980 along with current account deficits of between $3 and
$4 billion.

Foreign Capital Inflows

Capital inflows have been substantial. Lower operating costs and easy
availability of energy are attracting venture capital to the border areas
with the U.S. This trend can be expected to continue and even increase
as energy cost differentials widen. Industrial investment by U.S. firms
in the "Border Area" is expected to exceed $100 million during the next
few years.

Financial capital is easy for the Mexicans to obtain. Japanese and
European banks, as well as those in the United States not yet represented,

2

are moving quickly to establish a presence in Mexico. Two syndicated
loan packages have been developed by Japanese banks for Pemex, one led
by the Bank of Tokyo and the other led by the Long-Term Credit Bank of
Japan. Spreads for Mexico are well below one percent and currently
average 3/4 of one percent for 10 years.

Foreign Debt
---

Mexico's foreign debt is very large. Recent data suggest that the
total official external debt was about $25 billion at year end 1978,
although officials at the Banco de Mexico are reluctant to confirm the
size or discuss the structure of the foreign debt. Estimates of private
external debt, both long and short term, add an additional $7 billion.
Nearly 90 percent of Mexico's external debt is for one year or more.
Service on the official portion of the external debt is estimated to
be $3.3 billion in 1979 and $3.8 billion in 1980, but the debt service
does not seem to be particularly onerous in view of Mexico's oil revenues.

Petroleum Resources
---

Mexico has ample reserves of oil and natural gas. Energy analysts
who have been monitoring recent developments were not surprised by
revelations in the U.S. press that Mexico's proven reserves of 40.4
billion barrels included some 14 billion barrels equivalent in natural
gas. Probable reserves are estimated to be an additional 44 billion
barrels and potential reserves exceed 200 billion barrels.

Mexico is currently producing between 1.5 and 1.7 million b.p.d.
Domestic consumption averages 1 million b.p.d. leaving the balance for
export. Pemex has already announced plans to increase production to
2.25 million b.p.d. by the end of 1980 and 2.5 million b.p.d. by 1982.

3

Even if one accepts the most conservative estimates, Mexico's reserves are sufficient to produce, consume, and export at projected levels for the next 40 years. Mexico's oil is high quality "light" and commands at present a premium price, $23.60 per barrel. Mexico's earnings from oil sales should be between $4.5 and $5.5 billion in 1979 and twice that (at 1979 prices) by 1982.

P. D. Warner
Head, Latin American Research
Economics Department
Bank of America

July 13, 1979

MEXICO

The Balance of Payments

Foreign Capital Inflows

2

Foreign Debt

Petroleum Resources

MEXICO

The Balance of Payments

Foreign Capital Inflows

2

Foreign Debt
---

Petroleum Resources
---

July 13, 1979

MEXICO

The Balance of Payments

Foreign Capital Inflows

2

Foreign Debt

Petroleum Resources

MEXICO

The Balance of Payments

Foreign Capital Inflows

2

Foreign Debt

Petroleum Resources

3

July 13, 1979

[L.C.]

# MEXICO

## The Balance of Payments

Mexico will show continued improvement in her balance of payments during 1979 and 1980. Both export and import receipts increase, but deficits in the trade balance and the current accounts will continue to exist.

Exports of $5.8 billion and imports of $8.0 billion yielded a trade deficit of $2.2 billion in 1978 according to data recently released by the Banco de Mexico. Last year's current account deficit of $2.4 billion was more than offset by capital inflows of $2.6 billion and the overall balance of payments was positive in 1978 in sharp contrast with the $500 million deficit recorded in 1977. Mexico's accelerating growth rates have increased the demand for imports, mostly in the form of heavy equipment and industrial goods. It will still be several years before exports catch up. Trade deficits of $1.8 billion and $1.7 billion are forecast for 1979 and 1980 along with current account deficits of between $3 and $4 billion.

## Foreign Capital Inflows

2

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Foreign Debt
---

Petroleum Resources
---