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© 2010 International Monetary Fund

March 2010 IMF Country Report No. 10/71 March 10, 2010 March 1, 2010 2010 January 29, 2001

March 1, 2010 February 12, 2010

Mexico: 2010 Article IV Consultation—Staff Report and Public Information Notice on the Executive Board Discussion
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually everyyear. In the context of the 2010 Article IV consultation with Mexico, the following documents have been released and are included in this package:  The staff report for the 2010 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on February 12, 2010, with the officials of Mexico on economic developments and policies. Based on information available atthe time of these discussions, the staff report was completed on March 1, 2010. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF. A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its March 10, 2010 discussion of the staff report that concluded the Article IVconsultation.

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The document listed below has been or will be separately released. Selected Issues Paper The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information. Copies of this report are available to the public from International Monetary Fund  Publication Services 700 19th Street, N.W.  Washington, D.C. 20431 Telephone:(202) 623-7430  Telefax: (202) 623-7201 E-mail: publications@imf.org Internet: http://www.imf.org

International Monetary Fund Washington, D.C.

INTERNATIONAL MONETARY FUND MEXICO Staff Report for the 2010 Article IV Consultation Prepared by the Western Hemisphere Department (In consultation with other Departments) Approved by David J. Robinson and Aasim Husain March 1, 2010
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2008 ArticleIV Consultation. The Executive Board welcomed the significant improvements in Mexico’s fundamentals over the past decade. Directors also praised the authorities for adopting measured monetary and fiscal policy easing—carefully balancing the objectives of supporting activity and maintaining credibility—while letting the flexible exchange rate act as a key shock absorber. To address the medium-termfiscal challenges in the context of a falling share of oil revenue, further efforts were urged to strengthen revenues and restraints on current expenditure. Directors welcomed that the financial stability had been maintained, in part reflecting the strong regulatory framework and domestic funding base for banks. Advancing structural reforms were viewed as key to boosting growth prospects. MainIssues for 2010 Consultation. The 2010 consultation centered on near term policies to navigate out of the recession, and steps needed to support stability and potential growth over the medium term. FCL. An arrangement with Mexico under the FCL for 1,000 percent of quota (SDR 31.528 billion) was approved on April 17, 2009. The authorities have indicated their intent to treat the arrangement asprecautionary. Mission. Discussions for the 2010 Article IV Consultation were conducted in Mexico City during February 2–12, 2010. The team met with Finance Secretary Cordero, Banxico Governor Carstens, other senior government officials, representatives from the private sector and think tanks. The team met with investors in New York during January 14–15, 2010. Team. This report was prepared by a staffteam led by Vikram Haksar, comprising Kornelia Krajnyák, Ivanna Vladkova-Hollar, M.K. Tang, and Kristin Magnusson (all WHD), Giancarlo Gasha (MCM), Bikas Joshi (SPR), Geremia Palomba (FAD), and Andrea Medina (WHD).

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Contents

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I. Context––The Global Crisis and Mexico ...............................................................................3  II. The Legacy...