The economy is in condition of resisting United States measures

Mexico has the ability to assume the imposition of 25 percent tariffs planned by the United States government, said Bank of America Securities.

The country’s strength to assume these changes is based on the weight is strengthened, the financial market is liquid, the country’s reserves are high and the Bank of Mexico has adequate inflation control, said the firm.

Mexico has a great strength that other countries do not have, which is that the exchange market; It works very well, so even if they put tariffs to Mexico, the impact would be much lower because it would absorb almost all the weightsaid Carlos Capistán, chief economist for Latin America and Canada of the financial institution.

The weight is what absorbs the clash, but it helps because the macroeconomy has worked for many yearshe added.

Another strength is that Mexico has an investment degree, attributable to many years of behaving fiscally. In conference, Capistrán explained that Mexico has built, like Canada, a currency that helps a lot in the clashes, because it is commercialized in 24/7, it is completely convertible, it has very deep markets and, in addition, companies can cover their operations with financial instruments that protect from the losses generated by volatility.

If we did not have that deep market and the peso moves from 20 to 23 (pesos per dollar), many companies could suffer as we saw 15 years ago; But today all companies in Mexico already know that the weight can rise, they are covered, there are many financial products with which they can be covered.

He explained that in a hypothetical scenario that 25 percent tariffs were imposed and the weight was depreciated 15 percent, no company would come out flying through the air.

The weight after the choice was depreciated 20 percent. How many companies flew through the air with that in 2008 with depreciation? Several companies in MexicoCapistrán raised.

We have in recent months a depreciation of more than 20 percent, that means that the weight works in such a way that it does not generate much inflation, that companies and people can cover against those movements and people also already know that the Weight rises and low.

He pointed out that the Bank of Mexico has reservations for around 230 billion dollars, which gives strength to the peso and that the central institute has worked hard to try to maintain stable inflation.

In addition, it has generated enough confidence that when the currency depreciates the impact of inflation is low. Before 2008, in the 90s, a 10 percent depreciation usually gave almost 10 percent inflation. Now, from the choice here, more than 20 percent was depreciated the currency and inflation are going downhe said

He explained that in the event that the United States imposes tariffs, Mexico reacts by putting rates to products that are important to that country.