During the first quarter of 2022, Mexico’s current account registered a deficit of 6,523 million dollars, 29.7% less than in the same period of 2021, it is also the lowest for a first quarter in 10 years.
According to information from the Bank of Mexico (Banxico), the country historically suffers from a current account deficit, the most recent figures show negative balances in at least the last 21 years.
In terms of Gross Domestic Product, the current account deficit represented 1.9% of GDP, lower than the 3.0% deficit for the same period in 2021.
According to Banxico, the annual reduction in the current account deficit resulted from higher foreign exchange earnings from tourism and remittances, as well as from a lower primary income deficit and, in particular, from the oil trade balance.
The capital account showed a deficit of 6 million dollars, the same level as in the first quarter of 2021, while in the financial account there was a net indebtedness that implied an inflow of resources of 6,720 million dollars, including an increase in reserve assets for 3,933 million dollars, in the same quarter of 2021, the financial account deficit also remained practically unchanged, increasing 1.6 percent.
Portfolio investment down
As for portfolio investment, it showed an entry of 1,582 million dollars between January and March of this year; Although it is less than 5,637 million dollars for the same period of the previous year, the figure indicates the arrival of investment flows to the country in the first third of the year, a situation that is explained in part by the effect of the increase in reference rates. from the central bank, which since May 2021 seeks to make financial investment in the country attractive, increases that remain in sync with the rate policy of the United States Federal Reserve.
In the context of the international situation, the Bank of Mexico points out that most of the central banks of the main economies have continued with the normalization of their monetary stance and, in some cases, have even accelerated said process.
Emerging economies are no exception, and most central banks have continued to raise their benchmark interest rates, although with important exceptions, such as China.
In general, in the first quarter of 2022, the financial markets showed episodes of increased volatility and risk aversion, as well as an increase in interest rates and a strengthening of the dollar.
At this point, interest rate expectations point to a tightening of monetary policy, especially to contain and anchor inflation expectations.
So far this year, Mexico has continued to attract resources through the financial account, specifically through Foreign Direct Investment, thus said account ended the quarter with net indebtedness to the rest of the world.
Thus, in the quarter, Mexico captured 19,427 million dollars in FDI, an increase of 63% compared to the same quarter of 2021.
Second consecutive loss
Payment of interest abroad was reduced 3.1% to March
In the first quarter of 2022, the Bank of Mexico registered 5,024 million dollars for interest payments on both public and private debt, 3.1% less than in the same quarter of 2021, this meant the second consecutive drop considering only the first quarter of each year.
The reduction comes after reaching the maximum level of disbursements for that concept, in the first quarter of 2020, when 5,480 million dollars were paid. Of the total disbursement, 3,391 million dollars (67.5%) corresponded to the public sector, while the private sector paid 1,633 million dollars (32.5 percent).
External debt represents 34% of GDP
This concept is particularly important in the current context of strong increases in interest rates in the world’s main economies. In Mexico, according to information from the Ministry of Finance, at the end of 2021, the balance of the net external debt is 218,154 million dollars, 34.1% in terms of GDP and also the highest figure in the last 30 years.
In 2019, the payment of interest abroad reached its maximum level, with 26,206 million dollars, of which 54.4% corresponded to the public sector and the remaining 45.6% to the private sector. For 2021, the total payment was for 22,305 million dollars, 15% less than in 2019, in that period the public sector paid 4% less and private sector payments 28 percent.
