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Cost of flu for Mexico

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  • Cost of flu for Mexico

    Bloomberg.com:

    "Mexico?s government expects the outbreak of swine flu, which shut down businesses and schools in late April and early May, to cut GDP by 0.3 percent this year. The central bank?s most recent official forecast is that the economy will contract as much as 4.8 percent this year. Since then, the bank has said the swine flu may lead to a drop of as much as 5.3 percent."






    Full text of article:

    Mexico Central Bank May Not Hold Another Fed Auction (Update1)
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    By Jens Erik Gould

    May 20 (Bloomberg) -- Mexico?s central bank is less likely to hold another auction of funds from its swap line with the U.S. Federal Reserve because market conditions have improved, a Mexican bank official said.

    The bank placed $3.2 billion of the $4 billion worth of 264- day notes it auctioned from the line on April 21. The $30 billion swap line expires in October. The bank official declined to be quoted by name because he isn?t an authorized spokesman.

    The bank held its first auction to provide dollars to companies to help them meet their foreign financing needs. Today?s comments, along with the results of the first auction, indicate that companies are in better shape than they were late last year, said Alonso Cervera, a Latin America economist at Credit Suisse.

    ?Financial markets have been stabilizing gradually,? said Cervera, who is based in New York.

    Petroleos Mexicanos, the state-owned oil company, sold $1.3 billion on the foreign and local debt markets today, its largest placement since a January offering, as part of a $10 billion financing plan to fund investments.

    America Movil SAB, the Mexican mobile telephone company controlled by billionaire Carlos Slim, sold Chilean bonds for the first time on April 17 to take advantage of falling rates and a strengthening currency.

    Derivative Losses

    Mexican companies posted losses tied to derivatives contracts in the second half of last year as the peso plunged to record lows against the U.S. dollar and prices of commodities such as natural gas fell. The companies bought the derivatives contracts to protect themselves against fluctuations in energy costs and foreign-exchange rates.

    The U.S. Fed in October agreed to swap dollars for the local currencies of Brazil, Mexico, South Korea and Singapore to unfreeze money markets in emerging market countries. On April 1, Mexico asked for a $47 billion credit line from the International Monetary Fund, the biggest package the country has sought from the lender since the so-called Tequila Crisis in 1995.

    Mexico?s economy has suffered as the global financial crisis chokes demand in the U.S., which buys 80 percent of the country?s exports. Mexico?s government today cut its 2009 gross domestic product forecast, saying the economy will shrink 5.5 percent. The economy shrank 8.2 percent in the first quarter.

    Mexico?s government expects the outbreak of swine flu, which shut down businesses and schools in late April and early May, to cut GDP by 0.3 percent this year. The central bank?s most recent official forecast is that the economy will contract as much as 4.8 percent this year. Since then, the bank has said the swine flu may lead to a drop of as much as 5.3 percent.

    To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net;

    Last Updated: May 20, 2009 18:15 EDT
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