The Day at a Glance | April 6 2020

Stimulus proposal in Mexico

Yesterday, Mexico`s President Andrés Manuel López Obrador presented a series of measures to back the economy during the health contingency due to COVID-19, even though it was perceived as insufficient. The President announced there would be an increase in public investment to create up to 2 million jobs in the next 9 months and will provide 2 billion pesos of credit to households and small businesses – funded with resources from the Oil Stabilization Fund. Unfortunately, the stimulus package announced does not contain measures different of those announced in the recent past. The newest aspect is the announcement concerning efforts to reduce PEMEX`s fiscal burden by 65 billion pesos, but it`s still unclear if these are in addition to what was announced in previous months to back the company`s financial position. Concerns are growing in markets regarding the President may be underestimating the virus`s negative effects on the economy, which is estimated to cause a contraction worse than that one seen in 1994; the peso reached an all-time low (25.7) against the dollar in the early hours. The President remains convinced that his public welfare policies and infrastructure projects Dos Bocas and Santa Lucía will be enough to attract investment and create jobs. The most recent data shows that investment during January (before the spread of the virus) contracted (-) 8.8% annually (+1.7% monthly), a sign of weakness and low confidence levels in the private sector of the economy.

OPEC+ postpones its meeting to Thursday

The emergency meeting scheduled to take place this Monday between members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies was postponed for Thursday April 9th, which reflects there are still agreements to be made concerning production cuts. Confrontational statements between Russia and Saudi Arabia continued throughout the weekend, with both accusing each other of not wanting to carry out cuts in production. The meeting is key in order to balance a market that could lose up to 20% of its demand due to the health emergency. The largest international oil companies, such as Exxon Mobil, Royal Dutch Shell, Total and BP have raised up to $32 billion dollars in debt markets since mid-March in order to ensure cash flows during the pandemic. Additionally, they have started to reduce capital investment and overall costs, as well as delaying projects and stopped share repurchases.