The Day at a Glance | February 24 2021

The Top

· Inflation in Mexico increased slightly below what was expected in the first half of February (0.23% vs 0.27% e.).

· Powell considers that the rise in long term interest rates is a sign of confidence in the economy`s growth.

· The Chamber of Deputies approved the power sector reform and handed it over to the Senate; the bill has raised concerns of it inhibiting investment in Mexico and damaging the country`s image.

· Joe Biden will sign an executive order in attempts to resolve the scarcity issue occurring with the supply of semiconductors that is affecting different industries in the country.

Economic environment

The Consumer Price Index in Mexico recorded a 0.23% rate of growth during the first half of February. The rise set inflation at a 3.84% annual rate, its highest level since October. The largest impact on inflation came from energy prices once again, which increased 1.28% during the two week period; a rise that was compensated by a fall in the price of fruits and vegetables (-2.4%). Regarding the underlying component, goods (0.3%) had the largest impact on prices – led by non-food goods (0.4%); while services continue to grow at a limited pace (0.13%). With this, underlying inflation remained relatively stable at 3.84% annual. The figures have not considerably deviated from estimates, which forecasted growth in inflation above 4% for March and April given some comparable basis effects and the firm recovery seen in oil prices during the last 12 months.

The Chamber of Deputies approved an Electricity Industry Law Reform yesterday. Voting came to a close this morning after more than 16 hours of discussions that ended in 289 votes in favor and 152 against (with one abstention). The bill is one proposed by the President in order to reverse some of the changes made in the 2013 energy bill, in which the Federal Electricity Commission (or CFE for its initials in Spanish) was forced to subsidize its private competitors, which favored investment and production of clean energy on behalf of private businesses in the sector. The bill proposes giving back priority that was held by the CFE. The changes have raised concerns among employers in the sector and the country as this would be a barrier for investment in one of the sectors that need private initiative the most. According to employers that expressed their objections through the National Chamber of the Industry (CANACINTRA), the Mexican Confederation of Business Owners (COPARMEX) and the Mexican Institute of Competitiveness (IMCO), the law increases uncertainty regarding investments made in the country, hurt Mexico`s image by preventing it from complying with environmental protection commitments and takes away rights from Mexicans of having access to clean and cheap energy. The bill will be sent to the Senate for it to be discussed in the following days. Filing of protections is expected to occur if the bill is passed, which is something that could delay its implementation for six or twelve months – until the Supreme Court makes a decision.