The Day at a Glance | January 19 2021

The Top

· Janet Yellen will request greater public spending as Secretary of the Treasury at Senate confirmation hearing.

· Mexican government dispute with American companies in the energy sector could lead to USMCA dispute resolutions.

· EIA cuts crude oil demand estimates for the 1Q21 in 600 thousand daily barrels after quarantines are implemented around the world.

· INEGI indicator estimates an annual -5.4% contraction in economic activity in December.

Economic environment

This morning, Janet Yellen will give a speech before the United States Senate during her confirmation hearing as Secretary of the Treasury. According to the speech published yesterday, Yellen will request Congress to act in an energetic manner and approve the third stimulus package proposed by Biden to avoid a longer recession and long term economic effects. Yellen considers that more resources will be necessary for the distribution of vaccines to keep people at their jobs, and even though the country`s high level of indebtedness must be considered, the low interest rate environment is unbeatable to issue debt and carry out aggressive spending. Markets will be focused on Yellen`s speech, which will reinforce expectations of greater fiscal stimuli in the United States during the new administration.

A disagreement between American energy companies and the Mexican government could soon reach USMCA dispute resolutions. According to recent reports, the Trump administration officially called on the Mexican government for regulatory blockages that have affected US energy companies. This issue will fall into Joe Biden`s hands as the new President of the US; he will ratify the claim and will take the issue to the USMCA`s dispute resolution procedure. The letter sent by the Trump administration was signed by the Secretary of State and by the US Secretaries of Commerce and Energy, in which they assured that regulatory actions carried out by the Mexican government have created uncertainty regarding regulatory processes in Mexico and have damaged the investment climate. The main reason for this complaint is a memorandum that the Mexican government sent out last year, in which it instructed regulatory officials in the energy sectors to block permits in favor of PEMEX and CFE. This would be the first dispute in the new trade agreement and the first issue between López Obrador`s government and Biden`s.