The Day at a Glance | November 12 2020

The Top

· Michael Osterholm, one of Biden`s advisors, suggests implementing a nationwide quarantine for 4 to 6 weeks to control the virus; the prior approval of fiscal aid would be key.

· Mexico`s central bank will have its monetary policy meeting today; the target rate is expected to be cut in 25 base points (4% e.).

· Fitch has confirmed Mexico`s credit rating is BBB- with a stable outlook.

· IEA cuts its demand for crude oil estimates in 2020 (-400 thousand daily barrels, to 8.8 million daily barrels).

· Economic indicators: Industrial production in Europe falls unexpectedly in September (-0.4% monthly vs 0.7% e.; -6.8% annual); initial jobless claims drop to 709 thousand in the US, inflation slows down more than expected (1.2% vs 1.3% e. Oct.).

Economic environment

One of president elect Joe Biden`s Covid-19 advisors says that a 4 to 6 week nationwide lockdown would be the best strategy to control the virus. Michael Osterholm, who is currently Biden`s advisor and the director of the Center for Infectious Disease Research and Policy at the University of Minnesota, assured that a temporary shutdown (4 to 6 weeks) along with fiscal stimulus that would compensate citizens` and companies` incomes, is the best way to control the virus`s spread in the country. According to Osterholm, the economic damage would be mitigated and the strategy would buy time for the approval and distribution of a vaccine around mid 2021. The nationwide shutdown would help bring down the number of cases and hospitalizations to a controllable level. Osterholm co-directs a group of 12 advisors to Biden to take on the pandemic in the US.

Fitch Ratings confirmed Mexico`s credit rating at BBB- regarding its long term debt issues in foreign currencies. Additionally, Fitch reiterated that its perspective is Stable given the cautious, credible and consistent macroeconomic policies along with relatively stable finances during a time of crisis and a debt/GDP ratio that will stabilize at close to the average level of sovereign states with a BBB rating. Fitch considers that the government`s efforts to increase its revenues have resulted in higher than expected tax revenues and that the strategy to avoid larger indebtedness in 2020, maintaining fiscal discipline and implementing a fiscal reform in 2022, will all help limit the deterioration of public finances. Notwithstanding, the main credit risk continues to be PEMEX`s liabilities and the credit rating agency estimates contributions around 1% of GDP in the next few years on behalf of the federal government in order to finance the oil company`s negative cash flows. Fitch estimates that Mexico`s oil production will remain stagnant at current levels for 2021 and 2022, contrary to the government`s estimates, who forecasts a more optimistic scenario.