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As Mexico expands, finance ministry tightens stock market regulations

A picture of many young stock-brokers talking on the phones and making deals while working in an office.
19 May 2014

Mexico has published new rules on May 15 for handling derivatives trading on its stock market, according to Reuters. Its goal is to minimize any future crises that would lead to a recession like the one that happened globally in 2007-2009. During a recession, industries typically contract and the economy suffers greatly. As Mexico enters a period of strength, it does not want this.

Mexico has been working on these rules with the Group of 20 economic powers after the most recent worldwide recession. The new regulations have now been published in Mexico's Federal Register. These rules should help stabilize Mexico's continued growth, despite a slow start at the beginning of the year. Unlike the derivatives market in the U.S. during the period before the financial crisis, Mexican companies selling derivatives must sell them directly to consumers rather than through a business-to-business system. Additionally, the new rules establish standards for how the institutions that create derivatives operate their business. There are also laws about how auditing will work.

The rules were created together by the Mexican Ministry of Finance, the banking securities regulator and the central bank.

"It is necessary to modify current regulation to promote more transparency and order in the derivatives market," the Ministry of Finance said in a statement.

Stronger economic growth in Mexico

The matters of the financial system backing up the Mexican economy is important because the Mexican financial sector is growing. According to Reuters, the economy is showing signs of economic growth despite the stagnant first quarter. Part of the reason for this confidence in Mexico's financial stability is the increased government intervention in concerns like fiscal policy.

The International Monetary Fund has taken notice of Mexico's financial and economic reforms, Reuters reported. Factory exports are growing, and construction is improving in tandem with expansions in new factory construction and international investment.

"All of that points to the first stages of an acceleration of growth," Alejandro Werner, a director for the IMF, told Reuters in an interview in Mexico City.

Werner also said the softness in the job market, along with consumer confidence, should improve along with growth in the manufacturing sector.

"Hopefully as the year progresses, consumption will give an important push to growth and eventually we will see some signs that investment is picking up," said Werner to Reuters.

Now is a good time to take advantage of growth opportunities for companies expanding to Mexico. Using a Mexico shelter company will let a manufacturer ease into a transition into the Mexican market while the job sector is still an employer's market.

Mexico and the U.S. are tied together financially. As the U.S. grows in the future, Mexico will grow as well, according to Werner, and this growth will benefit companies that begin moving as soon as possible while the barrier to market entry is low.

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