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Mexico considering whether to renew IMF line of credit

A man touching a screen satating investment as the boldest term.
30 Jun 2014

Mexico and the International Monetary Fund have a close relationship. Part of that relationship involves a $72 billion flexible credit line, according to Reuters. This line of credit, along with Mexico's interdependence with the U.S., helps to keep Mexico in a strong position financially compared to other developing countries. The line of credit has never been used by Mexico, but it has been called an "insurance policy," Reuters reported. Those who invest in Mexico know that the country will not be insolvent should a disastrous recession take place similar to the one in the U.S. and abroad in 2008.

​Luis Videgaray, the Mexican finance minister, recently announced that he was still deciding whether or not to renew the line of credit, according to Reuters. He said that a decision would not be reached until November.

"We still haven't formally entered the process of renewing it," Videgaray said.

In a press release reported by Targeted News Service, the IMF issued a statement after Christine Lagarde, the managing director of the IMF, visited Mexico.

"(Mexico's) economy has been resilient in the face of a sluggish U.S. recovery and sporadic global volatility after the global financial crisis, I commend the authorities for adopting a comprehensive set of structural reforms last year that will reshape and transform Mexico's economy and support faster growth and improve living standards over the medium term."

Mexico a sound financial investment
Lagarde speaks to Mexico's stability and its ability to grow through major economic reforms. The country is becoming a place where making investments is a good idea - whether financial investments, or through expanding a business to Mexico and building a factory there to take advantage of the inexpensive labor and low barriers to entry. Investopedia recently wrote an article describing Mexico as a better bet for investments than Brazil. In a 2012 article, the news site called Mexico the China of the Americas, because of its ability to produce quality goods at a low price. Mexico's reputation for low-cost manufacturing has only increased since that time as China's economy has grown tremendously, increasing the cost of wages and doing business, while Mexico's labor costs are continuing at a relatively steady pace, making long term investments more feasible.

Those wishing to take advantage of opportunities in Mexico might consider expanding their business there through an offshore shelter company that would make the transition process easier.

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