00:00Talk to us about the effects of higher crude prices, because you make a lot of oil, but you also
00:05buy a lot of crude products.
00:10Right, Danny, thank you for having us this morning.
00:13Absolutely. Mexico is more a manufacturer exporter than an energy exporter, as you were precisely saying.
00:22So we have a relatively balanced effect on our domestic and fiscal front.
00:29We are exporters of oil, but we also import quite a bit of energy.
00:37But in the balance, we have a net almost neutral effect on our fiscal side.
00:44And for us, that is very important, because we're always watchful of what investors, markets, and rating agencies have to
00:53say.
00:54So we are estimating that we are going to be able to more or less offset and to accommodate the
01:02impact on our fiscal side.
01:04And also for the consumer. We have a stimulus package for domestic consumers.
01:10So not every increase in energy prices at the international markets would be passed through domestic consumers.
01:20So I think we, the quick answer for you would be that we would have a relatively neutral and balanced
01:27effect from our domestic and fiscal fund.
01:30Minister, is there a price or a level or a duration at which oil needs to stay elevated or higher,
01:36at which that changes, and you need to rethink energy strategies?
01:43Well, it's not only level, but also the duration, Danny, of this impact.
01:49We believe that what futures markets are telling us is that this will be relatively short-lived, and it will
02:00be temporary,
02:01and we should be able to accommodate both the fiscal, the price, and the economic effects.
02:07We would be more concerned if this turns out to be more prolonged, and the effects on prices will be
02:17more long-lasting.
02:19But at this current level of oil prices and energy, I think for the moment we would have a close
02:27to neutral effect on our fiscal balances and our economy.
02:32I wonder the effect of the drop in the currency. The peso has dropped an extraordinary amount against the dollar.
02:39Does that give you a tailwind in terms of economic growth?
02:42And I know that you're trying to pass an infrastructure bill right now also to stimulate growth.
02:50Well, the peso has been one of the gainers in the currency market for the last 12 months.
02:59So what we have seen recently under this energy price situation is a relatively modest pullback from what we've seen
03:10over the last 12 months.
03:12So we are, you know, content where the peso is trading.
03:17It's a free-flowed regime for our currency, which is one of the most liquids in the emerging market concern.
03:26So overall, over the last 12 months, the peso has been performing very well.
03:33And I think what we are seeing is the currency market accommodating the shocks in the energy and financial markets.
03:42Sure, we have seen some volatility on our currency front as of late.
03:47But over the last 12 months, the peso has been doing okay.
03:54And we believe that this framework, which also is accompanied by relatively stable performance on the interest rate market,
04:06our bond markets have, you know, have sold a little bit over the last couple of weeks.
04:14But it's down markedly from last year.
04:18So I think this mix that we are facing, we are facing a relatively stable currency and bond markets compared
04:26to other economies.
04:28Right.
04:29Fit well for our investment strategy and infrastructure.
04:33Minister, we also have talks for USMCA's preliminary review ongoing in Washington, D.C. this week.
04:40Are you confident that it will be extended?
04:47Yes, we are.
04:49The teams have begun talks in Washington, D.C.
04:53And if you take a look at Mexico's trade balance with the United States over last year,
05:00we became the United States' largest trading partner both on the export front and the import front.
05:08Mexico increased its market share in the United States.
05:12So despite the headwinds, despite the headlines, Mexico and the United States' economic integration continues to move forward.
05:24And I think this testifies to the increased flexibility and prowess of North American manufacturing.
05:33We are very optimistic that we both countries will end up having a very good trade deal.
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