APLA '13: Mexico economy slows on new regulations – consultant

18 November 2013 15:53  [Source: ICIS news]

CARTAGENA, Colombia (ICIS)--The new administration of Mexico's president, Enrique Pena Nieto, has changed the country's rules regarding mortgages and housing development, causing a sharp slowdown in the residential construction industry, a consultant from the country said on Monday.

The housing sector is a key end market for several plastics and chemicals.

In Mexico, the presidency had been occupied by the right-leaning Partido Accion Nacional (PAN) for 12 years. During its time in office, PAN adopted significant changes to government regulations, making it easier for developers to build houses and making credit more accessible to buyers, said Roberto Guzman, director of Mexico-based Pipa Consulting, a plastics consultancy.

Guzman made his comments on the sidelines of the annual meeting of the Latin American Petrochemical Association (APLA).

This benefited the country's house construction market without creating a real-estate bubble, Guzman said.

However, PAN was replaced by the election of a president from the Partido Revolucionario Institucional (PRI), Enrique Pena Nieto.

Since gaining office, Pena Nieto has rolled back some of the rules PAN had adopted regarding development and mortgages, Guzman said.

The rollback has tightened credit to home buyers and slowed down housing development, Guzman said. Already, Mexico's three largest developers are close to bankruptcy.

Looking forward, Guzman said there are some worries about the government adopting deficit spending in an attempt to stimulate the economy.

Recently, the Mexican Central Bank has lowered its 2013 forecast for GDP growth to 0.9-1.4%.

Guzman warned that the stimulus could cause inflation to increase.

Other concerns include an increase in corruption that could accompany the return of PRI to the presidency, Guzman said. PRI had ruled Mexico for decades prior to the 12 years that PAN held the presidency.

The APLA conference ends on Tuesday.

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By: Al Greenwood
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