IMF Renews Mexico’s $70 Billion Credit Line for Two Years

The International Monetary Fund renewed a Mexican flexible credit line of about $70 billion for two years, saying the nation’s government intends to “treat the arrangement as precautionary.”

The line replaces another that expires this month and has never been used. The nation in 2009 became the first to receive a flexible credit line, a mechanism created to help underpin economies deemed to have strong fundamentals.

The loan facility will provide additional protection to the Mexican economy, Finance Minister Luis Videgaray said in a statement today. The credit line has helped Mexico guard against risks to economic growth, the IMF said Nov. 12 at the conclusion of its Article IV consultation.

“This credit line recognizes the Mexican economy’s strength, which constitutes a solid and stable framework as we’re working on the effective implementation of the package of structural reforms,” Videgaray said.

Two years into his term, Mexican President Enrique Pena Nieto has passed laws to open the state-controlled energy industry to private investment and spur more competition in a telecommunications industry dominated by billionaire Carlos Slim’s America Movil SAB.

While the government says the economy will grow 2.1 percent to 2.6 percent this year, down from a 3.9 percent forecast at the start of the year, it forecasts that growth will quicken to 3.2 percent to 4.2 percent in 2015 as the economic overhauls are implemented and the U.S. economy expands.

Mexico’s central bank continues to accumulate international reserves, boosting them to a record $193 billion last week, up 9.3 percent this year. Banco de Mexico Governor Agustin Carstens has repeatedly cited the importance of foreign reserves and Mexico’s IMF credit line in protecting the economy against external shocks.

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