Press Release No. 14/543

Press Release: IMF Executive Board Approves New Two-Year US$70 Billion Flexible Credit Line Arrangement with Mexico

November 26, 2014

The Executive Board of the International Monetary Fund (IMF) today approved a successor two-year arrangement for Mexico under the Flexible Credit Line (FCL) in an amount equivalent to SDR 47.292 billion (about US$70 billion). The Mexican authorities stated their intention to treat the arrangement as precautionary.

The FCL is particularly useful for crisis prevention purposes as it provides the flexibility to draw on the credit line at any time. Disbursements are not phased nor conditioned on compliance with policy targets as in traditional IMF-supported programs. This flexible access is justified by the very strong track records of countries that qualify for the FCL, which gives confidence that their economic policies will remain strong.

Mexico’s first FCL arrangement was approved on April 17, 2009 (see Press Release No. 09/130), and was renewed on March 25, 2010 (see Press Release No. 10/114), January 10, 2011 (see Press Release No. 11/4), and November 30, 2012 (see Press Release No. 12/465).

Following the Executive Board’s discussion on Mexico, Mr. David Lipton, First Deputy Managing Director and Acting Chair, issued the following statement:

"Mexico has in place very strong policy frameworks aimed at maintaining prudent macroeconomic policies. Monetary policy is guided by an inflation targeting regime in the context of a flexible exchange rate; fiscal policy is governed by a fiscal responsibility law; and financial oversight is based on a sound regulatory and supervisory framework. These frameworks and strong public and private sector balance sheets have underpinned Mexico’s resilience to the global crisis.

"The authorities have made impressive strides in advancing structural reforms over the past year and a half, including in the energy, telecommunications, and financial sectors, as well as anti-trust regulation, labor markets, and the education sector. These reforms will boost productivity and output over the medium term.

"Mexico’s economic growth is recovering, supported by a strengthening U.S. economy. Macroeconomic policies have aimed to support the recovery and gradually build policy buffers. Mexico’s open and liquid financial markets have bolstered foreign portfolio and direct investments in recent years and can facilitate adjustment to external shocks.

"The country’s close ties with the global economy are a testament to the economy’s strength but heighten the economy’s exposure to external risks. An abrupt surge in global financial market volatility could lead to a reversal of capital flows to emerging markets, including to Mexico. The authorities are committed to adopting appropriate measures to deal with any shock. The successor arrangement under the Flexible Credit Line (FCL), which the authorities intend to treat as precautionary, will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against global downside risks and bolstering market confidence.

"The authorities do not intend to make permanent use of the FCL. They will continue to assess global conditions and intend to reduce access in any subsequent FCL arrangement, conditional on a reduction of global risks affecting Mexico."