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Strategies & Market Trends : Countries

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From: Sam Citron2/18/2009 2:55:24 PM
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Slim’s [Mexican] Economic Forecasts Are Alarmist, Lozano Says (Update2)
By Jens Erik Gould

Feb. 10 (Bloomberg) -- Mexican billionaire Carlos Slim’s economic forecasts are alarmist, may discourage consumers and scare away investment as the country grapples with a global downturn, Labor Minister Javier Lozano said.

Slim, one of the world’s richest men, told lawmakers in Congress yesterday that Mexico’s gross domestic product will “plunge” and unemployment will increase to record levels as exports and the price of oil drop.

No forecast has been more “grave” than Slim’s, Lozano said today in an interview with the Televisa television network.

“All the headlines refer to this catastrophic scenario that the most powerful man and businessman we have is giving,” Lozano said. “He should be conscious that this isn’t just another declaration or forecast. It can really have an impact on investment, employment and the mood of the people.”

The government is seeking to downplay Slim’s forecast after the country’s biggest newspapers printed front-page articles about the billionaire’s comments today. The Finance Ministry expects GDP to be unchanged this year, an outlook that’s more optimistic than predictions by analysts and the central bank.

Analysts polled by the central bank in a Feb. 1 survey forecast the economy will contract 1.2 percent this year as demand for exports wanes, remittances fall and job losses mount. The central bank says the economy may shrink as much as 1.8 percent.

Job Losses

Mexico has lost almost 500,000 formal jobs since November, the worst performance in the labor market since the Tequila crisis in the mid-1990s, Goldman Sachs Group Inc. analysts said in a report yesterday. Formal employment fell by 128,122 jobs in January, according to the Social Security Institute.

Slim, 69, is the world’s second-richest man according to Forbes magazine. He controls Telefonos de Mexico SAB, Mexico’s largest fixed-line phone company, and America Movil SAB, Latin America’s largest mobile-phone company. Slim agreed to loan the New York Times Co. $250 million last month.

Telmex’s press office declined to comment on Lozano’s remarks when contacted by Bloomberg News.

Organizacion Soriana SAB, Mexico’s second-largest retailer, fell 2.3 percent to 23.4 pesos, the first decline in three days. Investors who heard Slim’s remarks may be betting that consumers will further curtail spending, said Tufic Salem, an analyst with Credit Suisse in Mexico City.

Economic Concerns

“There’s a lot of concern about the economic environment,” Salem said in a phone interview. “It’s all closing in.”

Lozano said that while the economy will probably continue to lose jobs and may contract in the first half of the year, President Felipe Calderon’s stimulus plan will help mitigate the impact of the global downturn.

Calderon last month announced an initiative to increase infrastructure spending, raise unemployment benefits and lower energy costs. The plan, along with moves announced last year that include building Mexico’s first new refinery in almost 30 years, are worth 1.8 percent of gross domestic product, the government says. Mexico also freed a similar amount in credit for small and medium-sized businesses, Calderon said in a Jan. 31 interview.

The government and industries will increase spending on projects such as roads, airports and sea ports to 570 billion pesos ($39.9 billion) this year, Calderon said last month.

“He’s not considering what’s being done, everything we’re adding to the domestic market,” Lozano said about Slim.
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