MEXICAN ECONOMY OUT PERFORMS US ECONOMY

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The Mexican economy has maintained a favorable pace of growth due to: Domestic demand has accelerated, the economy is not hampered by imbalances, competitiveness has increased exports have gradually diversified, growth was 3.9% in 2011 and is expected to be between 3.3 and 3.5% in 2012, With the exception of the marked industrial cycle in 2008-2009, Mexico has recently outperformed the

United States. The investment and consumption accelerated
in 2011, The domestic demand is driven by the recovery in employment and credit, Exports are significantly higher than before 2008-2009 crisis, and an important process of diversification is taking place. The external balance is the highest in decades and international reserves are at historical maxima. Along with the FCL, this implies that

Mexico has almost 3 times the liquidity it had in 2008. In the past five years, fostered investment in infrastructure was higher by 62.2% (Vs. 2000-2006),attaining historical levels of close to 5% of GDP, That number excludes an additional 0.45% by Fonadin.

Beyond the recovery due to the global business cycle, a flexible exchange rate, wage convergence with Chine and proximity to the US (especially with high oil prices) will benefit Mexican manufacturing. Although inflation suffered a temporary increase late in 2011, it remains at moderate levels and domestic interest rates are close to historical minimums. Non-oil tax revenues historical maxima and oil production has stabilized. Discipline in public finances has led to a moderate deficit and a stable level of public debt. The strength of the Mexican economy allowed the federal government to issue 4 billion dollars in 2012 through new 10 and 30 year benchmarks at yields of 3.71% and 4.84%, historical lows for both tenors. Mexico has progressed with the structural reform agenda such as :Antitrust federal law, Auction of incentivized PEMEX contracts, Public Private

Partnerships, Infonavit Reform and it is complemented by a solid budget that generates confidence, promotes credibility and supports domestic demands.

Mexico has reached important housing goals in both economic and social impact terms during the present administration despite a global housing finance environment that suffered setbacks. Mexico achieved, almost a year ahead of schedule, 100% of the six year goal: 6 million actions related to housing (mortgages and subsidies) and an investment worth 1.4 trillion pesos. The challenges ahead are that the government needs to evolve its policy instruments and the private sector needs to refocus its skills to meet this challenge as well as making a bigger effort in terms of urban planning to make Mexicans cities sustainable.

Public institutions and private financial intermediaries expect to achieve 1 million housing actions in 2012, exceeding the target by 15%. The housing sector in Mexico has grown strongly and is reaching a natural level of maturity that requires adjustments in terms of policy and business strategy. the "Esta es Tu Casa" subsidy program will increase 57% in real terms for 2012 with new rules to induce more sustainable development models for housing. Through this program more than 30 billion pesos have been granted in the last six years, higher home values with better amenities are allowed and those that do not meet sustainability criteria are penalized or excluded. Federal, states and Municipal governments, housing developers and landowners come together to coordinate infrastructure, services, equipment, trade, education, health, industry, recreation and other inputs.

Despite a difficult external environment, the Mexican economy has performed well, the lack of imbalances at households, business, fiscal, financial and external's sectors imply a solid set of fundamentals. the budget for 2012 is a responsible and objective proposal, which at the time, will foster economic activity during the year. In 2012, Mexican housing finance and subsidy policy will remain strong.