Feb2014 - Mexico Border vs Non Border Consumer Price Index Comparison (and Possible IVA Effect)

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In January 2014, changes in Mexico's IVA (value added tax) were implemented that increased rates in the country's Border States from 11% to 16%. While much regional opposition to this change has come from the Border States, there has been little evidence to-date of impacts on consumers. Crossborder Group analyzed recent historic monthly consumer price index data from INEGI (the Índice Nacional de Precios al Consumidor - INPC) through January 2014 -- and found some surprising results comparing data from major non-border and border cities.

Notably, there does appear to be an unusual increase in Border State Cities' consumer price index in January 2014. It is unclear if this can be attributed entirely to the IVA increase - but additional future data will help to clarify this.

Also, another unexpected finding: odd peaks for Border State Cities consumer prices each November, and dips each May -- peaks potentially related to Mexico's November Buen Fin, as well as dips potentially related to some combination of Mother's Day sales on both sides of the border and US sales events related to Memorial Day.

Additional analysis is needed -- but Crossborder Group hopes this information may be useful for your Mexico and binational US-Mexico needs. Please feel free to contact us at Answers@CrossborderBusiness.com for questions or more information about our industry and market analysis services - or visit our website at www.CrossborderBusiness.com.

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Feb2014 - Mexico Border vs Non Border Consumer Price Index Comparison (and Possible IVA Effect)

  1. 1. Crossborder Informa: Notes on Mexico’s Consumer Price Index February 25, 2014  During a recent request to assess possible impacts resulting from Mexico’s 2014 IVA increases in border states, Crossborder Group analyzed Metropolitan-level Consumer Price Index data (Índice Nacional de Precios al Consumidor - INPC) from INEGI.  Data from selected major cities (see list below) were divided into “Non Border” and “Border” State cities – and monthly averages of the change in the INPC Index were calculated.  Several initial observations can be made from this data: o o 5 First, January 2014 data (the only monthly data available to-date following implementation of IVA increases in Mexico’s border States) does seem to show an abnormally high increase in the INPC Index in Border State Cities (compared both to historic averages and to Non Border State Cities). More data (February 2014, etc.) will be needed to assess if this is a temporary change. Second, there are notable peaks and dips that occur in the INPC Index in Border State Cities in November (peak) and May (dip) each year that do not exist in Non Border State Cities. It could be that November peaks are partly associated with the annual Buen Fin sales, and May dips are associated with some combination of Mother’s Day sales in Mexico as well as possible competition with Memorial Day sales in the US – but, again, additional analysis is needed. Monthly Change in MX Consumer Price Index Selected Non Border State v Border State Cities (Dec2010 base = 100, source: Crossborder Group analysis of INEGI data) 4 3 2 1 -1 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 0 -2 -3 -4 -5 Av Monthly Price Index Chg - Non Border Av Monthly Price Index Chg - Border INEGI Source Data: “Precios e inflación > Índice nacional de precios al consumidor > Mensual > Índice > Por áreas metropolitanas y principales ciudades” (http://www.inegi.org.mx/sistemas/bie) Cities Included in this Analysis:  Non Border State Cities: Mexico City, Guadalajara, Puebla, San Luis Potosi, Aguascalientes, Leon, Queretaro  Border State Cities: Monterrey, Tijuana, Mexicali, Ciudad Juarez, Hermosillo, Matamoros Mexico, US & Binational: Research + Strategies for Business, Planning, and Advocacy • CrossborderBusiness.com • 1.888.4XBORDER Crossborder Group Inc.: 619-710-8120[tel] ▪ 9605 Airway Road, Suite B, San Diego , California 92154 USA Crossborder NS, S de RL de CV: Blvd. Diaz Ordaz #12415, Tijuana Baja California 22106 México

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