Each year, our economic and financial forecasting exercise includes a list of possible positive or negative surprises for the world economy and that of Mexico. It is worth mentioning that we rarely stick to any of these possible predictions. Always, reality brings us the unimaginable. However, these collaborations are read much more than anyone. The same as horoscopes. People want to know what can happen so they can prepare or anticipate.
Although we use the terms black or white swans here, as a metaphor to differentiate those of the black swan, Nassim Nicholas Taleb (the author of The Theory of the Black Swan), never differentiates in the nature of the result, favorable or unfavorable, with colors. Simply, an event that appears by chance, that is totally unexpected, or highly improbable, be it good or bad, and that can have a great impact, is considered a black swan. So it is nonsense to try to predict swans, but the exercise may be worth it. We will start with the negatives, five global and five from Mexico.
Black swans for 2022:
1. Putin invades Ukraine. After the annexation of the Crimean peninsula, without a single bullet involved, and without NATO having taken any action in this regard, apart from some economic sanctions, the territory of Ukraine is in constant risk of being destroyed by Putin. want to invade. In the virtual interview that President Joe Biden and the Russian President had a few months ago, Biden was very clear in warning that an invasion will not be tolerated. If this event occurs. Global financial markets would panic, and a strong flight to quality would be generated towards the dollar and towards gold.
2. China invades Taiwan. Another constant threat is latent in a possible invasion of China in the territory of Taiwan, which could generate a global conflagration. The effects on global markets would be similar to the flight to quality mentioned above.
3. Global inflation is skyrocketing and the Fed has to sharply increase its benchmark rate and go out and collect money.
4. A new pandemic or a new, more resistant and deadly strain emerges with great force, leading to a new episode of great global confinement.
5. An attack on Joe Biden generates strong global instability.
6. Congress achieves approval of the constitutional change required by the electricity reform initiative. This generates a great evasion of global companies towards other countries. Mexico loses investment grade. The resources of foreign residents in government securities are left abruptly and a devaluation occurs.
7. The federal government decides to nationalize the savings of the Afores. The accumulated savings channeled to the Afores add up to 5 trillion pesos, equivalent to 20 percent of GDP. If they are nationalized, the government agrees to pay future pensions, and uses present resources at will.
8. The war between the different drug cartels gets out of control and generates a crisis of insecurity.
9. A large group of legislators from the PRI goes to Morena. The Congress is dominated by the party in power and the initiatives of the Executive and the Morenoites are radicalized.
10. A catastrophic event of nature, a great earthquake, or a huge hurricane strongly damages the electrical infrastructure, and the highways, which paralyzes the country and generates panic purchases.
The white swans for 2022. Here we also mention five global and five for Mexico:
1. Covid infections can be controlled and there will be no new waves of infections in the world in 2022.
2. Global inflation drops significantly and the Fed announces that it is delaying the dismantling of its extreme monetary policy
3. The US and Russia reach an agreement on Ukraine.
4. The US and China negotiate a stronger tariff reduction agreement.
5. The trend of actions in favor of the environment generates an investment boom that makes global GDP grow faster.
6. The federal government of Mexico announces a radical change in its energy policy and reopens investment opportunities for the private sector, both in the field of hydrocarbons and electricity, as well as in renewable energies. Pemex’s new business plan could go in this direction.
7. Inflation drops below 4% surprisingly and the Bank of Mexico may once again reduce its reference rate.
8. The US forces Mexico to better comply with the rule of law and the T-MEC rules.
9. The Executive announces a profound reform to the pension systems and financial laws that allows a more efficient, inclusive and deep financial system, with greater savings and lower financial costs.
10. The Federal Executive proposes a comprehensive tax reform initiative friendly to investment and employment.
Surely other possible surprises have come to your head. Here we mention only a few of them. Now it is up to you to put their probability of occurrence. We know in advance that some of these may have zero probability for you. For us too; but for that reason, if they did happen, they could be swans.