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Account Accounting credits (debits or credits) that identify transactions undertaken by a client with a bank in relation to a standard lend/borrowing transaction contract.
Advance payment Not yet enforceable payments that banks receive at the client's request to meet immediate payment periods.
Aggregate demand The amount of goods and services households, companies, the government and the rest of the world can and want to obtain at a given price level and for a certain period in a country. The National Accounts System breaks down aggregate demand according to buyers' economic function in intermediate and final demand.
Aggregate product Primary weighting unit within the CPI basket comprised of a series of specific products with similar characteristics. For example, all brands and types of cookies constitute the main concept of cookies.
Aggregate value (gross) The additional value that goods and services acquire during the production process.
Aggregate value, or gross domestic product, is the value created during the production process. It is a duplicate-free measure obtained by subtracting the value of intermediate goods and services used as inputs from gross production.
It can also be calculated as the sum of payments to factors of production; in other words, salaries, fixed capital consumption, operating surplus and production taxes net of corresponding subsidiaries.
Altered banknotes Formed by joining two or more parts of different banknotes. These notes have no value.
Altered metal coins Coins whose gold, silver, platinum or palladium have decreased as a result of filing, cutting, dissolving in acids or any other means of alteration.
Amortization table A table or list given by banks to clients along with the loan agreement containing a breakdown of payments by period through to the loan's full amortization. It contains the following information:
I. Client and loan identification data.
II. Date it was prepared.
III. The following (minimum) concepts are included for each period:
a) Period date or number.
b) Principal amount.
c) Amount corresponding to ordinary interest.
d) VAT on interest, if required.
e) Commissions, if required.
f) Obligatory insurance premia, if required.
g) Any reductions the client will receive if he/she complies with the conditions set forth in the contract.
h) The total amount the client must pay during the period (sum of paragraphs b to g).
i) The unpaid amount of the period in question which is calculated by subtracting the principal payment referred to in paragraph b from the unpaid balance of the previous period.
IV. The total amount payable resulting from adding up all of the periodical payments referred to in paragraph h) section III above.
V. Concepts subject to variation.
Autonomous factors Factors impacting liquidity that the central bank is unable to control and which do not normally stem from the use of monetary policy instruments. These factors include public demand for banknotes and coins and government's accounts with the central bank.
Auxiliary credit organization Term used to refer to diverse financial entities regulated through the General Law on Auxiliary Credit Activities and Organizations such as: General Deposit Warehouses, Credit Unions, Financial Leasing Companies and Financial Factoring Companies. Money Exchange Houses and Multiple/Special Purpose Financial Companies.
Available income Also referred to as disposable personal income. Corresponds to the amount available to the company for consumption and saving. It is the result of national income (NI) less direct taxes plus transfers less social security contributions less profits plus distributed dividends.



Balance of payments Systematic registration of all economic transactions that take place between residents of the country compiling it and the rest of the world. Its main components are the current account, the capital account and the official reserves account. Each transaction is incorporated in the balance of payments as a credit or debit. A credit is a transaction that results in payment from foreigners; a debit is a transaction that results in payment to foreigners.
Economic transactions included in the balance of payments are goods and services and rent between an economy and the rest of the world; the active and passive financial transactions of that economy with the rest of the world; property transfers and other changes in monetary gold; special drawing rights (SDRs); and, unilateral transfers.
Banco de México Accountholders' System (SIAC, for its acronym in Spanish) A system that manages the current accounts of Banco de México's participants. While it allows definitive fund transfers between participants' accounts with no restriction on the amount, more than a payments system it is the means by which the central bank provides payment systems' participants with liquidity.
After SIDV and SPEI® have closed, participants' balances are transferred to SIAC and SICAM's settlement also takes place in this system. Also, when operating timetables coincide, SIAC accepts fund transfers from and to SIDV and SPEI®. These transfers can only take place between the accounts of the same participant.
Bank Financial intermediary specifically authorized to receive deposits from the general public and to subsequently place them in financial markets through loans or investments.
Bank clearing Activity undertaken by banks (deposit banks) involving the reception and delivery of checks issued in their favor or charged to them.
In Mexico clearing takes place through clearing houses and Banco de México's bodies.
Bank financing Loans granted by the banking system to households, private companies and the public sector as well as securities issued by private companies, the public sector, and the central bank and acquired by the banking system.
Bank funding rate Rate representing one-day wholesale transactions undertaken by banks and brokerage firms in the interbank market in relation to bank debt securities. Banco de México calculates this rate by obtaining the weighted average rate paid in relation to direct and repo transactions with a term of one working day involving bank promissory notes, bankers' acceptances, and certificates of deposit that have been settled in Indeval's delivery-versus-payment system.
Bank Indemnity Bonds (BIB) Bonds that document debt taken out in 1982 by the Federal Government to nationalize banks. They were a means of compensating for the expropriation of shares issued by private banks.
Banker's acceptance Bills of exchange drawn by a company in favor of a bank. They are quoted by brokerage firms in terms of discount rates and the transactions take place through the Mexican Stock Exchange and banks' money desks; they pay an interest rate between Cetes (Treasury Certificates) and commercial paper.
Banking The activity undertaken by commercial and development banks that make up the banking system and constitute financial intermediation institutions. In other words, they take deposits which they pay interest on (borrowing rate) in order to, along with own resources, subsequently grant loans, discounts and undertake other financial transactions on which they charge interest (lending rate), commissions, and any expenses.
Banking system Organizational structure comprising banks, which responds to guidelines dictated by the competent authority. It includes domestic banks, private and mixed banks, and the central bank.
Banknotes fit for circulation Those that are complete, have not been cut, ripped, torn, have no punctures or markings, and their degrees of soiling wear (for paper banknotes) and of ink wear (for polymer banknotes) fall within 1-6 in the Selection range, and therefore are appropriate to remain in circulation.
Banknote fractions with value They have the following features:
First. The fraction to be evaluated corresponds to an authentic banknote issued by Banco de México, and it is complete; in other words, there should be no additions of any kind, and if there are, they are to be ignored when making the evaluation.
If the part comprises one or several that have become detached from the same note only the largest should be evaluated; the others should not be considered in the evaluation.
If the fraction comprises parts of different banknotes it has no value because it is an altered banknote.
Second. That it consists of more than one half of the surface of a complete banknote of the same denomination and type of banknote issued by Banco de México.
Banknote fractions without value Incomplete banknotes that do not meet the rules for grading note parts mentioned in the definition "parts of banknotes with value".
Banknotes (paper currency) Document made out to the bearer usually issued by a country's central bank which circulates as legal tender.
Banknotes marked with messages These banknotes have words, phrases or drawings on them in manuscript, printed or any other undeletable form aimed at divulging political, religious or commercial messages to the public. They have no value.
Banknotes unfit for circulation Those that are somehow damaged, and if they remain in circulation, they will keep on deteriorating until they become valueless, and therefore it is important to exchange them for banknotes in good condition. These banknotes can be exchanged in most of the country’s bank branches or in any credit institution (bank) where you are a client. This type of banknotes include: damaged banknotes, pieces of banknotes with value, and shapeless/deformed banknotes.
Banks' overdraft with the central bank An overdraft occurs when a commercial bank's current account withdrawals are greater than the available balance.
Banco de México fines banks an amount equal to double the overnight interbank funding rate for overdrawing on their accounts.
Basic account Demand account that pays no interest offered by banks under the terms and conditions established by the central bank (Banco de México). The provision establishes a payroll account and another for the general public and specifies minimum related services such as a debit card.
Basis point A level on a scale of 100 points used to express variations in bond yields. For example, if the yield on a bond changes from 10.0 percent to 10.33 percent it is said that it rose by 33 basis points.
Binding offer Document that at the client's request and based on information he/she attests to (i.e. without requiring the presentation of documents that support such information) is delivered in writing at no cost and obliges the entity granting the mortgage to establish and maintain the terms and conditions under which the entity will grant the loan for a period of 20 calendar days as of its reception date. It contains at least the following:
I. Loan amount and form of delivery;
II. Form of amortization;
III. Ordinary and past due interest rate and Total Annual Cost;
IV. Applicable fees;
V. Express acceptance by the entity granting the loan that advance payment will be received by any other entity and will transfer the rights derived from the corresponding contract as well as express acceptance of the borrower's replacement;
VI. Borrower expenses;
VII. Reasons for and fines applicable to early termination; and
VIII. Any others stipulated in the Ministry of Finance and Public Credit's Rules.
The binding offer becomes effective as long as the client notifies in writing his/her acceptance of it in writing during the term and presents all documents supporting the information provided in the application. The entity may not request any additional document to the ones indicated in the application and must grant the credit in the terms and conditions established in the binding offer as long as the following is verified: the applicant's identity, the authenticity of the data the application has provided, his/her credit capacity based on healthy market practices and conditions, an appraisal by an authorized appraiser, and compliance with other formalities.
Bond An instrument issued by a lender obliging the latter to make specific payments to the holder over a specific period of time. Bonds can have different characteristics, and issuers can range from sovereign governments to companies. The most common bonds are those that oblige the issuer to make payments (known as coupons) during the life of the bond and to repay its nominal value at maturity..
Bond issuance The distribution of securities by a company in order to obtain funds. The placement in the market of such securities is done by one of several financial institutions within the country or abroad.
Bonded warehouses Auxiliary credit institutions intended to store, keep or preserve goods or merchandise and issue certificates of deposit and pledge bonds, the latter being optional when at the depositor's request they are issued as non-negotiable certificates of deposit. Bonded warehouses may also undertake the following activities: a) transform deposited merchandise in order to increase its value, without their nature essentially changing; b) transport merchandise that enter or leave their warehouse as long as they are going to be or have been stored in it; and, c) issue certificates of deposit for merchandise in transit if the depositor and the lienholder agree and run the inherent risks and insure the goods via the warehouse.
Brokerage Reception of funds from the public for investment at the broker's discretion. The Mexican Law distinguishes between brokerage, commission and other services that bring supply and demand for securities together. Transactions on behalf of others consisting of investing in securities that are part of a stock exchange public offering.
Brokerage firm Private financial entity authorized to act in the stock market. Its purpose is to assist investors in the buying and selling of diverse instruments, such as bonds, securities and stocks, among others.
Budget Anticipated financial estimate, usually annually, of Federal Public Sector income and expenditure in order to comply with established programs' goals. Also a basic instrument for expressing economic policy and planning decisions.
Budget deficit The result obtained from comparing the financial deficit with the net increase in debt with a negative balance or the amount obtained from subtracting expenditure from revenues, expenditure being the larger. It is obtained by adding the acquisition of net long-term financial assets to the capital deficit.
Budget deficit or surplus (balance) The positive or negative balance resulting from comparing revenues and expenditures from the Federal Government and agencies and companies under direct budgetary control, whose funding is established in the Federal Budget (excluding amortization), and the balance from other accounts.
Budget spending Spending by the Federal Government, decentralized entities, and directly controlled state-owned companies according to their activities provided for in the Federal Budget.
Budgetary balance Balance resulting from comparing the revenue and expenditure of the Federal Government plus that of direct extra-budgetary control state-owned enterprises.



Capital account Balance of payments component showing the change in a country's assets abroad and foreign assets within the country other than those comprising the official reserve. This account includes a country's direct investments, and the purchase or sale of foreign securities and liabilities (bank and non-bank) with foreigners over a one-year period. Increases in a country's assets abroad and decreases in foreign assets within the country other than official reserve assets, represent capital outflows or capital account debits because they involve payments to foreigners. On the other hand, decreases in a country's assets abroad and increases in foreign assets within a country represent capital income or credits because they result in payments from foreigners.
Record of expenditures made by the Federal Government in relation to infrastructure works together with their maintenance and repair when acquiring property required to provide administrative services, constructions, and the creation or increase in trusts for loans or investments.
Capital expenditure Total expenditure allocated to the creation of capital goods and the preservation of existing ones, to the acquisition of property and securities by the Federal Government as well as funds transferred to other sectors for the same ends which contribute to growing and preserving the physical or financial assets of the nation. Also includes expenditure on the amortization of debt derived from credit or financing granted to the Federal Government by local or foreign institutions.
Capital goods Goods that are not used for consumption but for production, either in the transformation process or directly to increase assets or capital.
Term usually applied to fixed assets which sometimes cover items or factors that contribute to production. It is synonymous with productive capital (or goods); in other words, the capital used in production. These terms also refer to the material forms of production factors such as machines, equipment etc. as opposed to capital values (or capitalization) which is the monetary measure of such factors. They are assets used to produce other assets.
Capital market Series of financial institutions that steer supply and demand for long-term loans. Many of the institutions are intermediaries between short-term markets.
Cash deficit or surplus A deficit occurs when revenue collected by the Federal Treasury in relation to the Federal Income Law does not cover payments made. A surplus takes place when revenues exceed payments. It expresses the Federal Government's results and comes from adding the change in foreign accounts to the budget deficit.
Result obtained by comparing the available liquid revenues and expenditures of state sector entities, including transfers.
Change in inventories The difference between the volume of inventories at the beginning and at the end of each period valued in average prices effective during the same period of time.
CIF value (Cost, insurance and freight) The market value at a country's borders of imports of merchandise and other goods, etc. including all transportation costs and insurance associated with the goods from the export country, but excluding the cost of unloading them from a ship, plane, etc., unless it is paid by the transporter.
Clearing house Institution established by the system's banks and managed by Banco de México to exchange checks and commercial instruments they are responsible for, and settling the resulting balances from all transactions. Through these operations, banks maintain permanent contact for settling commercial instruments representing changes in the fund and/or portfolio, clearing reciprocal loans, and only meeting differences in money. This decreases unnecessary cash movements, and by eliminating direct payments, also eases settlements and prevents risks and wasted time.
Clearing houses channel documents delivered to a bank to be charged to an account opened at another bank. Documents affecting the clients of a same bank do not pass through clearing houses as they are cleared internally.
Commercial bank integral deposits Integral deposits include those made through traditional banking instruments, banker's acceptances, and government securities banks managed for their clients or intermediaries on behalf of third parties.
Commercial banks Banks authorized by the Federal Government to capture funds from the public and grant loans to support economic activities. Deposit and funding transactions are subject to borrowing and lending rates.
Commercial Bank's Average Cost of Funds (CPP, for its acronym in Spanish) Average weighted cost paid by different banks for deposits in different instruments, a monthly estimate of which is published by Banco de México between day 16 and 20 of each month in the Official Federal Gazette. The weights are obtained by multiplying the interest rate by its weight in deposits in banks' different instruments.
Commercial Bank's Average Cost of Term Deposits (CCP, for its acronym in Spanish) Average cost of deposits paid by different banks for term deposits. In the medium run, this indicator will replace the Commercial Bank's Average Cost of Funds (CPP, for its acronym in Spanish).
Commercial paper A debt security (negotiable promissory note) with no specific guarantee, issued by corporations whose shares are traded on the Mexican Stock Exchange; their price is low and their issuance must be authorized by the National Banking and Securities Commission which ranges between 7 and 91 days.
Compound interest Interest accumulated on the capital that produces it to increase it and in turn yield more interest.
Constant prices Prices quantified in relation to prices that prevailed during a given year and are being used as a comparison base.
Indicator that expresses the value of merchandise and services at base year prices.
Shows the dynamic observed in economic phenomena (with reference to a base year) after the influence of price fluctuations on macroeconomic aggregates has been stripped out.
Consumer Individual that makes final use of the goods and services produced by a country's economy in order to meet its needs.
Consumer goods All goods produced by society within the country or imported to meet demand directly: food, beverages, accommodation, personal services, furniture, apparel, decorations, etc. Any merchandise that meets public consumer needs. These goods are the opposite of production or capital goods that are used to produce other goods such as factory machinery.
Consumer Price Index (CPI) The CPI is an economic indicator. Its purpose is to measure changes in the prices of a basket of goods and services representing Mexican households' consumption over time.
Consumption Acquisition of goods and services from the government and the private sector to meet immediate needs.
The economic process consisting of buying or spending on goods and services to meet the needs of households, companies and the government.
Contract cover Table of information specifying the main terms and conditions of the operation set forth in the contract. It must appear on the front of the contract. The cover contains mandatory disclosures related to user protection and the client's consent.
Core inflation Increases in the prices of a CPI subseries containing the general product items with less volatile prices. It measures the medium-term inflation trend.
Counterfeit banknotes Notes with images or other elements used for Banco de México banknotes which could be ideal for deceiving the public because they could be mistaken for banknotes of legal tender.
Counterfeit metal coins Coins with images or other elements used in coins in circulation that could easily deceive the public because they can be confused with legally issued coins.
Credit and counterparty risk Counterparty risk exists when one of the parties to a financial agreement may not be able to meet its financial obligations, thus forcing the other party to incur a loss. Credit risk relates specifically to a loan agreement, i.e. when the borrower cannot pay his/her debt. Besides default, events which affect the value of a loan without it necessarily implying a default on the part of the borrower have recently been incorporated. For example, a rating agency downgrade changes the quality of a loan, as it means the agency believes that the likelihood of a debt issuer defaulting has increased, and so the credit is worth less as it is discounted at a higher rate.
Credit card A means of obtaining funds associated with or subject to a credit contract.
Credit institution An organization whose main activity consists of capturing deposits and granting loans.
Credit unions A special type of corporation, the purpose of which is to facilitate the use of credit by members. They are considered auxiliary credit organizations. To form one requires authorization from the National Banking and Securities Commission, which is their oversight body.
Creditor subrogation The replacement of a borrowing entity in a mortgage loan with another.
Currency Any currency or goodwill (checks, drafts, letters of exchange, payment orders and special drawing rights) that is internationally accepted as a payment means.
Currency in circulation The sum of the means of payment needed to undertake any kind of economic transaction. It is expressed as the balance of checking accounts in local currency (with or without interest) plus the amount of banknotes and coins held by the public.
Currency rate of change Gradual and ongoing change in the parity of one currency versus others. It implies the loss of a local currency's value and is an export support and stimulus mechanism which reduces the cost of exported goods and services.
Current account Balance of payments component registering trade in goods and services and unilateral transfers from one country to another. The main services transactions are travel and transport, and revenue and payments in relation to foreign investments. Unilateral transfers refer to royalties paid by individuals and the government to foreigners and royalties received from foreigners. Goods and services exports and revenue from unilateral transfers enter the current account as credits (with a positive sign) because they involve the receipt of payments from foreigners. Goods and services imports and unilateral transfers are recorded as debits (with a negative sign) because they involve payment to foreigners.
Current accounts (single accounts) Commercial bank deposits with Banco de México.
Current expenditure Public sector spending which does not create an asset but constitutes consumption; in other words, expenses related to the hiring of human resources and to the purchase of goods and services required to develop administrative functions.
Current prices Indicator of the value of merchandise or services accumulated at the time of the transaction. Used to refer to merchandise expressed in annual prices.
Customs Customs are public administrative offices established at a country's ports of entry or exit that are part of the Ministry of Finance's Revenue Office, and also have powers to collect taxes and other duties, tax goods entering and leaving the country, and to enforce the corresponding laws as well as other related, such as health, and communications and immigration, among others.



Damaged banknotes

Those that, after meeting one or more of the criteria listed below, must be withdrawn from circulation:

  • They have a soiling degree (paper banknotes) or ink wear degree (polymer banknotes) of 7-10 in the Selection range.
  • They have been cut or torn, and have been/or not put together with adhesive clear tape or clear glue.
  • They have missing pieces of less than or equivalent to 6.16 cm² (the size of a currently circulating ten-peso coin, approximately).
  • They have stains, marks, numbers, words, phrases or drawings, written or printed on them in an indelible way, as long as they are not political, religious or commercial messages. If they have the latter type of messages, they would lose their value.
Damaged metal coins Coins that are bent, deformed, burned, perforated, impregnated or covered in oxide or other elements that change their appearance but can remain in circulation.
Debit card A means of obtaining bank funds on demand and payment instruments. Debit cards can be used to: a) obtain funds over the counter at banks; b) obtain funds through automated equipment and systems; and, c) dispose of cash and/or acquire goods and services at affiliated businesses.
Debt Amount of money or goods that a person, company or country owes another and which constitute obligations that must be met within a given period. Depending on its origin, debt can be classified as domestic or foreign and depending on its destination, either public or private.
Debt placement Process through which the Federal Government receives loans from a domestic or external source and formalizes, through contracts, bonds, certificates and documents that cover obligations derived from exercising the budget, and which represent a means of financing for the Federal Public Sector.
Debt service The amount payable in amortization, interest, commissions or other expenses either within a country or outside of it in local or foreign currency derived from Federal Public Sector loans.
Debtor subrogation The replacement of a debtor in a mortgage loan with another.
Debts from Previous Fiscal Years (ADEFAS, for its acronym in Spanish) Series of liabilities entered into, accrued, accounted for and authorized within budget allocations that were not settled at the close of the corresponding fiscal year. Commitments acquired by the Federal Government in a fiscal year accrued as of December 31 of the same year, and to be settled the subsequent year during the period between January 2 and March 31 as long as the Ministry of Finance is informed previously of their amount and features.
Default interest Interest produced by capital between the maturity date of an unpaid loan and the date on which it is settled.
Deficit or surplus Negative or positive result from comparing the expenditures and revenues of an economic entity.
Deflation An economic phenomenon consisting of a general reduction in prices caused by a decrease in the amount of money in circulation, which in turn slows down the rate of growth in overall economic activity, and therefore impacts employment and the production of goods and services. It is the opposite of inflation.
Sustained and general reduction in a country's prices. Opposite to inflation.
Deflator Refers to the price indicator applied to current values in order to express them in real or constant terms at benchmark year prices.
Deformed banknotes Polymer banknotes that are deformed from being exposed to heat, some kind of solvent or any other procedure/substance.
Demand Amount of goods and services that economic agents require and can buy at a given price for a certain period of time.
In theory, demand and supply are the two basic components that set the price of goods and services.
Any person's desire to buy a good or economic service.
Demand for money The amount of banknotes and coins required by people/companies for transactions (to make payments), for precaution (to make unexpected payments), and for speculation (to face a possible decrease in the value of other assets). For example, an increase in demand for money from the public can be reflected in an increase in the amount of banknotes withdrawn by the public from ATMs, which meet that demand using resources provided by the central bank.
Deposit rate The percentage a bank pays to someone who deposits money through any of the instruments available for that purpose.
Deposits The domestic market captures resources when: a) a given person or massive communication media offer or promote the procurement of funds or resources, or b) funds or resources are requested often or professionally. In both cases, resources are captured through direct or contingent liability causing acts, in which the intermediary is obliged to cover the principal and, should it be the case, the accessories.
Depreciation (fixed capital consumption) The loss or decrease in the material or functional value of a tangible fixed asset due basically to the wear and tear of the property because it has not been covered by repairs or adequate replacements.
Accounting procedure aimed at systematically and reasonably distributing the cost of tangible fixed assets less their salvage value (if they have one) divided by the asset's estimated useful life. Accounting depreciation is therefore a distribution and not a valuation process.
Loss of value due to the use of a fixed asset that was not restored through repairs or replacement of the parts. Deterioration of capital goods during the production process which is quantifiable and applicable to production costs.
Derivative Financial instruments that generate payments or obligations, which in turn depend on the value of other assets such as commodities, currencies, bonds and stock prices, and market indexes. Futures and options are examples of derivative instruments.
Devaluation Reduction in the value of the local currency in relation to foreign currencies. In terms of the currency of a country, devaluation cheapens its exports and increases its imports prices.
Development bank financial system One of the public sector's main mechanisms for achieving and steering the country's social and economic development by financing strategic investment projects, channeling funds to priority activities and regions, supporting public works with a strong social bias, and providing technical advice. The system basically includes Nafinsa, Banrural, and Banobras.
Development banks Institutions that provide long-term banking and loan services subject to the priorities of the National Development Plan, and in particular of the National Development Funding Program, to promote and finance those sectors of the economy set forth in their organic laws. For example, Nacional Financiera (NAFIN) is entrusted with the promotion of savings and investment as well as channeling financial and technical support to the industry, and in general to the national and regional economy. Development banks fund projects that are a priority for the country.
Direct controls Mechanisms used by central banks to intervene directly to control nominal variables and achieve goals (inflation-related or others). For example, many central banks can set quotas and limits on bank loans or deposits.
Direct taxes Taxes levied directly on a person's wealth or income, and which cannot be passed on to prices.
Directo a México Directo a México is a service for sending money from a bank account in a participating bank located in the US to a bank account in any bank in Mexico.
Discount bonds Documents issued by banks that are negotiated in the secondary market below par.
Also, debt bonds with a haircut on the original principal.
Discount rate Return index used to discount future cash flows at their current value.
Discriminatory practice The following are considered discriminatory practices by banks:
I. Actions to prevent clients from different entities entering into transactions;
II. Charging different fees depending on the issuer of the corresponding disposition means, and
III. Actions to prevent clients from using the infrastructure of other entities or discouraging their use.
Banks' exemption of accountholders or borrowers from the payment of commissions or setting lower commissions when they use their infrastructure will not be considered a discriminatory practice.
Domestic financing Amount of borrowings in cash or kind from domestic creditors also authorized and recorded by the Ministry of Finance regardless of the type of currency they are in.
Domestic public debt All liabilities entered into by the Federal Government with local creditors payable within the country in both local and foreign currency. Their payment does not imply an outflow of funds.
Domestic savings Amount of resources generated by the local economy through the country's financial and tax systems destined for domestic financing and the balance of payments current balance. It is the unconsumed part of national income.
It is the difference between disposable national income and final private/ government spending on consumption.
Dumping Selling merchandise abroad at a lower price than what it is sold at in the exporter's domestic market. Its purpose is to obtain competitive advantages abroad. It can take place either occasionally when a country wants to increase sales abroad, and persistently and aggressively as part of a country's foreign economic policy. When detected it is usually penalized by the affected countries.
Durable consumer goods Merchandise with a useful life of more than one year required by economic agents, namely, households, companies and governments in order to function, such as homes, cars and domestic appliances, among others.
Duty Official tariff corresponding to the payment of taxes or contributions and rates or rights; officially set for the payment of fees corresponding to certain professional activities in return for a service received. Tax that must be paid in relation to imports. They can be "ad valorem" or a percentage of the value of the goods or "specific" such as a set amount per unit of weight or volume. Duties are used to obtain government revenue or to protect domestic industry from import competition.
Tax or tariff on products transferred from one country to another. These tariffs increase the price of imports making them less competitive in the importing country, which tends to restrict their sale.



Early payment Partial or full payment of the unpaid balance of a loan's principal before the date on which it is enforceable.
Economic activity A series of actions associated with the production, distribution and consumption of goods and services that meet material and social needs.
Economic agents Refers to the classification of productive, administrative or consumption units that participate in the economy. The National Accounts consider households, companies, the government, and external economic agents. In the case of transfers, economic agents are considered to be public companies, private companies, decentralized entities, merchandise producers, social security institutions, producers of social and community services, nonprofit private institutions, private individuals, states and municipalities, and the exterior.
Economic analysis Method used to separate, examine and evaluate, both quantitatively and qualitatively, the relationships between different economic agents as well as phenomena and situations deriving from them, both within the economy and outside of it.
Economic balance sheet Positive (surplus) or negative (deficit) balance resulting from the relationship between Federal Government's revenue and expenditure and direct and indirect extra-budgetary control state-owned enterprises. The economic balance is divided into the budgetary and extra-budgetary items.
Economic climate Series of economic factors comprising a country's current situation. A situation in which factors that foster economic growth, development or stagnation converge.
It describes the trend in the economy in intervals of less than one year by estimating the main macroeconomic variables used to assess the economic development of a country; in other words, whether the economy is growing, stagnating or in recession.
Economic Commission for Latin America and the Caribbean (ECLAC) UN entity founded in March 1948 which groups countries from the American continent. Its main purpose is to study Latin American economic issues in order to propose adequate ways of conducting comprehensive development in the region.
Economic cycle Alternative periods of interrelated highs and lows in economic activity which come after each other, namely, crisis, depression, recovery and boom.
Economic deficit The government's shortfall when intervening directly, through public expenditure, in economic activity. It represents the negative result of the difference between revenues and expenditures of both the Federal Government and state-owned companies subject to direct or indirect budgetary control.
The economic deficit is obtained by adding the non-budget deficit to the budget deficit. The budget deficit results from the negative difference of oil and non-oil revenues versus the Federal Government and state-owned sector's directly controlled budgeted expenditure. The non-budget deficit is the negative result of the difference between revenues and expenditures of Mexico's Federal District Government and agencies and companies subject to indirect budget control.
Economic development Transition from one specific economic level to another more advanced, which is achieved through a long-term structural transformation of the economic system with the consequent increase in available production factors and aimed at their better use, the result being equitable growth among production sectors. Development implies better standards of living for the population, not just product growth, and therefore involves quantitative and qualitative changes. The fundamental expressions of economic development are greater production and per capita productivity in different economic segments and higher real per capita income.
Economic growth Increase in the country's domestic product without necessarily implying an improvement in the population's standard of living expressed by employment, capital, trade volume, and domestic consumption growth.
Increase in the production of goods and services in a country/society during a certain period. Economic growth is generally defined as the result obtained for example from relating the value of Gross Domestic Product for a period to the same for other previous periods.
Economically Active Population (PEA, for its acronym in Spanish) A group of people aged 12 or more that supply labor, be it remunerated or not, to produce goods and services. It consists of all those employed and those searching for work (open unemployment).
Economically Inactive Population (PEI, for its acronym in Spanish) A group of people aged 12 or more who one week before the survey were not employed or openly unemployed but stated they were available to work immediately even though they had not actively looked for work in the months before the reference period for reasons which can be attributed to the labor market (openly unemployed).
Economy Branch of the social sciences dealing with the production, distribution and consumption of goods and services.
Effective interest rate Interest rate that reflects the effect of the composition of interest over a given period of time or takes into account the value of money over time.
Equilibrium Interbank Interest Rate (TIIE, for its acronym in Spanish) The TIIE (equilibrium interbank interest rate) is a rate representing credit transactions between banks. The TIIE is calculated on a daily basis (for periods of 28 and 91 days) by Banco de México based on quotations presented by banks through a mechanism designed to reflect money market conditions in local currency. The TIIE is used as a reference for diverse financial instruments and products such as credit cards.
European Union (EU) Economic organization founded by six European countries in 1957 through the Treaty of Rome; the founding countries are: the Federal Republic of Germany, Belgium, France, Holland, Italy, and Luxembourg; they were later joined by England, Ireland, Greece, Spain, and Portugal. The initial purpose of this supranational organization was to eliminate barriers to free trade and production factors, which is why it was originally called the European Economic Community. Currently, its main goals are: to foster economic rapprochement and progression among member states; the harmonious development of the community's economic activities, and growth within a framework of stability and cooperation. Its fundamental goals are currently to promote economic rapprochement.
Excess liquidity When the aggregate of commercial banks' current accounts with the central bank is positive or above the legal requirement (if there should be one) and this requirement is deposited in these accounts, there is excess liquidity.
Exchange rate The price at which one currency is exchanged for another, for gold or for special drawing rights. These transactions take place in spot or future currency markets.
The price of one currency in terms of another. It is usually expressed in terms of the number of local currency units that must be exchanged for a foreign currency unit. The equivalent value of the Mexican peso compared to foreign currency.
Exchange rate fluctuation Change in the parity of a country's currency in relation to a given foreign currency.
Expenditure Expenses from economic entities to acquire the means by which the production of goods or services, public or private, is carried out.
Expenditure Financing Intersecretariat Commission Permanent collegiate body that provides advice to the Federal Executive and coordinates different agencies. It is composed of the Ministries of Finance, Social Development, Comptrollership and Administrative Development, Economy, Labor and Social Security and the Central Bank Governor. It handles public spending and funding and is involved in the planning, programming, budget, execution, control, and evaluation of public governance.
Mechanism aimed at ensuring the coordination, communication and effectiveness of actions taken during the process of programming, budget formulation, execution and control of public expenditure. It is considered a Federal Executive coordinating and advice body for public revenue and expenditure decision making.
Expenses Spending or outflow of funds triggered by a commitment to settle a good or service received or any other concept.
Outflows of money even when they do not constitute expenses, which impact losses or gains. In fiscal accounting, payments charged to the budget.
Exportation Sale of a country's goods and services abroad. Usually refers to all income that a country receives from the sale of goods and services, either tangible or intangible. Tangible services usually correspond to non-factorial services, such as services related to transformation, various types of transportation, freight and insurance while intangible services correspond to financial services that cover profits, interest, commissions, and some non-financial services.
Exit of merchandise and other goods through a country's customs and across the borders of its territory including direct purchases within the country by extraterritorial organizations and non-residents.
Covers the Free on Board (FOB) of goods and services exports by freight, insurance and transformation services sold abroad.
Extended-use Electronic Payments System (SPEUA, for its acronym in Spanish) A system used to make interbank (own and third party) payments. The system can transfer payments (positive balance or available credit) between a participant's accounts and the SIAC and/or the SIDV. At the end of the day the system transfers account balances to the current accounts of participants in SIAC. SPEUA only accepts payments greater than or equal to 50,000 Mexican pesos.
This system stopped working on August 19, 2005 and was replaced by SPEI®.
Exterior According to the National Accounts, all those economic agents that are non-residents in the country, such as international organizations like the UN, UNESCO, FAO and others that receive quotas from agreements between the organizations of different countries. They also consider benefits received by governments in the event of disaster. National Accounts consider all non-resident economic agents in the country.
External financing Amount of borrowings in cash or kind from foreign creditors also authorized and recorded by the Ministry of Finance regardless of the type of currency they are in.
External public debt All liabilities entered into by the Federal Government with foreign creditors payable abroad in both local and foreign currency. Their payment implies an outflow of funds from the country.
External savings The amount of resources the national economy requires to cover the balance of payments current account deficit. External savings include direct foreign investment, non-monetary public and private sector loans, the change in international reserves, capital transfers, and errors and omissions.
Extra-budgetary deficit or surplus (balance) Balance resulting from comparing the revenue and expenditure of state-owned entities under indirect budget control.



Factorial services Concept used in the Balance of Payments Current Account involving income obtained or supplied by the compiling country derived from workers' income and income from ownership of real or financial assets held by residents of the country abroad, or which non-residents hold in the country in question.
Factoring Financial activity provided for in the General Act on Credit Organizations and Related Activities consisting of a credit contract to obtain immediate liquidity in the form of a single payment or a credit line. A credit guarantee is the cession of the value of invoices (collection rights) to the factor (person granting the credit) for the seller's (receiver of the credit) production of goods and/or services.
The financial cost of the factoring is assumed by the person factored for the administration and collection of the credit rights.
Federal Government Adjustable Bonds (AJUSTABONOS) Long-term bonds (3 and 5 years) issued by the Federal Government and denominated in local currency on which the Federal Government must pay a quarterly interest rate directly and unconditionally plus capital adjusted for increases in the national consumer price index at maturity, and therefore, in real terms, their value remains constant.
Federal Government Development Bonds (BONDES) Nominative and negotiable bonds issued by the Federal Government and placed at a discount by Banco de México with a maturity of less than one year.
Federal public expenditure Spending in relation to current expenses, physical investment, financial investment and debt or public debt payments made by the Legislative and Judicial Branches, the President's Office, State Secretaries and administrative departments, the General Attorney's Office, autonomous public bodies of decentralized bodies, companies subject to direct and indirect budgetary control, trusts where the federal government is the trustor as well as financial intermediation.
Federal public sector Series of administrative bodies through which the State undertakes or enforces the policies and will expressed in the country's fundamental laws. It includes all administrative bodies of the federal legislative, executive and judicial branches, and autonomous public bodies. It therefore covers the centralized sector and state sector and excludes the local governments' administration.
Fee Any amount, regardless of its denomination or type other than interest, that a bank charges a client.
Final demand The value of purchases made by end consumers of goods and services produced by a country. Households and government are considered sources of demand. This item also includes exports, change in inventories, and gross fixed capital formation.
Final targets Targets central banks must set by law, including price stability and economic growth.
Financial analysis Procedure used to evaluate the structure of the sources and uses of financial resources. Analysis used to establish the forms under which monetary flows change and explain the problems and circumstances influencing them.
Financial bonds Bonds issued by financial companies. These bonds must have a specific guarantee and take precedence over any of their assets in the event of an unpaid balance after the guarantee has been exercised. Besides interest, holders can participate in the company's profit.
Financial deficit (public sector deficit) The negative difference resulting from comparing the current account's saving or lack of and the capital account's deficit or surplus. It represents the net credit requirements of the entities involved.
Shows the government's total shortfall when intervening in the domestic economy. It is obtained by adding the economic deficit to net financial intermediation.
Financial deficit or surplus (balance) Obtained from comparing total non-financed revenues and total expenditure without amortization of public agencies and entities. Entities involved under direct and indirect control are included as well as financial intermediaries.
Financial groups Associations of different types of legally recognized intermediaries committed to common policies and responding jointly for their losses. One of the advantages of these groups is the possibility of their members acting jointly and offering the public complementary services.
Financial groups are comprised of a controlling company and at least three of the following entities: general deposit warehouses, financial leasing companies, brokerage firms, money exchanges, financial factoring companies, multiple banking institutions, and surety and insurance companies.
The Law on Credit Institutions and the Law for the Regulation of Financial Groups allow other types of association between intermediaries but only the financial group concept allows banks to merge with brokerage houses and insurance companies; in other words, the three basic types of intermediaries.
Financial institution An entity that intervenes in financial markets whose activity consists of capturing or obtaining funds from the public and investing them in assets such as securities and bank deposits, among others.
Financial intermediary Legally incorporated institutions that facilitate financial market transactions.
Financial intermediation Intervention by national credit institutions, auxiliary bodies, national insurance and surety institutions and others or entities legally authorized to act as links between lenders and borrowers that obtain a fee for loan transactions in local and international money markets.
Financial leasing companies Organizations which through a leasing agreement buy certain goods and lease them temporarily over a set term to individuals or corporations which must make partial payments in an amount that covers the goods' acquisition cost, financial expenses and other related expenses so that at the end of the agreement any of the following three options can be chosen: a) buying the good at a price below the acquisition value stated in the agreement or below market value; b) extending the term of use of the good and paying a lower lease; c) participating along with the leasing company in the economic benefit from the sale of the good according to the agreement terms.
Financial market Place where securities are bought and sold (financial investments). Such markets usually consist of several subsidiary markets: a capital market (for long-term investment), a money market (for short-term investments), a primary market (for new securities issuances), and a secondary market (for the purchase and sale of securities that have already been issued).
Financial or public sector balance Result obtained from adding the economic balance and the result of the use of resources to finance the private and social sectors (deficit or surplus from financial intermediation).
Result obtained from adding the Federal Government's balance, the deficit or surplus of direct and indirect extra-budgetary control state-owned enterprises, and the result of the use of resources to finance the private and social sectors.
Financial savings Difference between the M4 monetary aggregate (includes coins and banknotes held by the non-banking public, local and foreign currency checking accounts, and liquid and time savings instruments offered to the public) and banknotes and coins issued by Banco de México (M0).
Financial sector Series of entities or public and/or private institutions given over to credit, brokerage and insurance and surety/collateral activities.
Financial system The Mexican financial system is comprised of institutions that capture, manage and channel the savings of both nationals and foreigners to investment, which includes: financial groups, commercial banks, development banks, brokerage firms, mutual funds, insurance companies, financial leasing companies, surety companies, general deposit warehouses, credit unions, money exchanges, and factoring companies.
Financing Funds required to undertake an economic activity usually consisting of loans complementing own resources.
Funds obtained by the government to meet the budget deficit. Financing is secured abroad or within the country through loans, borrowings, and other obligations derived from subscription or issuance of securities or any other term document.
Fine Pecuniary sanction levied on someone who has not consistently complied with obligations that are mandatory by law, such as the payment of taxes, etc.
Fixed exchange rate The financial authorities tie the value of the local currency to the value of merchandise, gold, silver or foreign currency. The currency in question thus becomes a reference for the exchange rate.
Fixed income Set return on capital over a specific period of time.
Fixed income securities Securities that give the holder the right to receive a fixed rate of interest during their term which is established at the time of issuance.
Fixed-income securities Financial documents legally establishing the existence of a monetary debt and the obligation to repay it at a fixed rate of interest and after a set term.
Floating band Range in which the central bank limits exchange rate fluctuations. In an efficient floating band regime, governments must synchronize monetary and fiscal policy.
The purpose of the floating band is, on the one hand, to have a greater flexibility in foreign exchange transaction costs, which will be ultimately reflected in exchange rates and, on the other, to foster a more efficient foreign exchange market requiring less intervention from Banco de México.
Flotation Process by which a country's currency finds its exchange rate parity or level of exchange in the currency market free of market forces.
Flow Change/fluctuation of a given variable within the economic system. Flow variables assume the existence of an economic trend and are characterized by temporality. They are expressed in amounts measured for a certain period, for example, consumption, investment, production, exports, imports, and national income. Flows are closely related to funds as ones come from the other. The fund variable "immobilized property" therefore gives rise to the flow variable "rents", while the flow variable "wheat production in period X" gives rise to the variable "stored wheat".
FOB value (Free on board) The market value of exports of merchandise and other goods at a country's borders including transport costs, export rights, and the cost of placing the goods in the type of transport used unless this cost is covered by the transporter.
Used to value exports and defined as "free on board". Refers to the value of the sale of products in their place of origin plus the cost of freight, insurance, and other expenses at the customs office of exit.
Foreign exchange center Individuals or corporations who only and exclusively undertake the following currency transactions: I) currency purchase, sale and exchange; II) travelers' checks; III) coined metal; and, IV) bank demand documents denominated and payable in foreign currency. All of these activities in an amount no higher than ten thousand US dollars per client. In the case of transactions described in sections I to IV above, the counter value is delivered in the same operation in which travelers checks or checks denominated in local currency are settled. The operation does not consider/include the transfer of funds.
Foreign exchange market Place where foreign exchange and the buying and selling of debt securities in local and foreign currency takes place.
Forex market Place that brings foreign currency bidders and askers together. The volume of foreign currency transactions determines the daily prices of some currencies in relation to others, or the exchange rate in relation to the local currency.
Forwards A derivative contract in which a person known as "seller" agrees to transfer a given asset to another known as "buyer" on a future date and at a preset price. Unlike futures, which are similar to forwards, forward deals take place directly between the parties involved, not through an organized exchange, and therefore are not standard contracts.
Free exchange rate Determined exclusively by currency supply and demand. In other words, the price is derived from the free interplay of currencies in the foreign exchange market.
Free zones Certain regions located outside of domestic distribution centers and input-supply and basic goods centers that are exempt from paying taxes on purchasing foreign goods required for production and consumption. There are no longer any free zones in Mexico. However, the Free Trade Agreement allows for the establishment of border zones for the application of preferential tax and trade policies.
Fund flow Entry (inflow) and exit (outflow) of cash showing the correlation of fund flows between the private, public and external sectors taking place in both the real sector and through the financial system.
Funding Term given to the action of obtaining capital, funds or resources, for a project, person, business, or any other institution. Regarding the money market, the term "funding" can also be used to describe the overnight rate, which can also be found in this glossary.
Futures A derivative contract through which a person known as "seller" agrees to transfer a certain asset to another one known as "buyer" at a certain date in the future and at a pre-set price. Unlike forwards, which are similar to futures, they are standard contracts; in other words, specific amounts of assets –or underlying assets– are sold and bought with standard characteristics previously established in markets, such as quality, quantity, etc..
Futures market A market for transactions involving future sale and purchase contracts. Future transactions are based on market expectations in relation to certain goods, in particular commodities and farm products. They act as a hedge.



Global supply In National Accounting supply includes gross domestic product and imports of goods and services.
The series of goods and services produced domestically or externally that a country has to meet consumption needs, capital formation, and exports. For National Accounts purposes global supply is quantitatively equivalent to global demand.
Government consumption Total government expenditure at all institutional levels; in other words, the purchase of goods and services for intermediate use plus government workers' salaries, including small amounts of fixed capital consumption and indirect taxes that appear on some departments' books as well.
Government funding rate Rate representing wholesale credit transactions undertaken by banks and brokerage firms in the interbank market guaranteed with public debt securities with a one-day term. Banco de México calculates the rate by obtaining the weighted average rate paid in relation to transactions with a one working day term undertaken directly or as repos involving government debt securities settled in Indeval's delivery- versus-payment system.
Government sector Comprises all of the State's legislative, executive and judicial bodies established through political processes, including both central government bodies which exercise authority and which have jurisdiction on the entire country, and local bodies which have jurisdiction in only a certain part of the country.
Government securities Securities issued by the federal government in the money market with the dual purpose of raising funds and regulating the money supply.
Debt securities placed in a primary offering among the investor public. They are characterized by their liquidity in the secondary market. There are securities that are placed at a discount and those that are placed at face value or below par.
They are securities made out to the bearer on which the Federal Government must pay a fixed sum of money on a given date. They are issued through the Ministry of Finance and Banco de México, which is the financial agent responsible for their placement and redemption. Government securities can be considered a monetary policy instrument for controlling financial market liquidity through purchases and sales (open market operations).
The different types of value that arise during the buy-sell process are nominal value, placement value and market value.
Gross domestic debt Total loans pending payment, payable within the country, denominated in local and foreign currency, granted to the non-financial public sector by Banco de México, commercial banks, development banks, and loans acquired via government securities.
Gross Domestic Product (GDP) The total value of goods and services produced within a country over a given period of time free of duplication. Can be calculated from the difference between the gross value of production and goods and services consumed during the production process itself at buyer prices (intermediate consumption). This variable can also be obtained in net terms by deducting from GDP value added and fixed capital consumption from capital goods used for production.
Gross domestic product at constant prices The value of the gross domestic product measured in base year prices. It is defined as the product obtained each year after deducting price changes when valuing each of the economy’s products and services by the price of a reference year (base year), as defined by Mexico's National Accounts System.
The product at constant prices is known as the "real product" and is as useful as the product in current prices, as while the former allows for analyzing the real trend in production and flows of goods and services, the latter provides information on monetary type flows.
Gross domestic product at current prices The gross domestic product (GDP) is the sum of the monetary values of the goods and services produced by a country over a one-year period. It is duplicate-free value that corresponds to the sum of the aggregate value generated in all economic activities during a one-year period. It is also defined as the difference between the gross value of production less the value of goods and services (intermediate consumption) used in production processes. It is calculated using the current prices of goods and services every year (known as current prices) as a reference.
Gross external debt Sum total of financial liabilities that the public sector has contracted with external economic agents denominated in foreign currency. It considers exchange rate valuation and adjustments.
Gross fixed capital formation Expenses incurred by production units to increase fixed assets; assets are valued at purchase prices and can be obtained through direct purchase or be self-produced. Includes spending on improvements or modifications that lengthen the useful life or productivity of an asset. Value is added to new goods produced in the country, such as constructions, machinery, transport equipment and equipment in general as well as imported goods, even if they are used. Gross fixed capital formation does not include land, mineral deposits or woods. Mexico's New National Accounts System includes all personal and real property used by the government for national defense, such as vessels, airplanes, the construction of roads, airports, buildings and others destined for military use, as they are capital goods that can be used for civil purposes.
Gross fixed investment Consists of net investment plus replacement investment. Also known as gross capital formation.
Gross National Product (GNP) Total value at market prices of the flow of goods and services during a specified period generated by factors owned by residents in both the country and abroad. GNP is equal to the gross domestic product plus net income from factors derived from other countries.
The national product is a far more adequate measure than the domestic product for calculating the value of production in countries where net income from production factors derived from the rest of the world is large and fluctuates significantly. The domestic product of countries that are net importers of production factors is greater than their national product while for countries that are net exporters of production factors the situation is the opposite.
Gross production value The total value of the goods and services produced by a company regardless if they are inputs; in other words, intermediate goods used in the production process or articles destined for final consumption. It thus includes the value of all products regardless of whether they are for intermediate or final consumption. In the case of the Federal Government it is equal to the sum of the costs of goods and services produced. The gross value of production is also equal to intermediate consumption plus the aggregate value or gross domestic product.
It is the sum total of the value of goods and services generated by a company regardless of whether they are intermediate goods used in production processes or articles for final use.
Included in production for self-consumption –what a unit produces and consumes– and the production of fixed assets for own use. The gross value of production can also be obtained by adding intermediate consumption and gross aggregate value.
Guaranteed prices Minimum acquisition value of farm products the government guarantees producers.



High power money Banknotes and coins (also known as monetary base) plus banks' current account deposits with the central bank.
Household remittances Amount sent from abroad through a company in either local or foreign currency that is originated by a sender (an individual living abroad who transfers money to relatives in Mexico) for delivery locally to a beneficiary (an individual living in Mexico who receives the funds from the sender).



Idle capacity Percentage of a company's idle installed capacity. The part of capacity not used for production.
Implied prices Value indexes "implied" in gross domestic product calculations obtained through an annual relation of the product data with each year's prices (current). Indexes of average price changes for each activity sector and also the economy as a whole are recorded year on year.
Imports Purchases of goods and services from abroad by the country's residents; in other words, spending on goods and services by a country's consumers, albeit not on goods and services produced domestically.
Index Relates the value of one good with another so that any change in the value of the latter automatically reflects the first.
Indexation System used to offset losses in value arising from long-term obligations (loans, debts, obligations, wages, etc.) produced by monetary devaluations or inflation. It consists of setting an index (IPC, the value of a good or service, for instance) that serves as a reference for determining a yield or trend (for example, if the IPC for a given year increases by a given percentage, the previous year's nominal wages will increase by the same percentage).
Indirect taxes Taxes paid without the taxpayer having to be identified, simply by acquiring a product or paying for a service with the subsequent effect on consumers. Companies therefore act as government tax collectors.
Inflation The average growth rate from one period to another in the prices of a basket of goods and services.
Inflation rate Indicator of sustained growth in the prices of goods and services over a period of time expressed as a percentage.
Inflation targeting regime Monetary policy strategy that focuses on achieving inflation targets. It has the following characteristics:
a) It views price stability as the main goal of monetary policy.
b) Medium-term inflation targets are announced.
c) The monetary authority is autonomous.
d) Monetary policy is applied within a framework of transparency based on a strategy of communication about monetary authority targets, plans, and decisions.
e) All sources of inflationary pressures are analyzed in order to evaluate the future price trend. This analysis is the main reference point for monetary policy decisions.
f) Alternative inflation measures, such as core inflation, are used to strip out phenomena that have a temporary impact on inflation in order to identify the medium-term price trend.
Informal sector Small scale businesses or economic units with a low level of organization which use obsolete technology or humble materials. Generally speaking, these units are characterized by low-qualified workers and by the absence of any formal labor relations and administrative records.
Informal sector activities are legal in themselves but can and generally do take place outside the law, without licenses and records, either due to lack of knowledge or because all legal requirements / regulations cannot be met.
Input-product matrix It is a matrix of double entry accounts that quantitatively describes the relationships between productive activities and final users of goods and services. The columns register product availabilities. The rows register supply distribution based on different uses (intermediate and/or final). It presents the cost structure of different activities and their relationships. It also registers the value that each activity generates and adds during the production process.
Installed capacity Production volume of goods and/or services that a country's production unit can generate based on available infrastructure.
Insurance companies Companies incorporated under the General Act on Mutual Insurance Institutions and Companies that insure risks assumed by others and are engaged in one or more of the following insurance activities: life, accidents, illness and damage in some of the following areas: civil liability and professional risks, maritime-related and transport-related, fire, agriculture, vehicles, credit, various, and special-type.
Inter American Development Bank (IADB) International bank created in December 30, 1959 by twenty American nations: the United States and nineteen Latin American countries. Twenty six nations from the Americas and 15 nations from outside the region currently belong to the IADB. Bank funding came from capital contributions made from each member country and a special operations fund.
IADB functions:
a) Promote investment of public and private capital in order to strengthen the development of member countries.
b) Foster private investment in development projects.
c) Use of funds to contribute to the growth of member countries.
Interactive auction Public sale to or purchase by the highest bidder in which participants can see the bids made by other bidders and subsequently better theirs. In Banco de México interactive auction bidders make their bids in the knowledge of the auction's marginal assignation price. In other words, the bid they must improve on to be assigned the price.
Interactive System for Securities Deposit (SIDV, for its acronym in Spanish) An accounts registration system for the transfer of securities stemming from daily money and capital market transactions using the Delivery against Payment scheme. Participants can transfer positive balances from their cash accounts to SIAC. At the end of the day the accounts' cash balance is transferred to SIAC current accounts.
Interbank Electronic Payment System (SPEI®, for its acronym in Spanish) Allows fund transfers between participants. Includes information indicating whether a client ordered the payment and its identification. Can also carry information instructing the receiver to credit the payment to a client. SPEI® began operating August 13, 2004.
SPEI® allows participants to assign a high priority to certain payments and reserve part of their balance exclusively for their settlement. When the system receives a payment instruction it stores it in a line of pending payments. SPEI® frequently executes a process that determines which payments can be settled with participants' balances at that moment in time. If a payment cannot be made because the sender lacks liquidity, it waits in a pending-payments line.
Participating banks must send payments requested by their accountholders ten minutes after accepting them at the latest. Likewise, banks receiving a payment must credit it to the beneficiary's account 10 minutes at the latest after being notified that the payment has been settled.
Payments pending at the close of operations are cancelled and SPEI® account balances are transferred to Participants' Single Accounts in SIAC.
SPEI®'s security is based on digitally-signed messages. Participants use the digital certificates and codes of authorized persons who must obtain them according to Banco de México's Extended Security Infrastructure (Infraestructura Extendida de Seguridad, IES)) regulations.
SPEI® uses an open protocol (public communication rules with the system) that enables participants to automate their processes and provides clients with more and better services.
Interbank market A market that only involves transactions between banks and brokerage firms, namely, loans and the exchange of securities.
Interest (rate of) Rate, yield or capital gain usually calculated as a percentage of the capital and in relation to the time available. Broadly speaking, the price paid for the use of funds.
Percentage of capital that the individual or corporation has been loaned that is periodically paid to the lender.
Interest rate The cost of holding money as a loan. There are lending and borrowing rates.
Yield on a transaction over a certain term expressed as a percentage of the capital that produces it.
Price paid for using lendable funds.
Interest rate operational target The interest rate a central bank sets to influence intermediate and final targets and therefore achieve a given inflation target. The target rate's term is usually short. This is because the longer the term, the less relevant liquidity conditions become, and other variables that also influence the value of money begin to take on greater importance. Since January 2008, Banco de México has made the overnight interbank interest rate (also known as the "benchmark rate") its operational target.
Intermediate demand Comprises the consumption of a series of goods and services such as commodities, office material, fuel, professional services, and technical assistance, among others, used directly in production processes by industrial, commercial and services sectors in order to generate other goods and services of intermediate or final use.
Intermediate goods Material resources, goods and services used as intermediate products during the production process such as commodities, fuel, and office articles, among others. They are bought for resale or used as inputs or commodities to produce and sell other goods.
Intermediate targets Variables selected from a series of economic variables that bear a direct relationship with the final targets the central bank uses to influence the market. Intermediate targets include monetary aggregate growth targets, the exchange rate, long-term interest rates, and diverse credit indicators in the economy.
Internal rate of return (IRR) The discount yield equal to the current value of expenditures compared to the future value of expected income. It is used to decide whether or not to accept or reject an investment project. That is why the IRR is compared with a minimum rate or short rate. If the project's rate of return –expressed by the IRR– is above the short rate it is accepted; otherwise it is rejected.
Indicator of a project's profitability. It is defined as the value of the discount rate that evens out temporal income and cost flows. It is the threshold above and below which discount rates used to calculate the updated net value make this value negative or positive.
International Bank for Reconstruction and Development (IBRD) Specialized United Nations Institution created in 1945 as part of agreements reached by the Bretton Woods Conference (1944), aimed at allocating capital to reconstructing regions impacted by the second world war and speeding up the development of countries with lagging industrial and agriculture production.
The IBRD obtains its funds by selling securities to member countries as well as from international bond fees. It grants direct loans to governments and more frequently to companies or private institutions with government guarantees: It can also guarantee loans from private lenders. It provides economic development consulting services.
International Monetary Fund (IMF) Institution created at the Bretton Woods Conference in New Hampshire in 1944 to act as the guardian of the International Monetary System. Although the rules and organization of the IMF are fairly complex, its primary function is to set exchange rates for world currencies. Member countries must register their exchange rate with the IMF in terms of US dollars and maintain it. The IMF is therefore the main component of the dollar exchange system and the world's fixed exchange rate systems. The IMF has its own funds contributed by member nations that can be lent to countries to help them overcome temporary balance of payments problems. Furthermore, at the end of the 60s, the IMF began to issue a new type of reserve unit, the Special Drawing Rights (SDRs). At the time they were referred to as "gold paper" as they were units defined in terms of gold which could be used to settle debts between nations on the same bases as gold.
International reserves They comprise: currency and gold owned by Banco de México that are free of any lien and whose availability is not subject to any restriction; Mexico's favorable position with the IMF derived from contributions made to said organization; currencies from financing related to IMF foreign currency regulation and other international financial cooperation organizations, or which group central banks, and central banks and other foreign corporations that exercise authority in financial areas. Buy/sell transactions involving local currency pending receipt are not considered, and Banco de México's liabilities in currencies and gold are deducted except for those with a more than 6-month term at the time when reserves are calculated, and those corresponding to funding obtained as part of the previously mentioned foreign exchange regulation.
Investment Use of a sum of money to buy durable goods or securities. Spending to keep a company's production base working or to increase it. Goods and services produced but not consumed. Excess sum of money used to obtain a yield through financial or banking instruments.
Investment expenditure Spending by government departments and entities in order to acquire, increase, preserve or improve their capital goods. Includes the acquisition of third party shares and debt securities as well.
Investor Person that gives another the funds required to undertake their economic activities. Also the name given to a person that acquires securities or invests its money in a project to obtain a gain.
Issuance The act of creating new securities, shares, bonds, public funds, and promissory notes, among others.
Act of issuing company securities. Series of securities that a company creates and puts into circulation. An issuance is public if the placement takes place in the stock market through a brokerage house and private if the placement is directed at current shareholders or through the direct sale of a package of shares offered by the seller to the buyer.
The putting into circulation of securities in the market in order to obtain funds for an institution's activity.



Latin American Economic System (SELA, for its acronym in Spanish) Institution founded in 1975 in Panama to defend Latin America's regional economic interests and stand as a united front in international affairs. Twenty five Latin American countries are members of this system.
Latin American Integration Association (ALADI, for its acronym in Spanish) Association created in 1980 to replace the ALALC (Latin American Free Trade Association), the main purpose of which is to foster the integration and economic development of member countries. It is comprised of eleven Latin American countries: Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela. ALADI's basic functions are to promote and regulate reciprocal trade between countries of the region, to seek economic complementarity among member countries, and to develop acts of cooperation that contribute to broadening local markets.
Legal currency Currency on which the State of a country has conferred the power to act as a means of payment and which therefore must be accepted by everyone wanting to undertake transactions there.
Instrument accepted as a unit of account, measurement of value and means of payment.
Series of signs representing money in circulation in each country.
A piece of gold, silver, copper or other metal usually in the shape of a disc and minted with motifs chosen by the issuing authority to accredit its legitimacy and value, and also notes or paper of legal tender.
Legal reserve Refers to the obligatory and minimum amount (required by the regulator) of savers' deposits that commercial banks must hold on reserve to meet depositors' withdrawals. In other words, it is the percentage of deposits that banks cannot lend. The legal reserve is a requirement the central bank can make of banks and is usually deposited with the central bank. There is no legal reserve in Mexico.
Lending rate Percentage that banks, based on market conditions and central bank provisions, charge users for different types of loan services. Revenue for banks.
Libor rate (London Interbank Offered Rate) A rate used as a reference base for euro loans granted by private banks (consortiums or syndicates) mostly belonging to European countries and whose credit is granted in local currency, generally in dollars, in the form of loans or credit lines with terms of more than one year.
Interbank interest rate in the London market that is generally half a point below the prime rate. This global rate constantly varies based on demand for credit and the monetary supply and is used as a parameter for other global rates. It is the interest rate offered on the deposits of commercial banks that operate in the London euro currency market.
Liquidity Represents the quality of assets for immediate conversion into cash without implying a significant loss of value, such that the easier it is to convert an asset into cash, the more liquid it is said to be.
In terms of monetary policy implementation, it refers to excesses or shortfalls in banks' aggregate accounts (known as current or single accounts) with the central bank. For example, if a commercial bank needs money and overdraws on its current account with the central bank, the latter is said to provide liquidity.
Liquidity deficit When the aggregate of commercial banks' current accounts with the central bank is negative or below the legal requirement (if there should be one) and such requirement is deposited in these accounts, there is a liquidity deficit.
Liquidity facility Also known as "windows", they are central bank facilities that enable commercial banks to obtain the liquidity they require automatically as long as they comply with the conditions established by the central bank. Commercial banks must request access to them. Another characteristic is that the interest rate is preset by the central bank. Liquidity facilities can consist of overnight loans or loans for one or more days. Intra-day loans consist of loans granted by the central bank throughout the day (overdrafts on central bank accounts) to facilitate payment systems settlement. Liquidity provided by the central bank during the day aims to reduce the amount of reserves banks would have to keep in their central bank accounts to settle their daily transactions.
Loan Transfer of acquisition power between economic units (nations or governments, companies or individuals) to provide financial assistance to the borrower in exchange for interest and sometimes other advantages for the lender.



Macroeconomic framework Series of the most important macroeconomic variables that express the economic and social policy environment such as gross domestic product, balance of payments, consumption, investment, prices, wages, interest rates, exchange rate, employment, etc. Based on expectations for these variables it is possible to align goals, targets and allocate funds to programs and budgets.
Macroeconomy The study of the behavior of large economic aggregates such as global employment, national income, consumption, prices, and wages and costs, among others. Macroeconomic theory normally consists of the systematic study of the causes that determine national income and other aggregates as well as resource rationalization.
Market Any place that brings buyers into contact with sellers to undertake transactions and establish trading prices.
Market rate The average percentile cost of capturing funds during the year plus percentage points corresponding to banks' operating costs.
Market risk Market risk is the potential loss in the value of financial assets due to adverse changes in factors which determine their price, also known as risk factors; for example, interest rates or the exchange rate.
Market value Replacement cost due to direct purchase or production. In the case of articles or merchandise quoted in the market, it can be obtained from quotations in specialized publications, or else from supplier quotations and invoice prices, among other sources.
The value of securities prevailing in the market at a given time depending on their term and the number of days that have elapsed since they were issued. Its calculation considers the yield for the time elapsed since issuance until the time of calculation. In other words, it is the placement value adjusted for the daily interest generated by each of the outstanding issuances.
Means of provision Debit cards associated with demand bank deposits, credit cards issued under a credit contract, with checks, with fund transfer orders, including the service known as direct debit, as well as any others Banco de México recognizes in its general provisions.
Metal coins suitable for circulation Coins that are complete, not bent, deformed, burned, perforated, impregnated or covered in oxide or any other elements that change their appearance but can remain in circulation.
Mexican Federal Treasury Certificates (CETES) Bonds made out to the bearer issued by the Federal Government since 1978 the nominal value of which must be paid at maturity. This instrument was issued in order to influence the regulation of the money supply, finance production investment and encourage the healthy working of the securities market. The mechanism is used to capture funds from individuals and corporates who are ensured fixed income from them. The return received by the investor consists of the difference between the purchase and sale price.
Both individuals and corporations can buy Cetes; they are placed through brokerage firms at a discount rate and backed by Banco de México, as an agent of the Federal Government.
Microeconomy The study of economic issues beginning with basic units of decision: companies and consumers.
The study of the economic actions of individuals and small well-defined groups. The purpose of microeconomic theory is usually to determine the price and allocate the funds among diverse jobs.
Studies individual decision units, such as companies, households, families and individual consumers. It is based on a method of economic analysis that refers to the theory of the consumer, which leads to the theory of demand, the theory of production and costs, the theory of prices and production, and the market, its characteristics and types.
Minimum wage The lowest amount a worker must receive in cash for services rendered during a working day. Minimum wages can be general or pertain to one or several geographical areas or one or more states, or to a certain profession or economic activity within one or several geographical areas. Minimum wages are set by the National Minimum Wage Committee, which is made up of worker, employer and government representatives with the assistance of special consultative committees. The law determines that a minimum wage should be enough to meet the material, social and cultural needs of the head of a family and provide his/her children with a basic education.
Monetary aggregates They are the components of the monetary supply.
The four usual aggregates are:
M1 = comprised of banknotes and coins held by the general public, checking accounts held by the country's residents and current account deposits. Banknotes and coins held by the public are obtained by deducting cash held by banks from total banknotes and coins outstanding.
M2 = includes M1, resident bank deposits, public and private securities held by residents and retirement funds.
M3 = includes M2, bank deposits of residents abroad and public securities held by residents abroad.
M4 = includes M3 and deposits in Mexican bank branches and agencies abroad from residents living abroad and nationals.
Monetary base On the use side, it is the sum of banknotes and coins outstanding plus the net credit balance of banks' current accounts with Banco de México. On the source side, it is the sum of net international assets in local currency and net domestic credit.
Monetary deficit or surplus (balance) Obtained from comparing public sector net revenues and expenditures. It enables the public sector's real funding needs to be established. Commonly used to verify the accuracy of the Federal Government's current account with Banco de México.
The monetary deficit is the negative difference between revenues and real expenditure adjusted for economies, expenditure pending payment and the change in other accounts. It is the equivalent to net changes in public debt and the change in public entity budgets. The monetary surplus is the opposite.
Monetary liabilities Amount of resources in the banking system referring exclusively to checking accounts in local currency.
Monetary policy Actions implemented by Banco de México to procure the stability of the purchasing power of the country's currency.
Monetary Regulation Bonds (BREMs) Bonds issued by Banco de México under article 7, section VI of the Banco de México Act to regulate liquidity in the money market. An increase in monetary regulation deposits means that the central bank is withdrawing liquidity from the money market, while a decrease means it is injecting liquidity.
Monetary regulation deposit Deposits originated by the sale of government securities placed by Banco de México aimed at regulating money market liquidity. These transactions do not imply any Federal Government financing. These deposits cannot be withdrawn before they mature and have a return and yield equal to the securities sold by the central bank. An increase in monetary regulation deposits means that the central bank withdraws liquidity from the money market; a decrease corresponds to the reverse operation or a liquidity injection. This heading also includes mandatory deposits from banks with an indefinite term.
Monetary reserve A country's holding of monetary assets at a given point in time; it can be national or international. They comprise gold, domestic banks' deposits in top tier banks abroad (demand and time deposits), a country's net position with the IMF, Special Drawing Rights (SDRs), highly liquid and solvent securities of foreign governments, securities of multi-national financial institutions (WB, IADB, etc.), foreign banks' notes, bankers acceptances, and multilateral clearing agreement active balances.
Monetary supply Amount of banknotes and coins in circulation plus demand and time deposits in local currency in the economy.
Monetary system Legally established structure for circulating money in a given country and at a given time.
Money The equivalent of collective goods and services. Money takes the form of coins or notes made of polymer paper. It has four functions: as an instrument of exchange, as a measure of value, as a means of capitalization and value mobilization, and as a means of freeing debts and obligations.
Money exchanges Corporations authorized according to the General Act on Credit Organizations and Related Activities to undertake currency buying, selling and exchange operations, including those taking place through the transfer of funds with the public in national territory.
Money market Brings together bidders and askers in diverse credit transactions and short-term investments, such as discounts on commercial documents, short-term promissory notes, discounts on negotiable certificates of deposit, reports, sight deposits, promissory notes, and bankers' acceptances. Money market instruments are characterized by their safeness in terms of recovering the principal because they are very negotiable and carry a low level of risk.
Monopoly Market in which one company is the only seller of a product for which there is no substitute and therefore exercises pricing power.
Multiple Purpose Financial Companies (SOFOMEs, for its acronym in Spanish) Corporations with bylaws stating that their main purpose is to grant credit in a habitual and professional way, and to enter into financial leasing and/or financial factoring agreements.
There are two types:
I. Regulated multiple purpose financial companies, and
II. Non-regulated multiple purpose financial companies.
Regulated companies have financial links with banks or the controlling companies of financial groups banks are part of. Such companies add the words "multiple purpose financial company" to their name or the acronym "SOFOM" followed by the words "regulated entity" or abbreviation "E.R.". Regulated, multiple purpose financial companies are under the oversight of the National Banking and Securities Commission (CNBV, for its acronym in Spanish). Non-regulated companies add "multiple purpose financial company" to their name or their acronym "SOFOM", followed by the words "non-regulated entity" or their abbreviation "E.N.R.".
Mutual fund Company that invests its capital in a large number of shares in companies in different industries. It is appealing to investors because it offers a diversified portfolio and yield that exceeds what fixed-income securities pay.



National Banking and Securities Commission (CNBV, for its acronym in Spanish) Decentralized body of the Ministry of Finance responsible for supervising and regulating financial entities, individuals and other corporations that undertake activities provided for in the laws related to the financial system. Its main purpose is to protect the public's interests.
National Commission for Retirement Savings (CONSAR, for its acronym in Spanish) Decentralized body of the Ministry of Finance with technical autonomy and executive powers defined by the Retirement Savings Systems Law. The Commission coordinates, regulates, supervises and oversees these systems.
National Credit Institutions (National Credit Companies) Companies with a legal personality and their own assets which provide banking and credit services based on bank practices and uses but operate according to economic policy guidelines indicated by the President. These companies participate in financial intermediation, capturing domestic savings and channeling them to strategic and key activities as set in the National Development Plan and Medium-term Programs.
National credit societies A statutory corporation with its own legal personality and assets that provides banking and credit services according to bank practices and uses, and which is subject to economic policy goals and priorities.
National income Total income obtained from a country's production factors. Indicator of the volume of an economy's income. Volume of an economy's income over a given period of time.
National Insurance and Bonding Commission (CNSF, for its acronym in Spanish) Decentralized body of the Ministry of Finance responsible for inspecting, overseeing and supervising institutions, companies, individuals and companies regulated by the General Law of Insurance Institutions and Mutual Benefit Companies and the Federal Surety Institutions Law, as well as the development of the country's insurance and bonding sectors and activities.
National revenue The sum of all goods and services available during any given period for consumption or wealth accumulation.
Negative amortization This occurs when the outstanding balance on a loan increases over time. This is because the periodical payments are lower than what the lender charges in interest and other fees related to the loan such as commissions and expenses.
Net domestic debt Gross domestic debt less the banking system's total liabilities with the Public Sector.
Net Domestic Product (NDP) It is the total amount of goods and services produced by a country (GDP) less the goods and services used in the production process. It is obtained by deducting fixed capital consumption from the gross domestic product. It provides the value of new final production by eliminating the part of capital formation used to replace capital stock no longer of economic use.
Net external debt Gross external debt less Federal Government financial assets abroad.
Net international assets Net international assets are defined as gross reserves plus loan agreements of more than six months with central banks less total debt with the IMF and central banks derived from agreements of less than six months. Also considered is the gain or loss from the change in the US dollar currency value and gold buy-sell transactions to date.
Net taxes Total taxes less transfers households receive from the State (pensions, etc.).
Net unilateral transfers The registration of financial assets that cannot be exchanged and which are of two types: private and government. The first type of transfers are transfers from immigrants and workers remittances, transfers abroad by immigrants and outgoings from financial assets originated by workers remittances to the rest of the world; and, the second type consists of government loans and donations from one country to another, be they granted or received.
Nominal anchor Nominal variable used to set a monetary policy goal; in other words, a variable that is used to stabilize inflation expectations.
Nominal rate Interest rate on the face value of a document.
Nominal wage Wage paid to the worker by its employer in the currency of legal tender according to the amount set by the National Minimum Wage Committee or collective bargaining contract, legal contract or individual work contract. It represents the value of the amount the worker receives in monetary terms.
Non-durable consumer goods Merchandise with a useful life of less than one year required by economic agents, namely, households, companies and governments in order to function, such as food, beverages, commodities, fuel etc.
Non-factorial services Concept used in the Balance of Payments Current Account involving income and expenditures derived from the rendering of different services related to real and financial asset holdings such as transport, accommodation, insurance, and food, among others.
Until 1994, transformation services were included in this concept in which net revenue from the export in-bond industry was recorded.
Non-monetary liabilities Total banking system liabilities less checking accounts in local currency; known as quasi money.



Obligation Instrument on the holder the right to perceive a fixed annual rate of interest and the amount loaned at an agreed upon date.
Official creditors Public or international bodies or organizations a government owes money to, which include: a) loans from international organizations (multilateral loans), in other words, loans from the World Bank, regional development banks and other multilateral and intergovernmental organizations; and, b) loans granted by governments (bilateral loans); in other words, loans from governments and their agencies (including central banks) and loans from autonomous public agencies.
Oil bond (Petrobono) Debt security backed by a certain number of barrels of Mexican export crude oil and issued by the government in the international capital market. Considered a fixed income instrument because it offers a certain rate over a set period of time but its price in the secondary market varies depending on oil market expectations and the exchange rate.
Open market operations Money market operations at the central bank's initiative to reduce or expand the money supply. Banco de México intervenes in the money market through auctions to offer credit or receive deposits as well as through the purchase or sale of government securities, either directly or through repurchase agreements. The central bank must adjust the money supply daily by managing domestic credit so that it corresponds to base demand. Banco de México manages its net domestic credit through open market transactions ensuring that the resulting intervention is congruent with its current account accumulated balances target.
Open unemployment Workforce's idle percentage. Covers all people aged 12 or above who during the week the survey was conducted were not employed or self-employed (less than 1 hour a week), were available for work, and have taken decisive steps to seek work eight weeks prior to the reference period. In other words, people that replied to newspaper ads or family recommendations and tried to be self-employed in any activity.
Open unemployment rate Index obtained by dividing the openly unemployed population by the Economically Active Population (Población Económicamente Activa, PEA, for its acronym in Spanish) and multiplying the result by one hundred in order to obtain the unemployment percentage; in other words, the percentage participation of open unemployment in the PEA.
Operating deficit or surplus (balance) Obtained by subtracting from the primary economic surplus the public debt's balance inflationary amortization in local currency.
Operating expenses Spending on goods, services and other various expenses incurred by state sector entities for their ongoing activities and functions.
Operational targets Economic variables the central bank can influence directly and which have a direct relationship with its intermediate and final targets. In the case of Mexico, for example, as of January 21, 2008, Banco de México made the intraday interest rate an operational target.
Opportunity cost Term used to describe how decisions made in relation to scarce resources imply a cost. The opportunity cost is the value of the alternative or the disregarded better alternative.
Options An options contract is a voluntary agreement in which by paying a price called a premium, the buyer of the option acquires the right, although not the obligation, to buy or sell to the seller of the option a given core asset at a preset price (strike price) on a pre-established date or period.
Option contracts in which the buyer acquires the right to buy the core asset and the seller the obligation to sell it are known as "calls".
Option contracts in which the buyer acquires the right to sell the core asset and the seller the obligation to buy it are known as "puts".
Organization for Economic Cooperation and Development (OECD) International organism with the following main goals: a) achieve the highest possible rate of economic growth and employment; raise living standards in member countries based on conditions of financial stability and contribute to the development of the global economy; b) foster the economic development of member and non-member countries; c) drive growth in international trade on multi-lateral and non-discriminatory bases according to international standards. Their three protocols were signed in Paris on December 14, 1960. The Organization currently consists of 25 countries whose growth strategies are based on free market, democracy and trade models. Germany, Australia, Belgium, Denmark, France, Greece, Ireland, Iceland, Italy, Luxembourg, Norway, Holland, Portugal, UK, Sweden, Switzerland, Turkey, US, Canada, Spain, Japan, Finland, Australia, New Zealand, and Mexico.



Payments system A system comprising a series of instruments, bank procedures and generally, interbank fund transfer systems which ensure the circulation of money.
Peso parity The equivalence of the peso versus other currencies of countries it trades with. This equivalence changes due to adjustments in the value of the peso against the dollar and the dollar versus other foreign currencies.
Preferential interest rate Percentage below the cost of funding established according to Federal Government policies charged on loans for specific activities it wishes to promote; for example, selective regional credit, credit for small traders, and credit for farmers, among others.
Prepaid interest Amount of interest to be charged or documented ahead of the period of time in which it is incurred. Banks that grant loans or financing cannot demand that interest be paid in advance, only after expired periods.
Present value The difference between the cost of capital of an investment and the present value of the future cash flow the investment will produce.
Presumably counterfeit  banknotes Banknotes of dubious authenticity sent to Banco de México to determine if they are false.
Presumably counterfeit metal coins Coins with dubious authenticity sent to Banco de México to determine whether or not they are false.
Price Amount of money exchanged for a good or service; in other words, the value of a merchandise or service in monetary terms. With respect to the purchase of goods and some services it is called "price"; when hiring labor services, "wages", "salaries" etc.; with respect to a loan or capital, "interest"; and when it concerns a building, "rent".
Price index base weight The determination at a point in time of the relative importance to household spending of each of the goods and services comprising the CPI basket and the PPI.
Price index comparison base Point of reference in time as of when price changes are compared. The concept is also known as reference or simply "base" period.
Price index goods and services basket A broad sample of goods and services representing national production in the base period in the case of the PPI, and goods and services representing the material needs of households during the base period in the case of the CPI.
Primary economic deficit or surplus Result obtained by comparing total public sector revenues and expenditures excluding interest on debt. This concept measures the fiscal deficit over which direct control can be exercised as the debt service is largely a spending contingent on the overall economy.  
Primary expenditure Aggregate amount after subtracting interest, commissions and expenses associated with debt from net expenditure. This concept of expenditure reflects the level of expenditure over which the public sector really has control, as the interest is directly linked to accumulated historical balances.
Primary market Where securities are placed for the first time providing a flow of funds from investors to the issuer. The issuer delivers the securities and receives new funds for projects.
Series of negotiations aimed at acquiring securities of a new issuance.
Primary sector Sector of the economy grouping agriculture, cattle breeding, fishing, forestry and mining.
Prime rate The preferential rate of interest at which commercial banks loan money in the New York and Chicago markets. The prime rate is a global rate that constantly varies in response to demand for credit and the monetary supply as well as inflation expectations and the results of the US current account balance of payments.
Principal on a loan Loan amount excluding accessories available to the client. Also known as capital.
Private consumption Comprises the value of all purchases in the domestic market (whatever their duration) as well as nonprofit services undertaken by families and private institutions. Includes payment in kind, production of articles for self-consumption and the value owners assign to their homes. Excludes purchases of land and buildings for homes.
Private investment Comprised of purchases of final goods companies acquire for production (capital goods) and variations in stocks.
Private sector Economic sector that is beyond the direct control of the State but nevertheless receives indications from it. It includes activities undertaken by a private company to meet society's demand for goods and services.
Producer price Amount of money the producer receives from the buyer for each unit of a good or service generated such as production excluding Value added tax (VAT) or other types of taxes passed on to the buyer. It also excludes any transport cost not included in the price that had to be invoiced separately.
Producer Prices Index (PPI) A series of statistical indicators that measure the change in the prices of a basket of goods and services representing the domestic economy's production over time.
Production Process through which economic goods and services are created. The main activity of any economic system organized to produce, distribute and consume goods and services to meet human needs.
Productivity Relationship between the product obtained and inputs used measured in real terms; on the one hand productivity measures the frequency of human labor under different circumstances; on the other, it calculates the efficiency with which capital resources and labor are used in production.
Programmable expenditure Series of expenditures required to comply with the attributes of Federal Government institutions, departments and entities including the Powers of the Union, Autonomous Organs, the Central Public Administration, and entities belonging to Public State-Owned Administration subject to direct budgetary control that are defined as part of specific programs for better control and evaluation.
Public consumption Spending or purchases undertaken by the Federal Government, states, municipalities and Mexico's Federal District Government in pursuit of its goals.
Public debt Sum of public sector outstanding liabilities derived from domestic and external borrowing transactions on the country's credit. Spending item that groups benefits aimed at meeting Federal Government obligations related to its domestic and external public debt derived from loan transactions with terms authorized or ratified by Congress. Includes debts of previous fiscal years related to items other than personal services and the return of unduly received income.
Total loans received by the State in order to meet its needs.
Public deficit financing Funding obtained by the government to meet a deficit or increase its budget.
Public expenditure Spending undertaken by Federal, state, and municipal governments, including the Legislative and Judicial Branches and the state-owned sector, at their respective levels, during the course of their activities.
Public finances The management of government income, spending, public debt and the government's pricing policy through different public sector institutions. The study of public finances refers to the nature and economic, political and social effects in the use of fiscal instruments: revenues, spending, borrowings, and prices and tariffs of the goods and/or services produced by the state-owned sector.
Public sector budget Refers to all institutions, departments and entities considered in the Federal Budget. Includes legislative and judicial branches, autonomous bodies, centralized public administration, and bodies and companies involved in state public administration direct budget control.
Public sector financial operational balance Revenue, expenditure and deficits of Federal Public Sector entities and agencies deducted from transactions cleared between them. The difference between total revenue and expenditure generates the economic deficit or surplus.
Public sector primary balance The primary balance is equal to the difference between total Public Sector revenues and total expenses, excluding interest. As most of the interest payment corresponding to a fiscal year is determined by the accumulation of debt from prior years, the primary balance measures the effort made to adjust public finances during the current period.
Public treasury Government function aimed at obtaining monetary resources from various sources to finance the country's development. It involves raising direct taxes, rights, products and benefits as well as capturing additional funds through loans and borrowing both within the country and abroad.
Series of Federal Government assets, properties and rights.
Purchasing power Individuals' capacity to purchase goods and services through the wages and salaries they receive.



Rate A basic indicator for estimating the performance of certain variables in relative terms.
Real interest rate The percentage that remains after deducting the inflation rate from headline inflation.
Real wage The value obtained from dividing the nominal wage by the national consumer price index.
Rediscount rate The rediscounting of previously discounted effects, generally between banks.
Reference rate Interest rate derived from costs of funding and the operation of funds used by banks to grant preferential loans.
Repo Contracts in which a participant with funds available for investment acquires ownership of debt securities for a sum of money and agrees to transfer ownership of them back to the holder within an agreed upon term and for the same sum plus a premium.
Repurchase agreement A credit transaction in which the buying party acquires, for a sum of money, the ownership of securities and undertakes to transfer the ownership of similar securities within the agreed-upon term and upon payment of the same price plus a premium. The premium remains with the selling party unless otherwise agreed. By buying (selling) securities through repos, the central bank injects (withdraws) liquidity to (from) the money market.
Residual value (salvage value) That part of an asset's cost that is expected to be recovered through its sale or exchange at the end of its useful life.
Retirement Fund Management Companies (Afores, for its acronym in Spanish) Financial institutions engaged exclusively and professionally in managing the individual accounts of workers and channeling the funds of their subaccounts according to the laws on social security as well as managing specialized mutual funds (Siefores), which will produce yields that will be included in the individual account of each worker.
Retirement Savings System (SAR, for its acronym in Spanish) Benefit established in the Social Security Act, the main purpose of which is to form a long-term savings and insurance mechanism for the worker in the event of retirement, disability, unemployment, or death through a solid financial base. The system was created on February 24, 1992 following the approval of a series of amendments to the Social Security and the National Housing Fund Institute Laws. It is formed by the quotas or contributions employers must make and are equivalent to two percent of the base wage. The contributions are paid to banks and then credited to the workers' individual accounts.
Risk The word risk comes from the Latin "risicare" meaning "risk". In finance the concept of risk is related to the possibility of an event occurring that translates into losses for financial market participants such as investors, borrowers, and financial entities. Risk is the product of the uncertainty associated with the value of financial assets in response to adverse changes in factors that determine their price. The greater the uncertainty, the greater the risk.
Risk analysis Calculation of the probability of real returns being below expected returns. This probability is measured by the standard deviation or by the expected return variation ratio.



Sampling Technique employed in the partial analysis of a group of cases or events to obtain a given probability or level of certainty in relation to the characteristics of the pool being analyzed.
Saving Amount left after expenditure by individuals and institutions. Also, income after taxes that is not used in the case of individuals and that it is not distributed in the case of companies.
Unconsumed income. In other words, the difference between income and consumption. In an open economy it is the aggregate of net transfers from abroad or the subtraction of net transfers abroad. For a closed economy, savings are equal to investment (saving and investment made versus desired saving and investment).
Saving means "reserve" production capacity not used to produce consumer goods and make it available to produce new investment goods. National savings do not consist of accumulating money but capital.
Positive difference resulting from comparing an entity's income and expenses. For budgetary effects there are two types of savings: current account-related and capital account-related.
In the case of the Federal Government, savings are calculated before current transfers and interest payments.
Secondary market Series of negotiations with buyers and sellers aimed at acquiring securities or instruments already in circulation to provide holders with liquidity. The investor that has already bought a security or instrument decides to sell it to another. Thus, the exchange of monetary flow and securities occurs between two entities other than the issuer.
Securities In the broad sense, documents that represent rights associated with ownership of a document. Securities can be letters, checks, certificates, pledge bonds, and insurance policies, etc.
Securities Deposit Institute (INDEVAL, for its acronym in Spanish) The Securities Deposit Institute (Indeval) is the only company in Mexico authorized to operate as a securities deposit under the Securities Market Act by providing security safekeeping, administration, and transfer services as well as transaction clearing and settlement within a physically stationary environment.
Security Documents representing the right of the bearer to capital or credit. These instruments can be traded and their transfer or endorsement accredits ownership of them or implied rights.
Segregated securities Debt securities that separate out interest payable and principal, thus generating separate coupons. These coupons are instruments derived from the security's segregation, are independent of them, and grant the holder the right to receive a single payment at maturity.
Selected range Series of numbered banknotes from one to ten displaying different states of cleanliness or wear, representing all the changes in banknotes' physical state.
Services balance The systematic registration of all payments made for the services of the residents of a country to foreigners. These revenues and expenditures are also called services imports and exports.
Short position (corto) Name given to the overdraft Banco de México induced in banks' aggregate current accounts with the central bank between 1995 and 2008 under the accumulated balances regime (September 1995 – April 2003) and the daily balances regime (April 2003 – January 2008), as part of a restrictive monetary policy stance.
Simple interest Interest that is not accumulated to the capital that produces it, that is calculated by multiplying the capital by the interest rate without considering reinvestment or capitalization of interest.
Sources of financing Domestic and external banking and funding channels and institutions through which funds required for balancing public finances are obtained. The funds are required for economic activity and are usually loans that complement own resources.
Sources of income Income obtained by the State to finance public spending such as national income, the creation of money and foreign loans.
Special Drawing Rights (SDR) Type of currency issued by the International Monetary Fund to which all member countries are entitled depending on their contributions. In reality, SDRs are accounting items of the IMF assigned to each country according to their quotas. Some of their features are: they cannot be used to buy goods and services, and they can be used by fund members with a balance of payment deficit or that are losing monetary reserves. SDRs are important because they contribute to increase international liquidity based on gold or currency reserves.
Specialized Retirement Fund Mutual Funds (SIEFOREs, for its acronym in Spanish) Authorized financial intermediaries that act as a link between savers (workers) and institutions that need capital (companies and the government). Its main purpose is to invest funds from AFORE individual accounts according to social security laws.
These intermediaries operate using the sum of small amounts of funds paid in by a group of workers which forms common capital enabling them to participate in the financial market through the purchase of instruments and securities and to generate profits based on contributed funds.
Specific product Maximum de-aggregation of the goods and services in the CPI basket. Includes brand, presentation, and other characteristics that accurately identify an item.
Spot Cash purchase (sale) of one currency for another, in which the settlement takes place two working days following the deal.
Spread Additional cost to the interest rate paid on a loan. Its level depends on the cost of funding for the bank granting the loan as well as the risk the borrower represents.
Stagflation Economic situation consisting of a reduction in the level of economic activity accompanied by high and rising inflation.
Standard contract Document prepared unilaterally by entities in standard formats establishing the terms and conditions applicable to the transactions or services they undertake with their clients.
Sterilization Series of actions taken to offset liquidity excesses and deficits that impact banks' current accounts with the central bank in the short and long terms.
The central bank commonly sterilizes short-term liquidity excesses or shortfalls through market operations. Central banks also use other instruments to sterilize long-term flows.
Stock Accumulated amount of a given variable at a given moment in time.
Stock exchange Private company incorporated as a company with variable share capital, which facilitates securities transactions and the development of the exchange market; establishes outlets, installations and mechanisms that facilitate securities relationships and transactions; provides and releases to the public information about tradable securities listed in the prices system and related transactions; oversees the strict adherence of its partners to the applicable provisions; certifies stock market quotations; and, undertakes activities related or complementary to those authorized by the Ministry of Finance.
The Stock Market Act states that the State, through the Ministry of Finance, has the power to grant the concession for stock market activities. Currently, the only concession in force for these activities has been granted to the Mexican Stock Exchange.
Stock market The place where security transactions take place among brokers who capture funds from local and foreign savers and investors and invest them in a broad range of securities according to the funding needs of issuers, banks and government bodies.
Structural change Strategic process aimed at encouraging a series of transformations in the economic structure and social participation through far-reaching changes that correct fundamental structural imbalances of the economy's production and distribution framework such as: the lack of internal savings and balance of payments imbalances, modernizing the production and distribution framework, decentralizing production and social well-being activities; direct funding to development priorities; strengthening the State by driving the private and social sector; healthy public finances; and, preserving, mobilizing and projecting national development potential.
Supply Amount of goods and services available for sale to consumers by suppliers at a set price.
Surety Surety agreement in which a person called guarantor agrees, with another person's creditor, to pay the debt in case the person does not.
Surety companies Although not having an auxiliary credit activity, they are still considered as part of the Mexican financial system. They grant collateral and they are limited/special purpose companies.
Surplus Greater revenues than expenditures. Positive difference between the equity (more assets than liabilities) and a given company's paid-in capital stock.
SWAP Agreement under which the parties commit to exchange diverse asset flows on a future date.
Swaption Financial derivative consisting of an option that has a swap as its core asset.



Target rate Rate the central bank sets as a reference. It is usually a short-term rate. In the case of Mexico, the central bank's target rate is the interbank overnight funding rate.
Tax According to the Federal Fiscal Code, taxes are loans in money or in kind that the State sets unilaterally and which are mandatory for all individuals whose situation coincides with that stated by the law. Tax contributions or loans in money and/or in kind which, according to law, extend to and are mandatory for individuals and corporations so that public expenses can be met.
A monetary contribution or loan from corporations or individuals that the State sets coercively, it is definitive, and for which it obtains nothing in exchange.
Tax Administration Service (SAT, for its acronym in Spanish) Decentralized body of the Ministry of Finance created by the Tax Administration Service Act which has fiscal authority and undertakes a strategic activity on behalf of the State consisting of tax calculation, settlement and collection, betterment levies, rights, products, and federal budgets for public sector financing. The Tax Administration Service is autonomous in terms of the budget it has to achieve its goals and has technical autonomy for making resolutions.
Terms of trade Prices of a country's commercial products expressed in relation to the price of a global basket of commercial goods that enables the relationship between a country's export and import prices to be approximated.
Tomorrow Next (Tom/Next) Simultaneous purchase (sale) and sale (purchase) of a currency. The first transaction is settled the next working day and the second one two working days later on the deal date.
Total Annual Cost (TAC) Indicator of the total cost of financing applicable to any type of credit used to compare the financial cost of loans with different maturities and different products.
CAT includes the loan amount, ordinary interest, value added tax, fees, expenses, required insurance premia, principal amortizations, discounts and agreed payments and any other charges a client must meet when taking out a loan and during its life, including the difference between the cash price of a good and its price on credit.
CAT is expressed as an annual percentage.
Total public sector net debt consolidated with Banco de México Negative balance derived from consolidating Public Sector transactions with Banco de México. It adds central bank's transactions to those of the external sector, the private sector, commercial banks, state and municipal governments, private sector financial intermediaries, and non-sectorial creditors.
Trade balance The part of the balance of payments that considers imports and exports of tangible goods. It is used to register the balance or imbalance of such transactions with the exterior and it is expressed as a deficit or surplus; the former when imports are higher and the latter when exports are higher.
Traditional auction Public sale or purchase in which participants present their bids but cannot see the bids of others until the results of the auction are released.
Treasury Bonds (TESOBONOS) Negotiable bonds (with a nominal value of 100 dollars) issued by the Federal Government that can be placed at a discount or below par and amortized at a free exchange rate valid on the payment date.
Foreign currency denominated bonds (US dollars) issued for six months or less in relation to which the Federal Government must pay a sum of money in local currency equivalent to the value of such foreign currency on a given date. These bonds can be placed at a discount and are indexed to the 48-hour free exchange rate published by the Mexican Stock Exchange in its "Stock Market Daily Operations".
Trust Trusteeship legatee. The entity managing the trusteeship. In Mexico only duly authorized banks can be trust company.
Trust company Credit institution authorized by law which owns the assets or rights held in trust. It is responsible for managing the trust's assets by exercising compulsorily the rights received from the trustor, and has all that is required both to preserve the assets in trust and to comply with the trustor's objectives or instructions.
Trustee An individual or corporation with the required legal capacity to receive any gains resulting from the purpose of the trust, except for the trust administrator.
Trusteeship Mercantile legal concept in which a trustor allocates assets for a certain authorized end conferred to a trust company.
Act through which assets are designated to an authorized end conferred to a trust company. The Mexican law only provides for the express trust.
Trustor Person who hands over certain assets for an authorized purpose to another person called a trustee in order to attain the purpose for which they were designated. Only individual corporations with the adequate legal capacity to deal with the assets and capable legal or administrative authorities can be trustors. The Ministry of Finance represents the Centralized Government Administration as single trustor in the trusts it creates.



UDIBONOS Federal Government Development Bonds denominated in UDIs are Federal Government debt securities aimed at protecting holders from increases in inflation by keeping the real value of their investment constant and offering them real returns. Their reference is the value of Investment Units. These new securities, known as UDIBONOS, have a nominal value of 100 UDIs, are issued for a three-year terms, and pay a fixed rate of interest every six months. They are placed through auctions, and their yield is determined by the market.
Unemployment Situation of one or several individuals forming part of the working age population and available to work but not considered in paid employment; in other words, those who are not involved in any economic activity.
People who through no fault of their own want to work for available wages but cannot find employment. The term can also be applied to other types of factors such as capital, land, and savings among others.
Unpaid balance The principal of a loan that is pending amortization or repayment.



Value The extent to which things can provide well-being or pleasure. Equivalence of one thing for another. Securities representing shares in companies, amounts lent, merchandise, monetary funds or services involved in mercantile transactions.
Value added at basic prices The value of goods and services a country produces, excluding taxes on payable products and subsidies owed per economic unit, following their production or sale.
Value added at factor cost In the case of gross production it is the value of producer prices less net indirect taxes on merchandise, industries, etc., and direct and indirect intermediate inputs involved in the production process.
Value added at market prices (or at purchase prices) Producer prices plus distribution and transportation margins on behalf of the buyer.
The result of adding the total amount of net taxes from producer subsidies to the total value of goods and services produced at basic prices.
Value added at producer prices The market value of merchandise gross production by type of industry.
It represents the value of goods and services produced less VAT or any other type of deductible tax invoiced to the purchaser. This price does not include transport expenses invoiced by the producer separately.
Variable income Return on share ownership which varies depending on the earnings generated by a listed company and dividends decreed by the shareholders meeting.
Variable income securities Stock in relation to which besides the payment of principal, a variable yield that varies according to the company's financial and economic situation is paid as well as dividends set by the shareholders' meeting.
Volatility Unpredictable strong changes over a given period.



Wage It is the amount an employer must pay an employee for his/her work. It can be measured as a unit of time, a unit of work, a fee, a flat rate or any other agreed upon form. A wage is comprised of payments in cash, a daily amount, gratuities, earnings, housing, bonuses, commissions, benefits in kind, and any other amount the worker is given in exchange for his/her work.
Wage mass The remuneration of wage earners in money or in kind by a business or industry in exchange for their work, plus mandatory or private social security contributions.
Warrant (guaranteed value) An option issued and guaranteed by the same company, which usually matures in more than a year.
Warrants Documents issued in a series placed with public investors which grant the acquirer or holder the right to buy a certain number of shares from the issuer.
World Trade Organization (WTO) World body whose main purpose is to implement trade dispute solution mechanisms among nations. As of January 1995, the WTO replaced the General Agreement on Tariffs and Trade (GATT). The GATT previously had that purpose, but with the conclusion of the Uruguay Round negotiations on December 15, 1993 and the participation of 117 member countries, an agreement to create the WTO was reached.
Worn banknotes Notes that must be taken out of circulation because they are worn and/or dirty and correspond to grades 7 or above on the selected range as well as banknotes that have been cut in some way or scratched, which may have resulted in one of their parts becoming detached and may have been repaired with tape or transparent glue. Worn banknotes are also those with missing parts or which have had parts added to them made from material which is not banknote material and in total measures less than or the same as 616 square millimeters or 6.16 square centimeters (approximately the surface of a 10 peso coin currently in circulation) as well as those with stains, marks, numbers, words, phrases or drawings, in manuscript, printed or any other type of undeletable form other than what is indicated in the "banknotes marked with messages" definition.



Zero-coupon bonds Bonds issued by the US Treasury (1988) with a 20-year maturity and a capitalized discount rate such that at maturity their value is equivalent to the payment of the Mexican Government's restructured public debt related to this concept.
They are Treasury bonds of the United States and other industrialized countries that Mexico acquired giving them an asset to reinvest over 30 years at a fixed rate. At the end of the period they will pay the principal of the new bonds in full creating, at the same time, another fund guaranteeing 18 months of interest payment on such bonds and reducing the operating cost for Mexico.
The bonds are also known as "guaranteed bonds" as they serve as a mechanism for "eliminating" external debt. In this way, an asset that is maintained in a trust account is offered as collateral for the principal.
The value and maturity of the collateral instrument or "zero-coupon bond" is determined such that it equals the debt subject to transformation. Yields on the collateral instrument at maturity can therefore be used to amortize principal in one payment. The interest rate is fixed when these bonds are purchased and does not vary while the bonds are held, making them a reliable investment.