Mexico: A Minskyian case of financial fragility shaken by Covid-19

Using a Minskyian framework, we construct financial fragility indicators from a sample of companies listed on the Mexican stock market. Our aggregate empirical analysis shows that the financial fragility in the Mexican stock market was not a feature created by the Covid-19 pandemic shock, but it was instead a situation that slowly built up in the period pre-Covid-19, since 2017. Our mesoeconomic analysis also shows that strong differences were present, and some sectors have been financially more exposed than others before and during the Covid-19 pandemic. In particular, firms in the materials sector and firms producing products of recurrent consumption were the most financially stable while firms in the industrial sector and firms providing no basic products and services were the most financially fragile. Our analysis at sectoral level constitutes important information for public institutions that should be aware of such sectoral differences to produce more focused fiscal and industrial policies in Mexico, a suggestion relevant for other countries too. Our econometric analysis highlights the main factors that contributed to the higher financial fragility of the overall firms under observation. The paper concludes with a discussion of the possible economic implications that such financial fragility may entail for the Mexican economy in the context of the Covid-19 crisis.