ECONOMY-MEXICO:
Sunny Today, Cloudy
Tomorrow
By Diego Cevallos
MEXICO CITY (IPS) - So
far, the Mexican economy
has not fallen prey to
the ills affecting its
principal trading
partner, the United
States, and is surviving
internal political
tensions arising from
government initiatives
to reform the
state-owned oil company.
But conditions could
deteriorate in the
second half of the year.
Indicators of industrial
growth, bank credit,
employment, domestic
consumption, exchange
rates and investment in
capital goods were all
rosier than expected in
the first few months of
this year, according to
analysts.
In contrast, there has
been a moderate decline
in remittances received
from Mexican migrants in
the United States, and
in exports of
manufactured goods.
Prophecies of doom and
gloom for Mexico because
of the slowdown in the
U.S. economy have so far
not been fulfilled,
university professor and
business consultant
Ángel Vega told IPS.
For the last two weeks,
Congress has been
occupied by the leftwing
opposition, which has
blocked legislative
activity. With regard to
the potential economic
impact of this
situation, Vega said
"the markets have still
not looked in that
direction."
The leftist Party of the
Democratic Revolution (PRD),
the main opposition
party, warns that its
current protests may
expand into a social
uprising if Congress
approves reforms of the
state oil sector, which
it regards as akin to
privatisation.
While lawmakers busy
themselves with the oil
issue, the government of
conservative President
Felipe Calderón and most
economic players are
closely monitoring the
financial pulse of the
United States, on which
Mexico is heavily
dependent for trade.
The International
Monetary Fund (IMF)
predicts that economic
growth in the United
States will be barely
0.5 percent this year
and 0.6 percent in 2009.
Mexico is the Latin
American country that is
most threatened by the
U.S. slowdown, according
to the IMF, the Economic
Commission for Latin
America and the
Caribbean (ECLAC) and
other multilateral
bodies.
In the near future,
especially after July,
the situation in Mexico
could become more
complex, said Enrique
Quintana, a columnist
for the newspaper
Reforma.
The Calderón
administration’s
strategies designed last
year to cope with the
U.S. slowdown were based
on the premise that the
U.S. economy would
emerge from the doldrums
in 2009, with 2.3
percent growth that
year, he said.
Officials in Mexico have
implemented an
aggressive programme of
public infrastructure
works to stimulate
economic activity, and
they forecast a growth
rate of 2.8 percent in
2008, half a percentage
point less than in 2007.
But according to the IMF,
gross domestic product
(GDP) will grow by no
more than two percent
this year.
However, most analysts
estimate that economic
indicators due in May
will show first quarter
growth of about four
percent.
The Mexican economy may
experience its lowest
point in the second half
of 2008 and the first
half of 2009, Quintana
warned.
Vega said that
Calderón’s
"anti-cyclical" strategy
presupposed that the
problems in the United
States would begin to be
solved in 2009, "but
that’s not going to
happen, so difficulties
might arise just at the
most sensitive time."
Mid-term legislative
elections will be held
in Mexico in July 2009.
If the economy is
stumbling at that point,
it is likely that the
governing National
Action Party (PAN) will
not perform well at the
ballot boxes, and then
"the government’s tasks
will become more
difficult," Vega said.
According to a
preliminary agreement
between lawmakers of all
political parties,
debates will take place
in different forums from
May 12 to Jul. 22 to
discuss reforms to PEMEX,
the state oil monopoly.
In spite of soaring
international crude
prices, PEMEX is in deep
crisis because of
diminishing reserves and
lack of funds for
investment, because its
profits go largely into
government coffers to
fund the state
apparatus.
In Vega’s view, unless
the forthcoming debate
is carried out with at
least "a modicum of
civility," the
development of Mexico’s
economy may be severely
affected.
The energy debate will
coincide with the
tightest economic
squeeze in the United
States.
Up to Mar. 15 this year,
job creation had
increased by 4.9
percent. In January and
February bank credits to
businesses rose by 31
percent, and in January
general industrial
activity grew by 3.1
percent.
Construction grew by 12
percent in January and
the automobile industry
expanded by 20.4 percent
in the first two months
of the year, while
purchases of capital
goods increased by 40
percent in the same
period.
Supermarket sales
increased by between six
and eight percent from
January to March, in
spite of shortages of
some basic foods due to
the global price hikes
of commodities like
maize, rice, wheat and
soybeans.
Inflation, interest
rates, exchange rates
and other indicators
have experienced little
or no change.
In 2007, Mexico’s
foreign trade reached a
historic record of 555
billion dollars, with
exports worth 272
billion dollars and
imports of 283 billion
dollars. More than 80
percent of this trade
was with the United
States.
In addition to their
strong trade links and
the interconnected
production chains of
both countries, which
share a 3,200-kilometre
border, the United
States is the main
source of foreign
investment in Mexico.
In its neighbour to the
north, Mexico also has a
safety valve for some
500,000 people a year
who emigrate to the
U.S., reducing the
pressure of unemployment
at home. |
