Monday, February 1, 2010
There
are Signs of Economic Recovery in Mexico, but …
By Eduardo
García and Luis Felipe Cedillo
The growth in exports and imports in December 2009,
combined with a drop in the unemployment rate during that last month of the year, for specialists are unmistakable signs that
the Mexican economy, driven by the recovery of its main trading partner the United States, is in recovery.
In December, exports rose 22.8% compared to the same
period last year, the second consecutive increase and the highest growth since April 2008, when it rose 28.2%. The rise was
also supported by a 15.3% growth in manufacturing exports, reflecting a revival of external demand for manufactured goods
produced in Mexico, such as cars and home appliances.
If added to this performance, imports also rose 11.7%
in December over the same month of 2008, the first rise in 14 months, thus it is understandable why some analysts believe
the Mexican economy is emerging from the crisis.
Figures "confirm a strong recovery of production driven
by the external sector," wrote Arturo Vieyra, an economist of Banco Nacional de Mexico, the second largest bank in Mexico.
"The increase … of manufactured exports is the second consecutive annual increase and was above our forecast of 8.5%."
The import growth is also a favorable sign of Mexico's
economic performance since, on one hand it reflects an increased demand for goods produced abroad by Mexican consumers, and
on the other it is a symptom of larger orders of Mexican exports that require imported components for their manufacture.
Imports of intermediate goods, or goods used in production
lines in Mexico, grew 18.4% in December, higher growth than that reported for real consumption of 6.1%.
"As for imports, they respond with improvement not
only to the recovery of domestic demand, but also external, due to the relevant import components of exports," wrote economist
Pedro Uriz of BBVA Bancomer, the largest financial institution in the country, in a report.
Moreover, the decline registered in the seasonally
adjusted unemployment rate in the last month of 2009, from 5.6% in November to 5.4% in December, also shows that the benefits
of the economic growth of the country began to translate into greater employment opportunities for those who lost their jobs
during the economic recession of 2009.
However, not everything is rosy for the Mexican economy.
For some analysts, it remains to be seen whether the U.S. economic recovery, that appears to be the engine of the Mexican
recovery, is not just a temporary phenomenon of short duration.
If the recent momentum from abroad would decrease,
which many fear still could happen due to the problems the U.S. economy is facing regarding employment and the population's
high indebtedness, the strong momentum being experienced by the Mexican economy could disappear.
Nearly a third of Mexico's gross domestic product is
linked to the export sector, while this is, in turn, highly concentrated in the U.S., which consumes about 81% of Mexican
exports.
If the economy of the U.S. cools Mexico will likely
do so as well, as indeed was demonstrated last year when the recession in the neighboring country made Mexico have its worst
downturn in more than seven decades.
One factor that could further disrupt the Mexican economic
performance is an inflationary spike. Prices in the first half of January 2010 rose 0.75%, the Banco de Mexico [central bank]
reported, an increase greater than expected and the biggest rise for the first two weeks of the first month of a year in at
least the last nine years.
The price hikes and inflationary impact were mainly
due to increases administered by the federal and local governments, such as fuel prices or in the costs for the Metro public
transportation system in Mexico City.
The entry effect of an increased rate of Value Added
Tax also generated inflationary pressures, researchers said.
The risk is that if these increases do not slow down
for the second quarter, the country's monetary authorities will most likely be forced to raise the benchmark rate to curb
the inflationary pressures.
A rise in the benchmark rate would result in reduced
consumption and investment, two of the main engines of economic growth of any economy.
Therefore, although today the economic panorama of
Mexico is much more favorable than it was a few months ago, the country still faces internal and external risks that could
slow the apparent [recovery, this due to the negative factors that surfaced] in the economic sphere at the start of 2010.
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e-mid (Mexico Investor Digest), Jan. 25, 2010; Mexico Investor Digest is a reference for the business market, which offers integral
products and services that help and promote the development of highly competitive businesses in Mexico; Universidad de las
Americas, Mexico City; translation e-mid [edited].
