Mexico overtakes Canada, moves into 12th place among top exporters

Mexico's export growth placed it ahead of Canada last year.Mexico’s export growth placed it ahead of Canada last year. EL ECONOMISTA

Mexico overtakes Canada, moves into 12th place among top exporters

It is the first time that Mexico’s exports have exceeded those of Canada

The value of exports from Mexico increased by 10.1% in 2018 to US $450.92 billion, according to the National Institute of Statistics and Geography (Inegi), while its Canadian counterpart, Statistics Canada, said that Canadian exports totaled US $449.85 billion, an increase of 6.9% compared to 2017.

It marks the first time that the value of Mexican exports has exceeded that of Canada.

With total exports of just under US $2.5 trillion, China was easily the world’s biggest exporter last year, according to World Trade Organization (WTO) data.

The United States and Germany were the second and third biggest exporters, with total foreign sales of US $1.66 trillion and $1.55 trillion respectively.

Japan, the Netherlands, South Korea, Hong Kong, France, Italy, the United Kingdom and Belgium took out positions 4th to 11th.

The biggest contributors to Mexico’s export earnings were cars, petroleum, computers, auto parts, trucks, electrical conductors and televisions.

Mexico achieved strong export growth in 2018 even as tough negotiations to reach a new North American trade agreement continued to take place, creating uncertainty about the future of its relationship with its largest trading partner, the United States.

The leaders of Mexico, the United States and Canada finally signed a new trade pact on November 30 but it won’t take effect until it has been ratified by the legislatures of the three countries.

Both Mexico and Canada are pushing for the removal of the United States’ tariffs on steel and aluminum before moving to ratify the agreement.

Source: El Economista (sp) 

MEXICO CONSUMER CONFIDENCE REACHES HIGHEST LEVEL ON RECORD

Mexican consumer confidence rose in February for a third consecutive month, hitting its highest level on record, data from the national statistics agency showed on Tuesday.

Adjusted for seasonal swings, Mexico’s consumer confidence index rose to 119.9 in February from 113.2 in January, continuing the upward trajectory it has taken since President Andres Manuel Lopez Obrador took office in December.

The data offers some respite for the leftist Lopez Obrador after a spate of recent warnings from analysts and economists over the outlook for Latin America’s no. 2 economy.

Lopez Obrador has vowed to tackle poverty, reduce inequality and improve wages for the bulk of Mexican society.

His election in July also triggered a significant jump in the consumer confidence index.

In December, the country’s wage commission agreed to raise the daily minimum wage of just over $4 by 16 percent, the biggest percentage raise since 1996.

Still, Goldman Sachs economist Alberto Ramos noted the bright optimism among consumers was not shared by companies.

“Business sentiment has been more subdued as producers have been apprehensive with regards to policy direction and overall sector-level policies,” Ramos said in a note to clients.

Responding to warnings by ratings agencies that Mexico was running the risk of a downgrade to its credit rating, Lopez Obrador on Tuesday said the agencies were punishing the country for the “neo-liberal” policies of previous administrations, a favorite rhetorical target of the president.

The previous peak for the adjusted consumer confidence index was 116.1 in August 2001, a few months after data for the index began being registered by the statistics agency.

World Bank data shows that Mexico suffered a mild recession that year after the end of the dot-com boom.

The non-adjusted confidence index rose in February by nearly five points from the previous month to 116.8. That took the unadjusted index to its highest level since August 2001.

Reporting by Dave Graham; Editing by Bernadette Baum and Bill Berkrot

Foreign tourism up 7.3% in first half of year; revenues rose 4.3%

A busy beach in Mexico.A busy beach in Mexico.

Foreign tourism up 7.3% in first half of year; revenues rose 4.3%

Numbers were up across the board

Tourism figures for the first half of the year show increases across the board, including 7.3% growth in foreign visitors.

The June report by federal tourism data agency Datatur said 20.6 million international tourists arrived in Mexican destinations between January and June, up from 19.2 million during the same period in 2017.

The revenue generated was almost US $11.6 billion, up 4.3% from $11.1 billion last year.

The flow of Mexican tourists traveling abroad also rose. Their numbers were up by 11.4%, from 8.5 million in 2017 to 9.5 million this year.

The number of cruise passengers that arrived in Mexican ports during the period was up by 10.4%, from 3.8 million to 4.2 million.

Hotel occupancy rates were also up: 40.3 million domestic and foreign tourists booked a hotel room, an increase of 2.8% over last year’s figures.

The number of foreign visitors who arrived by air was 9.6 million, a year-on-year increase of 5.4%.

There was a big increase in Peruvian visitors during the period. Their numbers jumped 26.9%, followed by Canadians with a 15.8% rise, while Colombian and Argentinian visitor numbers were up 13.6% and 11.6% respectively.

The Datatur report also noted that tourism employed a record 4.13 million people during the second quarter of the year, 2.5% more than the second quarter of last year.

Source: Milenio (sp)

Mexico says deal with U.S. on NAFTA issues may be ‘hours’ away

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Agreement between Mexico and the United States on outstanding bilateral issues in renegotiating the North American Free Trade Agreement (NAFTA) could be just a few hours away, Mexican officials said on Wednesday.

“We hope that we’ll have a solution in the next couple of hours, or the next couple of days,” Mexican Economy Minister Ildefonso Guajardo told reporters before entering the offices of U.S. Trade Representative Robert Lighthizer for NAFTA talks.

The Mexican peso rose against the dollar after his comments.

A spokesperson for Lighthizer’s office said there was no deal yet and that “major issues” were still outstanding on NAFTA.

Since restarting last month, the talks have focused on settling differences between Mexico and the United States that go to the heart of U.S. President Donald Trump’s complaint that NAFTA has hollowed out U.S. manufacturing to Mexico’s benefit.

Trump has threatened to dump the 24-year-old accord if it is not reworked to the advantage of the United States. He hopes to reduce the U.S. trade deficit with lower-cost Mexico and claw back jobs, particularly in the automotive industry.

Although progress has been made on the automotive question in recent weeks, other issues, including a U.S. proposal that could kill NAFTA after five years, remain unresolved.

Guajardo’s comments were echoed by Jesus Seade, designated chief negotiator of Mexican President-elect Andres Manuel Lopez Obrador, who said the two sides were making “good progress” and that talks could conclude “in the coming hours.”

Canada has been waiting for the Mexican and U.S. teams to reach common ground on autos before rejoining the negotiations.

U.S. and Mexican officials say they will push for a deal on reworking auto industry rules that could open the door for Canada to return to negotiations soon.

Guajardo said the talks would seek to resolve the key issues so that Canada could rejoin the talks. How quickly Canada returns to the table would depend on the progress made in Wednesday’s talks, he said.

A Canadian government source said on Tuesday there was nothing to report yet on Canada’s return.

Talks to rework NAFTA, which underpins the bulk of foreign trade in North America, have ground on for more than a year. Discussions stalled ahead of the July 1 Mexican election as negotiators failed to make a decisive breakthrough.

Aside from autos, the three sides have yet to agree on future dispute resolution mechanisms, while Mexico and Canada also oppose a U.S. demand to introduce a “sunset clause” that would force a renegotiation of NAFTA every five years.

Mexico and Canada fear a sunset clause could be a major hindrance on long-term investment.

Reporting by Sharay Angulo and Timothy Aeppel, Writing by Daina Beth Solomon; Editing by Dave Graham, Dan Grebler and Susan Thomas

Great expectations for AMLO: survey reveals strong support

Poll results are nothing for AMLO to be unhappy about.Poll results are nothing for AMLO to be unhappy about.

Great expectations for AMLO: survey reveals strong support

69% expect things to improve during López Obrador’s presidency

The survey conducted by the newspaper El Universal between August 8 and 12 shows that 69% of those polled believe that Mexico will improve when Andrés Manuel López Obrador is president.

In contrast, just 6.5% of respondents said the country will deteriorate during the new government’s six-year term, while 16% said it would stay the same and 7.8% said they didn’t know what would happen.

The poll also shows that support for López Obrador’s performance as president-elect is very strong, with 64.6% of respondents saying that they totally or somewhat approved of his actions since he won the presidential election.

The figure is 11 points higher than the 53% of votes with which the Morena party leader triumphed on July 1 and more than 40 points higher than the approval rating given to President Enrique Peña Nieto in the same poll.

Only 12.1% of respondents said they totally or somewhat disapproved of López Obrador’s performance as president-elect while 12.7% said that they neither approved nor disapproved.

In the six weeks since millions of Mexicans went to the polls to elect a new president and renew both houses of the federal Congress, AMLO, as the political veteran is commonly known, and his nominees for cabinet positions have begun to outline the plans of the incoming government.

They include building new infrastructure such as the Cancún-Palenque trainand a new oil refinery in Tabasco, reestablishing a federal Public Security Secretariat, moving some secretariats to regional cities, cutting salaries and benefits of lawmakers and officials, planting trees, establishing a free zone in the northern border region, increasing the minimum wage and reviewing contracts for the oil sector and finishing the new Mexico City airport.

López Obrador and prospective finance secretary Carlos Urzúa also moved quickly to calm fears surrounding the incoming government’s economic plans, pledging that the nation’s finances will be kept under control and that the independence of the central bank will be respected.

Today, ratings company Standard and Poor’s expressed confidence that the new government would maintain a prudent fiscal policy and would avoid instability, and that even a more active government role in economic terms would not likely be anti-market or populist.

Once he is in office, 64.5% of the 1,200 people polled told El Universal that they believed that the López Obrador-led government would deliver on its campaign promises while 18.5% said that he wouldn’t. A further 16.5% said that they didn’t know.

Almost 30% of respondents predicted that Lopez Obrador’s greatest achievement in office will be to combat poverty while 16.5% said that it would be improving the economy.

Just over 9% anticipated that job creation would be AMLO’s most notable accomplishment and a similar number said that it would be stamping out corruption.

On the other hand, 19.9% of respondents said that government corruption would go down as the incoming administration’s biggest failing, while smaller cohorts said that it would be the relationship with the United States, a failure to combat drug trafficking and other crime, management of the economy and treatment of the structural reforms implemented by the current government.

If the election was held again now, López Obrador would triumph anew with 60.3% of the vote, the poll concluded.

El Universal said that the survey has a confidence level of 95% and a margin of error of +/- 2.9%.

Source: El Universal (sp), La Economista (sp)

Business, government will build an economic power, double the growth rate

Ramírez, left, and López Obrador embrace after yesterday's meeting.Ramírez, left, and López Obrador embrace after yesterday’s meeting.

Business, government will build an economic power, double the growth rate

New president meets with executives of Mexico’s biggest businesses

The incoming federal government and the business community will work together towards turning Mexico into an economic power, the president-elect said yesterday.

Speaking after a three-hour meeting with members of the powerful Mexican Business Council (CMN), Andrés Manuel López Obrador declared that Mexico has the capacity to double its rate of economic growth from 2% to 4%, adding that the private sector is committed to doing its part to achieve it.

“There is confidence, they are going to keep investing, they’re going to create jobs and we’re going to achieve the aim to make Mexico an economic power because we have the resources for that,” he said.

“We have a lot of natural resources, we have very hardworking people and business people who are going to invest. They’re going to have the support of the government so that they have the ability [to do it], so that they don’t have obstacles and so that economic growth is achieved,” López Obrador added.

CMN president Alejandro Ramírez described the meeting as “constructive” with frank and open dialogue with the president-elect.

He explained that the 50 companies that make up the CMN are excited to support the new government’s proposed economic initiatives such as the apprenticeship scheme for young people called “Youths building the future.”

Ramírez, CEO of cinema chain Cinépolis, said the meeting also covered a range of other topics including the importance of small and medium-sized businesses to the economy, ways that the private sector can contribute to combating corruption and impunity and the insecurity problem.

In addition, they also touched on plans for the energy sector, the next government’s legislative agenda and the future of the new Mexico City International Airport, he said.

“Once again, confidence permeated between the business sector and the next president of Mexico,” Ramírez said.

“It was a very cordial meeting with open dialogue. We all left very optimistic.”

With regard to the airport project, López Obrador told a press conference today that his transition team will carry out a national public consultation in the last week of October to help determine its future.

“I call on the people of Mexico to help us . . . to resolve this difficult issue that we inherited but which we must confront in the best way possible,” he said.

Javier Jiménez Espriú, tapped to be the next secretary of communications and transportation, said that in accordance with an expert report on the project delivered to the incoming government today, there are two options that must be considered.

The first is to continue with the construction of the current project in Texcoco, México state, and the second is to build two new runways for commercial flights at the Santa Lucía Air Force Base in the same state, he explained.

“. . . The two options have points for and against, which is why I’ve decided to carry out a comprehensive consultation with specialists, members of the business sector, civil society and citizens in general,” Jiménez said.

The airport project is one of seven infrastructure projects that López Obrador has said his government will prioritize once in office.

Source: El Financiero (sp), Milenio (sp)

AMLO effect? Consumer confidence spiked 14.8% in July

consumersTheir confidence is way up.

AMLO effect? Consumer confidence spiked 14.8% in July

‘Consumers have definitely given a positive vote to the electoral results,’ economist says

Mexico’s Consumer Confidence Index spiked sharply in July to its highest level in more than a decade, immediately after Andrés Manuel López Obrador — known as AMLO — won a landslide victory in the presidential election.

The index rose 14.8% last month, the National Statistics Institute (Inegi) said yesterday, to reach 101.7 points.

The figure was well above the 90.4 median forecast of eight analysts surveyed by news agency Bloomberg and the highest since March 2008 when it hit 102.3 points.

The only comparable surge in consumer confidence came in February last year when the index increased by just over 13%.

However, that result followed the so-called gasolinazo of January 2017 when fuel prices rose sharply to put a major dent in confidence.

“Consumers have definitely given a positive vote to the electoral results,” said Joan Enric Domene, an economist at the brokerage firm Invex Casa de Bolsa.

“People haven’t seen a substantial improvement in their quality of life yet, but they are happy with the outcome.”

The index was also up 17.8% compared to July last year.

The Inegi data is based on the National Consumer Confidence Survey that the institute carries out during the first 20 days of each month in conjunction with the Bank of México.

Confidence about Mexico’s economic outlook over the next 12 months increased by 31.9% compared to figures from the previous month, the biggest single-month jump recorded in the history of the survey.

Respondents’ confidence in their own purchasing power over the next year also increased, albeit by a lesser 11.3%.

The percentage of people who said they currently had plans to buy furniture, a television, a washing machine or another domestic appliance increased by13% compared to June figures.

The peso has also fared better since López Obrador’s election, appreciating 6.3% against the US dollar. A greenback currently buys just over 18.5 Mexican pesos.

Following his July 1 triumph, the president-elect and his prospective cabinet sought to calm fears surrounding the next government’s economic plans, a move which analysts believe has reassured investors and contributed to the peso’s strong performance.

Although household consumer confidence is up, Domene said that the same confidence hasn’t manifested itself in the business community.

“There are loose ends that the private sector is waiting to see tied up by this new government,” he said.

“Surely, in the next few months, investment from the private sector will be more reticent than consumer spending.”

López Obrador will take office for a six-year term on December 1.

Source: El Financiero (sp), Bloomberg (en)

Priority given to 7 infrastructure projects costing 500 billion pesos

López Obrador, left, and incoming finance secretary Carlos Manuel Urzúa Macías at yesterday's press conference.López Obrador, left, and incoming finance secretary Carlos Manuel Urzúa Macías at yesterday’s press conference.

Priority given to 7 infrastructure projects costing 500 billion pesos

Mexico City airport, Cancún-Palenque train, isthmus trade corridor, full internet coverage among them

President-elect Andrés Manuel López Obrador announced yesterday that the next government will prioritize seven urgent infrastructure projects with an investment of 500 billion pesos (US $26.5 billion).

The projects are the new Mexico City International Airport; a trade corridor in the Isthmus of Tehuantepec; the Cancún-Palenque train; the paving of 300 rural roads; the provision of internet to the whole country; earthquake reconstruction; and support for residents of marginalized neighborhoods.

López Obrador, or AMLO as he is widely known, told reporters outside his transition headquarters that the funds to carry out the projects will come from cost-saving measures his administration intends to adopt such as cutting the salaries of high-ranking officials and consolidating government purchases in the Secretariat of Finance as well as through the elimination of corruption.

With regard to the new airport, López Obrador repeated that there are three options: continue the project as a public-private joint venture, auction it off to the private sector or scrap it completely and use the existing airbase in Santa Lucía, México state, for commercial flights.

The president-elect, who was vehemently opposed to the airport project before softening his position, said his transition team will consult with specialists and the public between August 15 and October 15 as part of the incoming administration’s analysis of the three alternatives.

He said the current government has invested 80 billion pesos (US $4.2 billion) in the project, of which 45 billion pesos have been spent and 35 billion pesos remain in a trust.

In the Isthmus region — where the distance between the Gulf of Mexico and the Pacific Ocean is the shortest in the country — López Obrador said the aim is to “connect the countries of Asia with the east coast of the United States and create jobs in that entire strip of national territory.”

Future transportation secretary Javier Jiménez Espriú said earlier this month that the development planned for the Isthmus of Tehuantepec would include the modernization of the railroad between Coatzacoalcos, Veracruz, and Salina Cruz, Oaxaca, as well as the upgrading of the region’s highways.

The third infrastructure priority is the so-called Mayan Train which will run between Quintana Roo and Chiapas and cost 64.9 billion pesos (US $3.4 billion), according to the incoming government’s National Project 2018-2014 document.

Slated to be completed in four stages, the train line will have nine stops and is intended to boost tourism and the economy in the south of Mexico.

López Obrador said the fourth project would focus primarily on ensuring that all rural communities in Oaxaca and Guerrero are accessible via paved roads, adding that construction would require “the intensive use of labor” and consequently generate much-needed employment for local residents.

The president-elect also said his government will prioritize guaranteeing internet access to all Mexicans, pledging that the entire country will be connected.

López Obrador said he will present a national earthquake reconstruction plan on September 19, the first anniversary of the second of last September’s two major quakes.

The plan will prioritize “victims who are still living in camps, [exposed] to the elements and who have not been supported,” he said.

He pledged that monetary assistance will be fully funded by the federal budget and not provided in the form of loans.

Finally, the president-elect said that residents of Mexico’s poorest neighborhoods will also be afforded support with those living in marginalized areas of border cities, the country’s main tourism destinations and the metropolitan area of greater Mexico City set to be the initial priority.

López Obrador, who won the July 1 election in a landslide, will be sworn in on December 1 while the new federal Congress — in which the next president’s three-party coalition will have a majority in both houses — will sit for the first time on September 1.

Source: Sin Embargo (sp), Milenio (sp), El Economista (sp), El Universal (sp)

Analyst who predicted stronger peso is still bullish on the currency

The peso has strengthened since the electionThe peso has strengthened since the election. BLOOMBERG

Analyst who predicted stronger peso is still bullish on the currency

Latest prediction is it will reach 18 to the dollar by the end of the year

One of just two analysts who predicted the peso would strengthen after the July 1 election is still bullish, Bloomberg reported today.

Ilya Gofshteyn at Standard Chartered Bank in New York forecast the currency would strengthen past 19 to the dollar during this quarter.

It has gained more than 5% since the election to about 18.85 per dollar, the best performance among more than 40 currencies tracked by Bloomberg.

Now it will reach 18 to the dollar by the end of the year, predicts Gofshteyn, who expects a new NAFTA agreement by early next year.

A United States trade war with China would be good for Mexico as companies move their purchases to Mexico to avoid tariffs on Chinese goods. Barriers for Chinese goods mean an advantage for Mexican producers, the analyst said.

Source: Bloomberg (en)

Chinese auto maker BAIC is preparing to announce a US $2-billion investment to build a plant in Mexico, according to company sources.

The BJ40 is one of the models BAIC sells in Mexico, with prices starting at 571,900 pesos.The BJ40 is one of the models BAIC sells in Mexico, with prices starting at 571,900 pesos.

Chinese auto maker preparing to build US $2-billion plant

BAIC vehicles are only assembled here, leaving them subject to a 21% tariff

The unnamed sources told news website Expansión that the plan could be made public as soon as next month and is designed to make the car manufacturer’s prices more competitive in Mexico as well as Central and South America.

The company currently uses a production line in a Veracruz facility operated by Mexico-based AT Motors for the final assembly of the vehicles it sells in the domestic market.

But because none of the manufacturing process is completed in Mexico, each BAIC vehicle pays a 21% import tariff.

The operations director for Grupo Picacho, which markets the Chinese cars in Mexico, told Expansión that by moving the entire manufacturing process to Mexico, significant savings will be made and prices will drop.

“With this we believe that we can reach 4% [tariffs] . . . in the segments we participate in: compacts, SUVs and all-terrain vehicles,” Samuel Echeverría said.

The company first entered the Mexican market in the middle of 2016and has since sold 1,700 vehicles.

The company sources said that eight states — Sonora, Coahuila, Nuevo León, Puebla, Hidalgo, Guanajuato, Yucatán and Quintana Roo — are competing to win the investment.

Echeverría explained that a variety factors including logistical convenience, plant accessibility for local suppliers and incentives offered by state governments will ultimately determine which state is chosen.

“One of the requests that BAIC International is making . . . is to be able to offset the tariff with some tax extensions while the plant is being built,” he said. “Some states have taken the lead on offering different tax incentives,” Echeverría added.

Once the plant is operational, the company will be able to import a quota of cars to Mexico duty-free dependent on the number of vehicles it manufactures locally.

Source: Expansión (sp)