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financial crisis effect on Mexico

Friday 19 June, 2009

I attended this conference organized by the US Mexican Chamber of Commerce – Mid America An Analysis on the U.S. Economic Situation and Its Impact on the Mexican Economy which featured a great panel from Mexico & Chicago.  Here are their presentations:

Quick summary:  Mexico is hugely dependent on the US economy-50% of its GDP comes from exports & imports & much of that is with the US.  Interestingly, although $ remittances to Mexico have declined, because of the peso devaluation, in peso terms remittances have increased.  Since Mexico is 1/3 jungle, 1/3 mountains, 1/3 desert, it has little agriculture.  On average Mexico gets its share of water, but it’s poorly distributed-they drown in the south & suffer from dehydration in the north.  Like Japan & Singapore, Mexico needs exports to come back.  Mexico didn’t acquire many toxic assets, but suffers their consequences like everyone else.  Mexico had its own Lehman Brothers, (Comerciale Mexicana?), which dragged down other Mexican stocks.  When financing in the US dried up, even big Mexican companies were crowded out, leading to a credit crunch in Mexico.

Q&A enlightened:

  • the regular surveys conducted of macquiedoras & distributed back to macquiedoras will probably not be revived
  • Mexico will probably not rise to the level of BRIC generally because it’s difficult to maintain sustained levels of growth because of fiscal reform, rigidity of a few companies with vast market & pricing power (ex. cement is most expensive in Mexico), oil inefficiencies, & require more education & R&D.
  • the $B injected in the US economy means we probably won’t suffer from deflation, & probably won’t suffer from hyperinflation, but could suffer from inflation, depending on how fast the fed takes $ back out of the economy-there is little risk of inflation in the short term because of available excess capacity.  The US affects everywhere, including Mexico.
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