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Mexico’s Economy to Grow in 2013 and Beyond, Experts Agree

17 September, 2013

As 2013 hurdles into its second half with what seems at times breakneck speed, Mexico’s government has made it clear that the nation’s economy is not only stable, but poised to “accelerate” as the year comes to a close.

“Mexico’s government expects a ‘clear acceleration’ of the economy in the second half,” writes the Latin American Herald Tribune. “We expect a clear acceleration in the second half and of course in the coming year,” Mexico’s Finance Secretary Luis Videgaray reportedly told Radio Formula Friday, after reviewing the nation’s central bank’s latest bulletin.

In general terms, Mexico’s economy has evolved considerably over the last several years, causing its middle class to expand and its GDP to rise. Currently, economists at the Boston Consulting Group estimate that by 2018 (if not sooner) factories throughout Mexico’s growing industrial centers could produce as much as $60 billion in annual output.

“In 2012, average manufacturing costs in Mexico, adjusted for productivity, dropped below those of China – and are set to keep dropping,” writes Adina Solomon for Air Cargo News. “Mexico has 44 free trade agreements, more than any other country.” 

Airline carriers including Aeromexico, Lufthansa, American Airlines and United Airlines are moving thousands of tonnes of cargo between Mexico and the rest of the world every year, and business is definitely growing. Not surprisingly, when it comes to over-ground shipping, the story is the same.

“Today I’m seeing freeways built where there were cattle trails 10 years ago,” Butch Hensley, president of Amado Trucking in Arizona, told Solomon. “It’s incredible. There’s an excess of 100 million consumers in Mexico, and that’s about 30 percent of what we have in the U.S.,so it’s a tremendous market.”

Items moving into and out of Mexico real estate include electronics of all kinds, automobiles and automotive parts, luxury goods, textiles and a wide variety of perishables, including agribusiness staples such as avocados, herbs, mangos, lemons, seafood, papaya and a wide variety of chili peppers. In fact, according to Curt Fisher, regional manager for Lufthansa, three times as much cargo (90,0000 tonnes) each year goes from Europe to Mexico than from Mexico to Europe, showing that Mexico also has a strong import market – another sign of the nation’s extremely healthy economy.

Bank of America Merrill Lynch also expects the Mexican economy to continue growing, with future forecasts upwards of at least 4 percent, surpassing last year’s already impressive 3.9 percent growth rate. In addition, Canada’s The Globe and Mail pointed out last month that the performance of the Mexican Stock Exchange has proven that “investors think good things can happen,” following an 18 percent gain on the Mexican Bolsa IPC Index last year.

“There are huge expectations in Mexico with the new agenda of the government that, this time, all of the reforms will be for real,” Piero Gutierrez, the Mexico-based portfolio manager for the Scotia Latin American Fund. “There now seems to be a consensus among the political parties to get the reforms the country needs to grow at a higher rate in the future.”

Also of note,FX Street reports that consumer confidence is at an all-time high in Mexico right now, rising more than 2.5 percent by June of 2013, suggesting an even better second half of the year in terms of consumption. In fact, Bloomberg reported that the developing amendment to break Mexico’s oil monopoly is likely to help Mexico’s credit outlook improve.

“The energy bill is ‘more critical’ than an upcoming tax overhaul in deciding on Mexico’s Baa1 rating,” Mauro Leos, a senior officer at Moody’s reportedly told Bloomberg in a phone interview. “A Moody’s committee will discuss the nation’s stable credit outlook before congress votes on the bill.”

Topics: Economy Bloomberg