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ECONOMIC BRIEFINGS
Information provided by the Mexico Trade Commission-ProMexico’s New York Office.


IMPACT FROM THE U.S. SLOWDOWN
Mexico has faced the impact from the U.S. slowdown in three main macroeconomic fronts:

  • According to the Ministry of Economy, the Foreign Direct Investment received from January to June of this year has reached 10.5 billion dollars, down 20.4% from last year. New investments have taken the biggest hit declining from 5.7 billion dollars to 2.1 billion dollars during the same period of time.

  • Remittances from Mexican workers in the U.S. to Mexico have been declining increasingly and continuously from June of this year up to date. It is expected that by the end of the year they will decrease by another 2-5%. One of the main reasons behind this decline is the huge contraction in the U.S construction industry.

  • The price of oil is down notoriously. The Mexican oil mix is down from almost 130 dollars per barrel to less than 70 dollars per barrel. That means about a 50% decline from its peak in July of 2008. This is going to take a toll not only on the amount of foreign dollars entering into the country but also on the fiscal accounts, since a significant part is being used to pay for government expenditures.

MACROECONOMIC SITUATION
Despite the impact Mexico has experienced, it is very important to acknowledge as well that Mexico at this point in time is in a more solid position to confront this global crisis due to many factors which are worth mentioning: fiscal balance, lower levels of foreign debt, independent central bank and inflation under control, large pool of domestic investments ready to be used to finance the needs of the governments and the private sector, stronger and healthier financial system and a flexible exchange rate etc.

MEXICO’S ECONOMIC OUTLOOK
The government has revised its estimates of GDP growth from 2.4% to 2.0% in 2008 and from 3.0% to 1.8% in 2009. The Mexican oil mix price was revised from 80.3 to 75.0 dollars per barrel for 2009. The average exchange rate forecasted for 2008 and 2009 is 10.6 and 11.2 pesos per dollar, compared to previous estimations of 10.4 and 10.6 pesos per dollar, respectively.

MEXICAN GOVERNMENT’S PROGRAM FOR GROWTH AND EMPLOYMENT.
As a result of this economic outlook, the government is putting in place a program of structural and cyclical measures to allow the Mexican economy to successfully face and deal with this global environment. It is important to mention that this program has to be approved by the Mexican Congress

This program includes additional expenditures in infrastructure of ps. 65.1 billion and will also increase its financing through development banks supporting Mexican firms – in particular small and medium sized firms –, for the primary sector, for infrastructure, and for housing. This will account for a total of ps. 130 billion during 2009.

Also, the government intends to eliminate Pemex’s Pidiregas regime, along with other measures, which will give greater transparency to the investment of Pemex. The Pidiregas liability along with the elimination of Pemex investments from the government balance budget target will liberate resources up to ps. 90 billion that will be used for a new refinery and infrastructure investment and social programs.

All in all, considering the macroeconomic stability and the implementation of this program, we expect that Mexico will be in a strong position to deal with this difficult environment by protecting jobs and creating new ones with public investment.


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