Transcript aghoshal

An Analysis of the US Economic
Situation and its Impact on the
Mexican Economy
US Mexico Chamber of Commerce
June 11, 2009
Animesh Ghoshal
DePaul University
June 2009: US economy appears to be in
very bad shape
Comparisons to year ago:
GDP
Expected Change
Unemployment Expected
Growth GDP
In
Rate
Budget
Q1
Growth
Industrial
Balance
For
Production
% of GDP
Year
Spring 2009
-2.6
-2.9
-12.5
9.4
-13.2
Spring 2008
+2.5
1.1
+0.2
5.0
-4.6
Channels through which emerging
economies are affected
•
•
•
•
•
Exports
Capital Flows
Tourism
Remittances
Trade Credit
Mexico appears more vulnerable
than most
Exports as % of GDP
Mexico
28%
Venezuela
31%
Brazil
14%
Colombia
17%
Argentina
25%
Mexico particularly exposed to US economy:
80 percent of exports go to US
Reduction in US Demand for Imports
US total imports
of goods, JanApril 2008
($b)
US total imports of Percentage
goods, Jan-April
Change
2009
($b)
Mexico
71.8
52.5
-27%
Venezuela
15.1
7.5
-50%
Brazil
9.1
6.1
-32%
Colombia
4.1
3.1
-24%
Mexico a major recipient of FDI
FDI inflows, 2007
FDI Inflows
$b
Mexico
FDI Inflows
as % of
Gross Capital
Formation
FDI Inflows
as % of GDP
24.7
9.2%
2%
0.6
1.0%
-
34.6
14.7%
3%
Colombia
9.0
17.8%
4%
Argentina
6.5
10.1%
2%
Venezuela
Brazil
Mexico also a major recipient of
workers’ remittances
Inflow of Remittances, 2007
Inflow of Remittances
$b
Remittances as % of
GDP
27.1
3
Venezuela
0.1
-
Brazil
4.4
-
Colombia
4.5
2
Argentina
0.6
-
Mexico
Tourism: Mexico major destination for tourists, and
by some measures, tourism is 3rd biggest
contributor to foreign exchange earnings
Tourism
Number of International
Arrivals, 2007
Rank
21.4 m
10
Brazil
5.0 m
41
Argentina
4.6
44
Mexico
Tourism: Sharp decline expected in
2009
• Revenue in 2008: $13.3 billion
• Revenue expected in 2009: $7.6 billon
– Slowdown in US and European economies
– Swine flu scare
– Hotel occupancy down by 25% in April
June 2009: Mexico’s economy appears
to be bad shape
• First quarter GDP fell by 8.2%
• Decline felt throughout economy
– Manufacturing output fell 13.8%
– Construction fell 7.7%
– Services fell 7.8%
• Worst downturn since 1994-95 crisis,
when GDP fell 6.2% in 1995
• Near term prospects not good
– Economy expected to shrink 5-6% in 2009
But Mexico today very different
from Mexico of the past
•
•
•
•
Inflation
Exchange Rate
Debt Service
Interest Rate
YR
19
80
19
8
YR 1
19
8
YR 2
19
8
YR 3
19
8
YR 4
19
8
YR 5
19
8
YR 6
19
8
YR 7
19
8
YR 8
19
8
YR 9
19
9
YR 0
19
9
YR 1
19
9
YR 2
19
9
YR 3
19
9
YR 4
19
9
YR 5
19
9
YR 6
19
9
YR 7
19
9
YR 8
19
9
YR 9
20
0
YR 0
20
0
YR 1
20
0
YR 2
20
0
YR 3
20
0
YR 4
20
0
YR 5
20
0
YR 6
20
0
YR 7
20
08
YR
Percent change in CPI
Inflation
MEXICO, INFLATION 1980-2008
140
120
100
80
Series1
60
40
20
0
Exchange Rate, 1980-1998
Exchange Rate (pesos per dollar)
12.00
10.00
8.00
6.00
4.00
2.00
0.00
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Exchange Rate, 1994-2008
Debt Service
Debt Service as % of Exports
40
35
30
25
20
15
10
5
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Interest Rate
Lending Interest Rate, %
70
60
50
40
30
20
10
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Longer Term Prospects Are Very
Good
• Close link to US economy
– US expected to recover faster than rest of G-7
• Good economic policies
– Fiscal stimulus possible
– Easing monetary policy possible
• Anti-poverty programs
• Political stability