Following President Claudia Sheinbaum ‘s announcement of investments in Mexico by at least four companies for around 20 billion dollars (mdd) , the global firm that offers commercial data, CIAL Dun & Bradstreet , analyzed some of the current administration’s economic goals, among which it considered the relocation of production lines ( nearshoring ) as one of the growth factors, although it pointed to public debt as a risk.
He indicated that Sheinbaum Pardo committed to promoting nearshoring by taking advantage of the trade relationship with the United States and Canada, countries that make up the Treaty between Mexico, the United States and Canada (T-MEC) .
In this sense, Mexico is the one that should benefit the most from this phenomenon due to the advantages it has: a strategic location, logistics production chains developed with the United States and qualified labor, among others.
In addition, the country is expected to report a trade surplus of $256 billion in 2024, a figure that would be historic “that has marked a clear change of direction since the validity of NAFTA (North American Free Trade Agreement) ,” said CIAL Dun & Bradstreet.
In its analysis, Cial Insights: Economic and Financial Monitor, highlighted that during this period, Mexican exports to the United States grew by an average of 8.3% annually , while imports from the United States grew by 5.7% annually .
Currently, Mexico is already the main exporter to its northern neighbor, so the new administration must “tread carefully” to carry out the review of the T-MEC in good terms, which will be in 2026,” the firm stated.
Another point that the company considered was the stability of energy prices , which is why the current government has proposed that the costs of electricity, domestic gas, gasoline, diesel, and others not increase in real terms during this six-year term.
It also stated that the Gross Domestic Product (GDP) of the electricity industry fell by 6% annually on average during the previous six-year period . “At this time, this industry is still 27% below its 2018 production level. It needs to grow at high rates to recover and get out of this crisis,” the report highlighted.
CIAL Dun & Bradstreet, in its Economic Monitor section , Decline in Industrial Production , indicated that this sector is facing a slowdown in the economy, which could lead to national GDP growing only 1.2% this year, as projected by several financial institutions.
In this context, he noted that in August industrial production fell by 0.3% annually , which was its worst figure since the beginning of 2021, “after the recession caused by the COVID-19 pandemic.”
“At the moment, the industrial sector is affected by the 4.1% annual decline in construction and the stagnation of manufacturing (only 0.7%). After growing 3.5% in 2023, the industrial sector would advance just 0.5% in 2024 and would remain stagnant in 2026 (0.4%). Bad numbers for this sector, which accounts for 30% of the national GDP,” he stressed.
Regarding the exchange rate, he recalled that on October 11, the Bank of Mexico (Banxico) closed the day at 19.40 pesos per dollar, which represented a depreciation of 0.97% that week.
Following the approval of the judicial reform, the exchange rate has remained stable , even with a slight appreciation, and the estimate of 19 pesos per dollar is expected to be maintained at the end of 2024, although pressures are expected due to the elections in the United States, the company said.
In the Special Report section, interpretation of public debt , he explained that it increased by almost 6.8 trillion pesos between 2018 and 2024, and noted that this year it will be equivalent to 50.1% of GDP. He indicated that a public debt that exceeds 50% of GDP in the following years makes it one of the most important risk factors for the Mexican economy , to which are added the pressures on public finances.
This analysis comes after the uncertainty generated among investors by the reform of the Judicial Branch , as well as the expectations due to the recent change of government in Mexico, now headed by President Claudia Sheinbaum.
It also occurs in a context of moderate investment, an economy that is slowing down, as well as a weakening of internal and external demand, which have led BBVA Research to make downward forecasts of the growth estimate for 2024, from 2.5% to 1.2 percent .
It should be noted that on September 18, the Federal Open Market Committee (FOMC) of the United States Federal Reserve cut the funding rate by 50 basis points (bp) , leaving the rate between 4.75 and 5.00 points , which could affect Mexico due to the close trade relationship it has with the United States.
Comment and follow us on X: @GrupoT21
