Institutions and analysts continue to raise their 2021 economic projections for Mexico on the back of expectations of stronger growth globally. The improved Mexican forecasts reflect expectations of how much stronger US industrial activity, which we expect will expand 4.7% this year, and economic growth would stimulate Mexico’s non petroleum exports (the only serious economic driver the country can expect) and other current account revenues such as remittance flows. Just how such variables perform will depend on the extent to which US private expenditure recovers, stoked in part by extraordinary stimulus measures and the extent to which their contribution to household savings might expand consumer spending.
Recovery in Mexican industrial output should reflect the degree of integration between the US and Mexican economies. We can expect an uneven performance from branches of the Mexican economy, depending on whether their sales are primarily directed at external markets (winners) or the internal market (losers). The most prominent among those in the former of these two categories includes agricultural-agroindustrial producers and the most export-oriented manufacturers (such as machinery and equipment), as well as the mining and metallurgy and chemicals sectors, the same ones that fared best even at the height of last year’s crisis.
But risks remain, including disputes and litigation over supposed infringements of the revised North American trade accord, such as the current electric power industry dispute involving 17.5 billion dollars in pre-existing investments and another 7.5 billion in current ones, and the threat of export restrictions on companies targeted for labor-related complaints and environmental issues.
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