Economics: Mexico’s TPP Challenges
The full text of the Trans-Pacific Partnership treaty was made public the second week of November and is now expected to be ratified by each participating country.
Our analysis suggests that membership in the TPP will lead to changes, albeit minimal ones, on the level of Mexico’s trade in the textile, automotive and agricultural sectors.
This week we will focus specifically on the textile and automotive sectors because of the considerable changes they have registered in recent years and their prospects. While the automotive industry has grown significantly in Mexico, the country’s textile sector has slowed considerably since 2000 even as it remains a significant component of Mexican manufacturing.
In the current context, we can expect membership in the TPP to provide Mexico with opportunities to better integrate into global productive chains in those sectors, but it could also open the door to greater competition, along with the risk of displacing Mexican exports currently flowing into the US market.
In other news, some of last week’s indicators painted a negative picture of the direction of the Mexican economy. The Consumer Confidence Index weakened unexpectedly in November, although only the second month of negative results so far in 2015.
Three out of five components of the CCI fell compared to the same month a year earlier and there was a considerable slowing of the uptrend in consumer expectations of purchasing durable goods, precisely the index component that has registered by far the strongest gains for quite some time.
In a similar vein, all three components of the producer confidence index (ICE) showed increased levels of pessimism for November. The construction sector ICE fell 5.1 points, that of the commercial sector tumbled 3.1 points year on year, and the manufacturing index was off by 1.7 points.
Both the consumer and business confidence indexes were marked by a strong degree of pessimism regarding the future course of the Mexican economy.
In contrast to those reports, the week produced numbers that bode positively for the direction of the Mexican economy. A case in point was the leading indicator for October, which rose 0.02 points above September’s reading, the first positive result from this indicator in fourteen months.
One factor that contributed to that modest uptick in the leading index was a 0.29 point rise in the Manufacturing Employment Trend Index for October.
Lastly, the index of Gross Fixed Investment grew a real 5.3% in September in its original series, an improvement over increases of 2.8% in August and 4.3% in July.
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