Economic results published during March tended to confirm the growing consensus that Mexico’s 2021 economic prospects are looking slightly better, with much of that improvement a reflection of the brighter US outlook that can be expected to spill over on multiple fronts, ranging from increased demand for Mexican exports as the revival of US industrial activity accelerates to the stronger remittance inflows aided by Washington’s additional stimulus measures.
But closer to home, not all economic data nor developments this past month were positive. Overall, the Mexican economic recovery will have to contend with the pull of strong external market demand and the drag of a weak internal one.
Industrial activity continued to fall in January, with even its predominant manufacturing component stumbling -1.0% just one month after recording its first increase in 15 months. All components of credit to the private sector have begun to show signs of weakening, including an especially sharp decline in lending to businesses. The 2020 operating and financial results of the country’s main energy companies (Pemex and CFE) proved not only to be much worse than had been expected, but also dire enough to raise concerns about the extent to which they could damage public finance in Mexico. On top of that, other risks to an export-driven recovery remain, including litigation over supposed USMCA violations (the electric power industry dispute, and potential restrictions on companies cited for labor-related complaints and environmental issues).
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