Weaker Peso Fails to Boost Mexican Exports

4/26/16 Wall Street Journal

peso by Guanatos GwynMEXICO CITY—The steep slide of the Mexican peso has failed to boost the country’s manufacturing exports, primarily because of a sluggish U.S. industrial sector coupled with close integration of supply chains across the U.S.-Mexico border.

Economists say the peso’s 24% depreciation against the U.S. dollar in the past 18 months should make Mexican-made goods more competitive. But the reaction has been slow because of close synchronization of U.S. and Mexican business cycles.

Exports of manufactured goods, which account for 90% of Mexico’s total exports, fell 6.5% in March from the year-earlier month, the government statistics institute said Tuesday. The drop was led by a 10% fall in auto industry exports.

Imports of intermediate goods, equipment and machinery—all key components for manufacturing exports—also fell in March, contributing to a $155 million trade surplus for the month.

Despite Mexico’s free-trade agreements with 46 countries, including the European Union and Japan, about 80% of its $380 billion annual exports go to the U.S.

A recent Bank of Mexico analysis showed that demand for Mexican components in the U.S. export sector has more of a short-term impact on Mexican exports than changes in the peso-dollar exchange rate.

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