Mexico is Latin American winner as Brazil spirals

4/29/16 CNN Money

South-America-BrazilIt’s a tale of two economies for Latin America’s two largest countries.

Brazil is in a political crisis and severe recession. Its president, Dilma Rousseff, could be impeached this year. Brazil’s debt has also been downgraded to junk status.

Meanwhile, Mexico is growing, politics are relatively stable and its debt was upgraded in 2014.

“Right now Mexico and Brazil are as different as they come, this is day and night,” says Alberto Ramos, head of Latin America economic research at Goldman Sachs.

Those diverging narratives bore out Friday. Officials in Brazil announced that unemployment hitnearly 11% in the three months ending in March, way up from about 8% a year ago. Mexico’s unemployment rate is 3.7%.

Mexico’s economy grew 2.7% between January and March compared to a year ago, according to government figures released Friday. That’s even slightly better than what most economists expected.

That’s not stellar growth but it’s a lot better than Brazil’s economy, which shrank 3.8% in the fourth quarter last year and its central bank estimates the economy will contract 3.5% this year.

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Mexico GDP Beats Forecasts on Consumer Spending; Peso Rises

4/29/16 Bloomberg Business

pesoMexico’s economy expanded more than analysts forecast for the third time in four quarters as strength in domestic consumption offset weak exports and a drop in oil output. The peso extended its gain, rallying to the strongest level in more than four months.

Gross domestic product rose 2.7 percent in the first quarter from a year earlier, according to preliminary figures released by the national statistics institute Friday. That compared with the 2.4 percent median forecast of 19 economists surveyed by Bloomberg. From the previous quarter, GDP expanded 0.8 percent. The institute will release final GDP figures May 20.

Mexican consumers are spending more as inflation holds near a record low and remittances rise amid weakness in the peso. The country has been a bright spot for growth compared with some Latin American economies such as Brazil, and in an interview last week, central bank Governor Agustin Carstens said it may get even better as factors that have held back the expansion, such as weak exports, begin supporting growth.

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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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BP Results Still Hurt by Gulf of Mexico Spill

4/26/16 Wall Street Journal

BPLONDON— BP PLC’s fatal blowout in the Gulf of Mexico in 2010 continues to haunt the company, helping to drag its quarterly earnings into a second consecutive loss and overshadowing the British oil giant’s progress on cost cuts.

BP on Tuesday said its earnings took a $917 million hit in the first quarter related to the Deepwater Horizon explosion that killed 11 workers and caused a massive spill in the Gulf of Mexico, a disaster that changed the course of the British oil giant and cost the company $56.4 billion to date.

The additional spill costs and the weakest oil prices in over a decade cast a cloud over BP’s financial performance, despite signs that heartened investors and caused the firm’s shares to jump over 4%.

Counting the Deepwater Horizon costs, BP said its equivalent of net earnings was a $485 million quarterly loss. Stripping out those and other one-time charges, BP had a profit of $532 million in the first quarter, significantly beating analysts’ consensus forecast for a loss of $140 million.

The spill forced the company to sell more than $40 billion in assets, pull back its ambitions and craft the business around a smaller set of high-value oil and gas fields.

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The Real Reason Why Mexico Hates Donald Trump

4/19/16 Forbes

Donald_Trump)If you believe the Mexican government and its former president are worried about the plight of their poor workers toiling away on American farms, think again. They are worried about one thing: money.

Say what you will about FORBES’ No. 324, but he scares the Bank of Mexico more than he scares Mexicans.

The Associated Press was the first to point out just how important Mexican immigrants, both legal and illegal, are to the health of the Mexican economy. Last year, Mexicans in the U.S. wired $24.8 billion to family members. That’s more than Mexico’s economy brought in from oil revenue and is nearly half of what a country the size of Brazil brings in from foreign direct investment (FDI).

Former Mexican president Vicente Fox and current leader Enrique Peña Nieto can shout all they want about Donald Trump’s controversial border fence proposal. But their unvoiced concern is how U.S. immigration policy impacts for their biggest source of foreign capital.

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From Obstacle to Asset: Re-envisioning the U.S.-Mexico Border

4/19/2016 Forbes

By Christopher Wilson and Erik Lee

forbesThe U.S.-Mexico border has yet again made an appearance in the political theater of the U.S. presidential campaign, starring in its traditional supporting role as a stock villain character. Though the political dialogue sounds like a re-reading of a script written in the 1990s or early 2000s when Mexican migration peaked, the discussion on the ground in most—but not all—U.S.-Mexico border communities long ago moved on to regional economic development. It is a largely positive discussion that could not be more different than what we are hearing at the national level.

Throughout the border region, local leaders from the public and private sectors are asking themselves how they can form cross-border partnerships to leverage assets in their sister cities and strengthen their local economies. They are looking to create a border that connects the United States to Mexico at least as much as it divides our two nations. A close look at the economic data, however, reveals divergent local economies and major border barriers. In our recent report, Competitive Border Communities: Mapping and Developing U.S.-Mexico Transborder Industries, we found that while advanced manufacturing industries such as  aerospace, automotive and medical devices often predominate in Mexican border communities, RV parks, retail and freight transportation are often the most concentrated (and often low-paying) industries in U.S. border communities.

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Pemex Isn’t Mexico’s Only Debt Problem as States Owe $28 Billion

4/19/16 Bloomberg Business

14238061995_8018a2dc0e_mMexico’s debt-laden oil producer has largely dominated investors’ attention in recent months because of the threat it poses to the government. But that’s not the only potential debt crisis facing the nation.

States including Veracruz, Nayarit and Zacatecas are drowning in red ink after racking up about $28 billion in obligations, the most in two decades. Their finances are about to deteriorate even further as many governors ratchet up spending to bolster their chances of winning elections in June, according to Moody’s Investors Service analyst Francisco Vazquez. On April 1, the ratings company lowered the outlook for all but one of Mexico’s 31 states to negative.

“A state crisis is coming,” said Rodolfo Navarrete, a Mexico City-based analyst at Vector Casa de Bolsa, and the most accurate Mexico economic forecaster according to data compiled by Bloomberg. “I expect state governments will look for more financing, either by trying to increase transfers from the federal government or by raising bank debt. This will increase public-sector debt,” which could affect the nation’s credit rating.

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