MexECON Blog

January Exports Rise 26.7 Percent YOY

In a revised report from INEGI (the national statistics agency), Mexico's trade balance showed a deficit of $0.33 billion in January.  The deficit was little changed from the $0.25 billion registered in the previous month, but it was much narrower than the $1.56-billion deficit in January 2009.  Exports in January were up 26.7% from the same month one year earlier, while imports were up 17.0%.  Manufactured goods made up about four-fifths of Mexico's exports in the first month of 2010, and exports of these products were up 21.5% year-over-year.  The manufactured goods with the biggest increases included plastics, metals, autos, and industrial equipment.  Petroleum products made up about one-eighth of the country's exports in January, and they were up 68.6% year-over-year.  The volume of Mexico's petroleum exports continued to fall, reaching 1.238 million barrels per day, but prices were almost twice as high as in January 2009.  Agricultural exports were up just 6.1% year-over-year.  However, that masked big increases for certain products.  For example, strawberry exports were up 21.9%, while tomato exports were up 9.4%. 

Comment:  Because Mexico relies heavily on imported capital goods and intermediate products, it often runs a trade deficit.  In addition, the peso has frequently been over-valued for long periods, which further contributes to a trade gap.  Nevertheless, the big rebound in Mexico's exports since mid-2009 is helping to reactivate the economy.  With the vast majority of the country's exports going to the United States, it is clear that increased demand and inventory rebuilding north of the border is a prime reason for the turn in fortunes.  In the medium term, continuing improvement may depend on the U.S. economic recovery broadening and consolidating.  In the longer term, greater investment in technology and education could boost manufacturing competitiveness, while the displacement of U.S. agricultural production should increase exports from Mexico's farm sector.  In the energy sector, however, under-investment and limits on private activity could mean that the volume of petroleum exported from Mexico's aging oil fields will continue to decline.

Patrick Fearon, CFA
Vice President, Fund Management

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