MexECON Blog

February Exports Confirmed Up 31.2 Percent YOY

The national statistics agency INEGI has confirmed an earlier report that Mexico's February trade balance showed a surplus of $243.9 million.  That marked a significant improvement from the deficits of $332.6 million in January and $514.0 million in February 2009.  The report confirmed that exports in February were up 31.2% from the same month one year earlier, while imports were up 25.7%.  Manufactured goods made up more than four-fifths of Mexico's exports in February, and exports of these products were up 28.2% year-over-year.  The increase came in large part from higher foreign sales of rubber and plastic goods, metal products, and autos.  Petroleum products made up about one-eighth of the country's exports in February, and they were up 69.8% year-over-year.  The volume of Mexico's petroleum exports continued to fall, reaching 1.198 million barrels per day, but prices were almost twice as high as in February 2009.  Agricultural exports were up only slightly on a year-over-year basis in February.  However, some types of products fared much better than others.  For example, while the value of melon exports fell 18.6%, the value of strawberry exports rose 61.4%, the value of tomato exports increased 5.4%, and the value of cattle exports edged up 5.1%.

Comment:  Mexico relies heavily on imported intermediate goods and, to a lesser extent, on imported raw materials.  It therefore runs a trade deficit more often than not.  In addition, the peso has frequently been over-valued for long periods, which further contributes to a trade gap.  Because of this, the trade surplus in February is particularly impressive.  Inventory rebuilding in the United States is probably the main reason for Mexico's improving trade figures.  The risk is that U.S. restocking could be completed before the U.S. economic recovery has broadened, in which case Mexican exports could stall out and slow the rest of the economy.  The recent rise in the value of the peso could also slow the country's export gains.  In the longer term, greater investment in technology and education could boost Mexico's manufacturing competitiveness, while the displacement of U.S. agricultural production should raise exports from Mexico's farm sector.  Unfortunately, under-investment and limits on private activity in the energy sector could lead to continuing declines in Mexico's oil output.

Patrick Fearon, CFA
Vice President, Fund Management

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