MexECON Blog

December Exports Rise 16.4 Percent YOY

In an initial estimate, Mexico's December merchandise trade balance showed a seasonally-adjusted surplus of $202.4 million, following an upwardly revised surplus of $261.9 million in November.  It was the first time Mexico had two straight months of trade surpluses since mid-1997.  According to the report, from the official statistics agency INEGI, Mexican exports rose 2.3% in December, after a rise of 3.2% in November.  Imports rose 2.6% in December, after an increase of just 0.3% in November.  On an unadjusted basis, Mexican exports in December were up 16.4% from the same month one year earlier, while imports were up 17.0%.

Manufactured goods make up the vast majority of Mexican exports, and they were up 15.1% year-over-year in December.  Throughout 2010, autos and auto parts had been the main driver of Mexican manufacturing exports, but in December, the auto category was up little more than manufacturing exports in general.  In fact, the major manufacturing categories with the strongest export growth were steel and metals, industrial equipment, and foods and beverages.  Petroleum products are the second-most important category of Mexican exports, and they were up 25.6% year-over-year in December.  On a volume basis, Mexican crude oil exports totaled 1.501 million barrels per day, up 16.5% from December 2009.  On a value basis, the average export price for Mexican crude oil rose to $81.45 per barrel, up 16.7% from one year earlier.  Finally, Mexican agriculture exports in December were up 1.5% year-over-year.  Among the agricultural products showing the best gains, foreign sales of fish and shellfish were up 62.5% year-over-year, while foreign sales of avocados were up 41.9%.  Among the agricultural products showing the weakest performances, exports of wheat were down 89.9% and exports of corn were down 74.9%.

Comment:  Mexico's foreign trade sector not only continues to grow well, but its growth is becoming much more balanced, and it is no longer uncomfortably dependent on exports of autos and auto parts.  While it is true that year-over-year export growth has moderated, that was to be expected.  After all, the year-ago base is now much higher, and much of the U.S. inventory rebuilding that kicked off the rebound has now been completed.  Going forward, the strengthening U.S. recovery, augmented by new tax cuts, will likely keep Mexican exports growing well.  Nevertheless, some risks remain.  One key risk is that the Mexican peso has been appreciating rapidly.  That could make Mexican exports more expensive, though Mexican Economy Minister Cordero and others have argued that the peso could still rise much more before it would offset Mexico's key advantages, such as its proximity to the United States.

Patrick Fearon, CFA
Vice President, Fund Management

                         Mexico's Merchandise Trade Balance
                              Seasonally Adjusted, Million US$
                                             Source:  INEGI
Trade Balance 1012

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