MexECON Blog

March Exports Rise 21.0 Percent YOY

In an initial estimate, Mexico's March merchandise trade balance swung to a seasonally-adjusted surplus of $848.3 million, easily erasing the revised deficit of $251.2 million in February.  The surplus in March was the fourth in the last five months, and it was the biggest surplus in more than 15 years.  According to the report, from the official statistics agency INEGI, exports from Mexico jumped 3.8% in March, offsetting the 0.4% decline in February and marking the strongest monthly export gain since last summer.  Imports into Mexico fell 0.1% in March, after increases of 1.3% in February and 3.5% in January.  On an unadjusted basis, Mexican exports in March were up 20.1% from the same month one year earlier, while imports were up just 16.3%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and they were up 15.9% year-over-year in March.  The major manufacturing categories showing the strongest export growth were steel and metals, food and beverages, and autos and auto parts.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they jumped 49.3% year-over-year in March.  On a volume basis, Mexican crude oil exports totaled 1.424 million barrels per day, up 7.0% from March 2010.  On a value basis, the average export price of Mexican crude oil rose to $102.05 per barrel, up 41.5% from one year earlier.  Finally, Mexican agriculture exports in March were down 6.3% year-over-year, almost certainly reflecting the extraordinary freezes that destroyed many vegetable crops in early February.  Among the agricultural products posting the biggest declines, foreign sales were down 43.0% for cucumbers, 36.4% for strawberries, and 27.3% for tomatoes.

Comment:  Mexico's trade sector is performing better than it has since just after the big peso devaluation in the mid-1990s.  The size and frequency of its current trade surpluses have no parallel since that period.  Rapidly rising exports have helped boost industrial production and cut unemployment, which in turn has prompted a budding recovery in consumption spending and the first signs of rebounding investment.  With the economy now firing on all cylinders, Mexico's economic rebound looks set to continue for some time.  Nevertheless, it is important to remember that the trade picture will eventually moderate.  Mexico relies heavily on imported capital equipment, subassemblies, and raw materials, so today's export growth alone would spur greater imports over time, even as improving consumption spending raises the demand for foreign consumer goods.  That is unlikely to change without fundamental economic reforms to spur greater entrepreneurship and the development of domestic suppliers.  In addition, today's strong export growth is helping boost the peso, and as the currency becomes more expensive, there is increased risk that it will eventually short-circuit the export boom.  Finally, global crises such as the recent Japanese earthquake and political conflicts in the Arab world could undermine global confidence and weigh on demand.  In sum, Mexico is enjoying an extraordinary trade boom, but it should be preparing for an eventual moderation.

Patrick Fearon, CFA
Vice President, Fund Management

                    Mexico's Merchandise Trade Balance
                         Seasonally Adjusted, Million US$
                                          Source:  INEGI
Trade Balance 1103

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