Image of a Fiat automotive assembly plant in the city of Toluca (Mexico) in 2013.Susana Gonzalez (Bloomberg)
The increase in the cost of Mexican export products, derived from the strong appreciation that the Mexican peso has had against the dollar in recent months, has not stopped the automotive sector. According to data published by the National Institute of Statistics and Geography (Inegi) on Monday, exports from Latin America’s second largest economy grew almost 3% in July, compared to the same month last year. This was the third consecutive month in which exports registered year-on-year increases.
The value of merchandise exports reached 47,550 million dollars, reported the Inegi. The vast majority of those revenues come from non-oil products, which suffered a 29% drop. “Within non-oil exports, those directed to the United States grew 6.9% at an annual rate and those channeled to the rest of the world, 0.3%,” says the Institute’s statement. The monthly advance, that is, between June and July of this year, was 1%.
The Mexican peso has appreciated 6.8% against the dollar since May, making its export products more expensive. Agriculture and mining products have been hit, while manufacturing has held up better, increasing 2.4% last month. Importantly, exports from the automotive sector increased 13.3%. “This remains driven by improvements in supply chains and healthy demand for vehicles,” Banorte economists wrote in an analysis report.
Banorte identifies risks to the strength of the Mexican trade balance. The weakness of global demand, the increase in oil prices derived from the restrictions on crude oil production by Saudi Arabia, more adverse weather conditions due to the presence of the El Niño phenomenon and new attacks by Russia on oil silos grains in Ukrainian ports are some of them and the disruptions to maritime trade due to the low water level in the Panama Canal are some of them. The strength of the Mexican peso is also strong.
“Given the divergence between monetary policies between advanced and emerging economies, the Mexican peso could maintain its position of strength,” the bank’s analysts expect.
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