More problems in Mexico and less Torque Arms

The problems that beset the U.S. economy have been gaining increasing importance in the evolution and future of the Mexican economy. Is that the U.S. crisis has affected the Mexican economy on several fronts. Thus, the U.S. slowdown hits demand for Mexican manufacturing and remittances that Mexican workers sent from the U.S., along with the contraction in Mexico oil production and lower capital inflows result of the turmoil in international financial markets, could lead to Mexico's economy to grow just 0.4% in 2009, as estimated by a report from investment bank Merrill Lynch . With these projections for Mexico Merrill Lynch also agreed the OECD. The data show the Mexican economy and the impact of the crisis. At the end of last week was met by the fact that the economy had expanded by 1.6% during the third quarter. This growth rate was the lowest in five years. The weakening of the U.S. economy is also reflected in the deterioration of external accounts represented the country experienced a trade deficit of U.S. $ 2,739 million during the month of October, being the bulkier deficit since 1991.

As expected, the volume of remittances sent from Mexicans U.S. to Mexico, it also reflects the problems of the U.S. economy. According to the site "Prensa Latina?, Remittances recorded a yoy decrease of 6.5% during the third quarter. During the first and second quarter, remittances had been a fall of 3.4% and 1.1% respectively. There is no safety in the Mexican government about the magnitude of the economy, can have the crisis in the U.S. Is that given its direct link with the U.S. economy, the more deep and lasting the crisis in that country, the greater the negative impact it will have on the economy of Mexico.

The Mexican government, meanwhile, had launched a counter-cyclical plan, which I discuss in an article "What Have in Common Felipe Calderon and George Bush?" in March reinforced by an emergency expenditure of $ 4,000 million, "Mexico announced emergency spending U.S. $ 4000 million," and that includes more infrastructure spending, about 5% of GDP in the 2009 budget. According to the head of the Ministry of Finance and Public Credit, Agustín Carstens: "It is the highest level ever recorded in at least two decades?: Making matters worse, in the midst of the slowdown in the Mexican economy, the depreciation Mexican peso has resulted in an inflationary overheating, making it difficult for the Bank of Mexico can apply cuts in benchmark interest rate. Mexico's annual inflation accelerated to 6.18% until the first half of November, this being, its highest level in seven years, caused by increases in the prices of electricity, gas and some food. What are the prospects for Mexico in this context? Given the deterioration of Mexico's external sector for the economy to regain momentum, should be used in domestic demand.

For now, the inflationary pressures that are observed in the Mexican economic environment make it difficult to believe that the Bank of Mexico decided cuts in benchmark interest rate, in the remainder of the year. At least also rule out possible increases in interest rates given the deteriorating economic situation in Mexico. The alternative of expansive fiscal policy, as they are doing the major developed economies and as we have begun to evaluate and implement, several Latin American economies, is in the debate and there is resistance to it. Ramiro Tovar, professor of economics at the Instituto Tecnológico Autónomo de Mexico (ITAM) believes that one must not fall into the temptation of a countercyclical policy and instead should be made to greater fiscal discipline to contain and reduce public spending. This view is shared by investment bank Merrill Lynch. The problem is that without a monetary policy free to act in the current situation, with an external sector problems and a slowing domestic demand compounded by rising unemployment, an expansionary fiscal policy has become one of the few resources that the government Mexican is on hand to prevent the deepening economic downturn.

The picture shows complex for various sectors of the Mexican economy. The manufacturing sector is already being beaten by the crisis through reduced demand from the U.S., the construction had started the year with good growth prospects, is also suffering from the economic slowdown. Even the tourism sector, given the pervasiveness of the economic crisis, is suffering the negative effects of the crisis, which has recently led to entrepreneurs and the federal government made a call to develop and promote domestic tourism to address the impact it can have on international tourism crisis. It is clear that Mexico's economic situation has become more complex and also, the government has limitations on courses of action to take to stimulate the economy. Probably in yield inflationary pressures, the Bank of Mexico will begin to cut interest rates. Expansionary fiscal policy is not ruled out in the short term. Meanwhile, Mexico will still receive welcome any news from the United States about new ads for stimulating the economy. We will meet again tomorrow, Horacio Pozzo