Looking Back and Ahead of 2017, while Mexicans Brace for Trump
Official economic indicators released during the month of December reaffirmed the role that domestic consumption has been playing throughout the past year. A case in point was the report on private consumption for September showing a 12 month rate of growth of 3.6% that marked an improvement over the 3.2% average increase recorded between January and August of this year.
The most recent results from the national retail association and automotive tended to confirm those trends even though Antad data showed somewhat disappointing numbers last month following a stellar performance in October. The automotive industry recorded record sales last month even as the industrial sector declined for a fourth month in October. Moreover, November also produced another sharp erosion of consumer sentiment.
On the level of public finance and reform policy, the fourth phase hydrocarbon field tenders, the country’s first deep water bid round, proved to be by far the most successful phase of Round One biding, which bodes well Mexico’s economic and productive future over the medium term and provides Pemex more time in which to complete its process of financial strengthening.
But concerns regarding Mexico’s public sector financial health continue to grow as evidenced by Fitch’s decision last month to follow the lead of Moody’s and S&P and lower Mexico’s long term foreign and local currency issuer default outlook from stable to negative, which implies that there is a 33% chance of a downgrade in the next 24 months.
Banco de México’s last monthly survey of private sector economists for 2016 revealed a further deterioration of expectations for the coming year in the case of a number of indicators.
The consensus estimate of GDP growth for 2016 came in at 2.10%, which was in line with that of the previous month. They have trimmed their real term GDP growth projection for 2017 to 1.70%, down from 1.80% in the previous survey.
In this economic context, Mexicans brace for the new American president. Relations between Mexico and the United States have always been complicated and deep. Social and economic ties between the two countries have been trending toward greater integration especially since the adoption of Nafta. A broad survey shows Mexicans have been growing less critical and more admiring of the United States, at least until two years ago.
In the most recent GEA-ISA survey, just under half of Mexicans said they have at least one close relative living in the United States and two out of ten said they receive remittances from such relatives. The other major tie between the two countries is on the level of economic activity and business, and among those expressing an opinion in the latest poll many more viewed Nafta positively (46%) than negatively (21%).
There seems to be a generalized perception that Donald Trump’s election will prove prejudicial for Mexico-US relations and the measures he spoke of during his campaign would be especially detrimental to Mexico. Anger and a willingness to protest are much more pronounced among those with close relatives living in the US and/or receiving remittances.
A majority continues to reject the way the Mexican government has responded to the election of Donald Trump and President Peña Nieto’s decision to invite the Republican candidate to Mexico last August, though a significant percentage has come to accept that decision in the past three months.
So far during the transition period in Washington, president-elect Donald Trump’s team has sent very contradictory signals, but amid all the confusion there is a paramount need for the Mexican government to put forward a solid and coherent position aimed at bringing order and the prospect of a future for Mexican citizens living in the United States.
Although the specific aspects of such a strategy could hardly be spelled out publicly in great detail until the counterpart makes clear its positions, that does not preclude Mexico from adopting clear principles as to the basic thresholds for defining what issues are open to negotiation and which ones are simply off the table. It might also represent the last opportunity for the president to revive his support among the Mexican people amid an unfavorable economic and security context.
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