News, Insights and Best Practices for Manufacturing in Mexico

Central bank governor positive about Mexico's economic prospects

27 Sep 2013

Category: Labor & Economics

Stories about Mexico's economic growth and troubles are both published often in many news sources. Understanding the real state of the country's economy is important to many U.S. businesses and investors, but getting an accurate picture can be difficult. And while speculators may theorize and chase hypotheticals, financial authorities aren't very concerned about the economy and forecast steady growth to come.

Mexico's central bank governor Agustín Carstens has very few worries about the economy. Indeed, according to Terra, the only thing that keeps him up at night is his neighbor's dogs. He told the press that the debt to GDP ratio is healthy, the country has a low level of debt and there's no negative trend in evidence in terms of debt and GDP. The short-term rise in debts proposed for 2014 by President Peña Nieto's administration doesn't put Mexico's economic strength at risk, said Carstens. He said Mexico had experienced a temporary slowdown but would soon return to economic growth.

The Financial Times reported the latest IGAE, a monthly economic indicator, rose in Mexico in July 0.5 percent from June and 1.7 percent year-over-year. The service sector helped facilitate this growth. Marco Oviedo of Barclays predicts manufacturing in Mexico could also make better numbers in August, though there are risks related to September's severe weather that might curtail such a trend.

Mexico's economic future
Despite a few challenges, Mexico's economy is continuing to grow, with the IGAE for July growing more quickly than the year's average rate.. Retail sales also increased in July. These are good signs that corroborate the optimist of analysts and officials.

Many U.S. companies keep a watchful eye on the state of the Mexican economy. The two countries influence one another, and many U.S. businesses have establishments in Mexico. Automakers and aerospace manufacturers from around the world have established plants in Mexico to take advantage of the opportunity to reduce manufacturing costs. For this reason, it is important on an enterprise level for foreign companies to pay attention to the state of the economy in Mexico. An economic upswing in the country is good news for these companies, many of which are also looking to expand into Mexico.


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