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 Business News | July 2006 
Mexico Exports Probably Rose for Second Month in June on Autos
 Patrick Harrington - Bloomberg
| | "The bottom line is that concerns about Mexico losing competitiveness to countries like China will only grow when U.S. growth slows." |
Mexico's exports may have surged for a second month in June as sales of automobiles helped regain U.S. market share lost to China.
Exports climbed to $22.7 billion after reaching a record $22.71 billion in May, according to the median estimate of four economists surveyed by Bloomberg. Mexico will post a trade surplus of $884 million for the first half of 2006, the survey shows.
Mexico is stepping up exports of cars as manufacturers including Dearborn, Michigan-based Ford Motor Co. and Wolfsburg, Germany-based Volkswagen AG expand plants in the country to offset rising labor costs in the U.S. and Europe. Mexico, which depends on the U.S. to buy more than 80 percent of its exports, remains competitive against China, Deputy Finance Minister Alonso Garcia Tames said.
"The geographic location of Mexico is an advantage that can't be taken away," Garcia Tames said in an interview in Mexico City. "We have certainly been displaced from some markets by the Chinese, but in other areas such as autos, we remain very competitive."
The Finance Ministry is scheduled to report June trade data today.
Mexico's auto industry accounts for 15 percent of the nation's manufacturing and about 10 percent of total industrial production. The country sold 801,809 vehicles overseas in the first half, up 52 percent from the same period last year, compared with an 8 percent rise for all of 2005.
Bigger Market Share
Until 2003, Mexico held a bigger market share in the U.S. than China. Buoyed by low manufacturing costs, a weak currency relative to the U.S. dollar and World Trade Organization membership, China's exports to the U.S. doubled between 2000 and 2004 to $197 billion. Mexico's U.S. exports rose 15 percent to $156 billion in the same period.
Competition from China hit Mexican clothing and textile makers the hardest, Garcia Tames said in the July 12 interview. Mexico's textile industry lost about 250,000 jobs from December 2000 through 2005, said Rosendo Valles, chairman of the National Textile Industry Chamber.
During the first six months of this year, Mexico has reversed the trend. U.S. imports from Mexico have risen 19 percent compared with 17 percent growth for China. In 2005, the value of U.S. imports from China grew 24 percent while those from Mexico grew 9.2 percent.
Hitting `Bottom'
"What's clear is that Mexico's multi-year decline in U.S. market share hit bottom in 2005," Gray Newman, a senior Latin America economist for Morgan Stanley, said in an interview from New York. "You have seen some improvements, most notably in the auto sector."
With imports also rising in June, the monthly trade deficit widened to $150 million from $97 million in May, according to the survey of economists.
The surge in manufacturing output in Mexico prompted WestLB AG to raise its forecast for Mexican economic growth this year to 4.2 percent from 4 percent in a July 18 report. Industrial production growth probably will average 4.9 percent this year after a 5.7 percent surge in May, WestLB said. Mexico's $770 billion economy probably will grow 3.2 percent in 2007 because of a weaker U.S. economy, Amorim said.
Investment in Mexico's auto industry will reach $5 billion this year as manufacturers such as Ford and Toyota Motor Corp. gear up to boost exports to the U.S., Mexican Economy Minister Sergio Garcia de Alba said during a May 18 interview.
Rising Investment
Auto investment will boost Mexico's direct foreign investment to as much as $20 billion this year, Garcia said. Mexican auto production may double to 3.49 million units annually by 2010 as carmakers plan new investments, he said.
Oil exports from Mexico also are climbing, bolstered by demand from China.
Petroleos Mexicanos, Mexico's state oil monopoly and the world's third-largest oil company by volume, boosted 2005 exports by a third to $28.3 billion because of higher prices.
"China is a mixed blessing," Garcia Tames said. "Chinese exports threaten our exports, but at the same time, the Chinese have been acquiring some of our raw materials, which are a very important source of our income," he said.
During the first half of 2006, Pemex exports jumped to $18.36 billion from $12.61 billion during the same period last year, according to the company's Web site.
Mexico's dependence on oil and automobile exports suggests economic growth may weaken, said Salvador Moreno, chief economist at ING Groep NV's Mexican unit in Mexico City.
"We are at the high point of the U.S. demand cycle," he said in an interview from Mexico City. "The bottom line is that concerns about Mexico losing competitiveness to countries like China will only grow when U.S. growth slows."
To contact the reporter on this story: pharrington8@bloomberg.net |
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