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 Business News | October 2007 
Mexico Prepared to Ride Out US Dip
 Martin Wolf & Adam Thomson - Financial Times
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 |  | The strongest influence on the Mexican economy is industrial production, which is holding up and has a strong chance of keeping up thanks to the weakness of the dollar.
- Agustín Carstens |  | |
Mexico's stronger public finances and low inflation will help it ride out any oncoming US downturn far more successfully than it did in 2000, according to the country's leading economic authority.
In an interview last week, Agustín Carstens, Mexico's finance secretary, told the FT that the country was better positioned than the last time the US economy weakened. "Nowadays, there is far more resilience," he said.
He added that the nature of the US economic weakening was also qualitatively different from the previous downturn - a fact that would make life considerably easier for its southern neighbour.
In particular, US industrial production had proved more robust this time, fuelling expectations that the country's export-driven manufacturing sector would continue to be a source of business for Mexico's maquila - assembly factories that re-export to the country of origin - and other industries.
"The strongest influence [on the Mexican economy] is industrial production, which is holding up and has a strong chance of keeping up thanks to the weakness of the dollar," he said.
One of the main reasons he gave for optimism this time was the fact the centre-right administration of Felipe Calderón had pushed through several important reforms since coming to office in December.
These have included placing public sector pensions on a firmer footing and, more recently, changes to the tax code which are expected to increase government revenue by at least two percentage points during the next five years.
"This was the first fiscal reform in more than three decades that was not related to a fiscal crisis," said Mr Carstens.
He said that other points in Mexico's favour were the high international price of oil and low inflation, which at 3.6 per cent last year was low compared with 10 per cent during the last US downturn in 2000, when Mexico was still suffering after-effects from the so-called Tequila crisis of 1994. |
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