President Enrique Peña Nieto has been touring areas of Mexico that were affected by severe weather over the past few weeks. His communications to residents there have been positive, including the assertion that Mexico is "back on its feet" and will soon be back to normal. This is an adequate pronouncement about Mexico's economy as well. As The Financial Times reports, Mexico's economic performance has recently been lukewarm. However, there are definite signs of a turnaround.
The storms in Mexico may have an impact on its economy. Storms Ingrid and Manuel killed at least 147 people and caused $6 billion in damage, according to recent estimates. This disaster will bring the year's growth for Mexico down to 1.7 percent, according to finance secretary Luis Videgaray. However, many analysts expect coming growth to outweigh the negative effects of the storms.
A bright outlook
However, there is cause for optimism. In a survey of market participants, Nomura holdings, a financial services group, found they all expect energy reform to be approved by the end of the year, an initiative that will bring considerable capital investment to the country. Furthermore, The Financial Times, through its research division LatAm Confidential, found a quarter of fund managers surveyed had plans to boost exposure to Mexico. These fund managers believe Mexico has a bright future and see few if any downsides in making investments in the country.
As the U.S. economy continues to recover, Mexico's will continue to do so as well. This is because nearly one-third of Mexico's GDP can be attributed to exports, most of which are sent to its northern neighbor. In a manufacturing-heavy economy, consumer and business demand are both important. Both, too, tend to rise with economic indicators in target countries. On the whole, Mexico's manufacturing and exporting prospects are good.
Improvements ahead for Mexico in oil and gas as well as infrastructure and fiscal reforms promise to bring yet more value to investments made in the country. Companies considering expanding to Mexico should not be frightened away by news of slightly slowed growth; indeed, the economy is turning around. American companies that choose manufacturing in Mexico have the opportunity to witness and be a part of an economic resurgence that will benefit the country and investors in its industries alike.
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