Mexican economy not 100% dead just yet

Mexico continues to struggle to contain the spread of COVID-19, with over 400,000 accumulated cases and 46,000 deaths.  Mexico City remains at orange, the second highest level of alert under the national traffic light system for establishing economic and mobility restrictions, and the rest of the country’s 32 states are at either red, the highest alert level, or orange.  The level of business activity remains substantially reduced with respect to pre-COVID levels and no significant improvement is foreseeable in the near term.

ECONOMY AND INDUSTRY

  • Consumer spending in Mexico will drop by an estimated 17% in 2020 with respect to the previous year, according to projections by brokerage Finamex Casa de Bolsa. COVID-19-related factors such as confinement measures, lost income and consumer caution on spending appear to be driving the trend.  (Reforma, July 20, 2020)
  • Same-store retail sales fell by 17.9% year-on-year in June for member chains of the National Retailers Association (ANTAD), the organization reported. Nonetheless, the figure represents a slight improvement over the previous two months, against the backdrop of store closings due to the COVID-19 contingency. (Reforma, July 14, 2020)
  • Mexico’s Gross Domestic Product (GDP) will not return to pre-COVID-19 levels until 2025, according to a report by Citibanamex, the Mexican subsidiary of Citibank. The report projects the country’s GDP will contract by 11.2% in 2020. (Reforma, July 14, 2020)
  • Remittances to Mexico from abroad in May rose 2.9% with respect to the same month the previous year, despite the worldwide economic slowdown. Analysts suggest unemployment and stimulus payments in the United States may have helped maintain the flow of remittances in spite of job losses.  (Expansión, July 13, 2020) 

 ECONOMIC ACTIVITY OF NOTE                                                                                             

Investment and economic activity in general remain significantly lower than prior to the COVID-19 crisis, due to ongoing restrictions on business operations and mobility.

  • Wind power: Chinese wind energy developer Envision Energy, in conjunction with Mexican developer Vive Energía and Spanish infrastructure group ACS, inaugurated an electricity generation plant in the southeastern state of Yucatán. The new wind park, for which the amount of investment was not specified, is projected to supply 300 gigawatt hours per year to the local grid. (World Energy Trade, July 30, 2020)
  • Chemicals: Swiss chemical ingredients maker Givaudan will invest approximately US$163 million through 2025 in its operations in the central state of Querétaro, the company reported. Resources will support the implementation of new technologies for the production of fragrance ingredients. (Milenio, July 29, 2020)
  • Beverage: Mexican tequila producer Casa Don Ramón plans to establish the country’s largest mezcal production operation in the southern state of Puebla, the state government announced. Total investment was not specified for the site, which has a projected capacity to distill the output from 40,000 hectares (approximately 100,000 acres) of agave. (Milenio Digital, July 30, 2020)
  • Airports: Mexico City’s government-owned international airport inaugurated a US$22 million expansion of its Terminal 2 arrival area, local media reported. The upgrade adds seven new gates to the terminal to ease overcrowding (prior to the COVID-19 contingency) while the new Santa Lucía airport is constructed outside the city.  (Forbes Mexico, July 23, 2020)
  • Energy: Mexico’s state-owned national electricity utility the Federal Electricity Commission (CFE) announced via a press release that it will construct five new generation plants and acquire additional plants. The CFE is playing a key role in the current administration’s efforts to consolidate control over the energy industry in the hands of government-run companies. (El Financiero, July 22, 2020)
  • E-commerce: Mexican e-commerce platform Central en Línea, the independent online sales arm of Mexico City’s colossal Central de Abasto food wholesalers market, is seeking approximately US$4.5 million in its second round of investment to take advantage of sharp growth during the COVID-19 contingency period. The shopping and delivery app, which has received some US$600,000 in angel investment so far, will direct resources to upgrade its technology and delivery fleet. (Reforma, July 13, 2020)
  • Natural gas: S. natural gas utility Sempra Energy announced investment of US$1.9 billion to enhance operations at its natural gas liquification plant in the northwestern border state of Baja California. The project will improve the company’s capacity to transport natural gas to the plant, liquify it and transport it back to the U.S. for distribution or export. (Mexico Business, July 13, 2020)
  • Aerospace: French aerospace manufacturer Safran has initiated construction on a new manufacturing plant in the northern state of Chihuahua, the Mexican government announced. The facility is expected to produce interior components for Boeing passenger planes. (Reuters, July 11, 2020)
  • Trains: The Mexican government is preparing to issue public international tenders this year for the manufacture of rolling stock and construction of rail lines for its Tren Maya passenger train, the Tourism Ministry (Fonatur) reported. Contracts will include construction of 70 – 90 rail cars of varying types and approximately 965 miles of track. (Reforma, July 9, 2020)
  • Telecommunications: Mexican telecoms service provider Axtel reported the inauguration of a new data center in the central state of Querétaro, via investment of US$20 million with an additional US$36 million planned for expansion over the next two years. The facility, which includes latest generation energy efficiency technology, will provide services such as virtual servers, physical servers, big data, ERP, OpenStack computing resources and others. (DCD Noticias, July 4, 2020)
  • Automotive: Canadian vehicle manufacturer Bombardier Recreational Products (BRP) announced it will construct a new production plant in the northern border city of Ciudad Juárez. The US$136 million facility, which will produce all-terrain vehicles, is expected to begin production in late 2021. (Citibanamex Reporte Económico Diario, July 3, 2020)

Leave a Reply

Your email address will not be published. Required fields are marked *