Archive for category Trade

Mexico hoping yuan appreciation will boost exports

Put me in coach

Put me in coach

In the run-up to this weekend’s G20 meeting in Huntsville, Ontario, much ink has been spilled regarding the value of the Chinese currency.  Economists, pundits and observers of all stripes have taken positions on various sides regarding the question of how much and how fast the yuan (or Renminbi, if you prefer) needs to appreciate against other major currencies.  And, of course, how willing Chinese authorities are to allow this to happen.

Hypothetical scenarios projected in some circles of a rapid appreciation of 40% have China’s export competitors salivating.  Basic trade theory holds that by hiking the value of the yuan, Chinese exports become more expensive, making competing products made in countries such as Mexico that much more cost competitive.  Gaining ground of this type is seen as critical in the hotly disputed U.S. market for goods such as appliances and electronics.  Trade data for 2009 suggests that Mexico is already gaining some overall market share from China in the United States, and we have touched on the relative cost competitiveness between Mexico and China in this space before.

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We are number 50

Movin' on up

Movin' on up

Mexico rang in at number 50 out of 155 countries included in the World Bank’s Logistics Performance Index (LPI) for 2009, released last month.  OK so we’ve got some work to do, but the 2009 ranking does represent progress since coming in at number 56 on the 2007 Index.  Unfortunately, we’re not even number one in Latin America, which went to Brazil at 41, and we were also edged out by Argentina and Chile, ranked 48 and 49, respectively.  The Index awards each country points for the quality of their logistics industries in categories such as Customs, infrastructure, competence, tracking and timeliness.  Among the various categories considered, Mexico scored lowest on “Customs,” which is summarized as evaluating the “Efficiency of the clearance process (i.e. speed, simplicity and predictability of formalities) by border control agencies, including Customs.”  This comes as no surprise to those of us who have struggled with jarring arbitrariness and explanations of shipment detentions that are eyebrow-arching at best.  For what it’s worth, Mexico scored best on “Timeliness,” which either means we are embracing the service standards set by the wealthy economies, or we really have to work on those other categories.  In any case, at least we are climbing rather than dropping on the LPI.

To review the LPI in detail, go here:  World Bank LPI

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Thoughts on the Mexican economy at year’s end

el-nopalAs 2009 draws to a close, Mexico, like many countries, will be happy to see the back of this year.  Not only did 2009 see the worst economic decline in decades, but the steep recession was exacerbated by the outbreak of the H1N1 flu in April, which had a devastating effect on tourism and, to a lesser degree, business travel.  Mexico’s deep economic integration with the United States is a key motor for the economy, and as a result, the contraction of demand for vehicles and other durable goods in the U.S.A. hit Mexico’s productive sector hard.  The first two quarters of the year were practically catastrophic, as the precipitous dropoff in demand for vehicles led to layoffs and temporary plant closings in Mexico’s large vehicle manufacturing industry.  Tourism, hit by the one-two punch of the slumping U.S. economy and then the flu outbreak in April, is showing tepid signs of recovery, but the sector is still expected to close the year approximately 20% below 2008 levels.

The good news is that for the moment, the worst appears to have passed.  Read the rest of this entry »

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Mexico heroically drinking wine during crisis

Aux barricades

Aux barricades

A recent story in Reforma cites information from the Mexican Wine Council in reporting that consumption of wine in Mexico has weathered the steep economic downturn remarkably well.  The story maintains that while wine sales in restaurants have dropped 25% so far this year, sales in wine shops and liquor stores are up 35% and supermarket wine sales are up 30%.  This has to be a testament to the yeoman-like labor of the country’s wine producers, importers and distributors over the past ten years to boost consumption of wine in the country.  Although Mexico is the oldest wine producing country in the Americas, wine has never been a traditional part of the culture here.  In recent years, however, Mexico’s wine industry has really hit the salt mines in an effort to democratize wine consumption to include the commercially attractive middle class market.  The road is long and steep: A 2005 report on world per capita wine consumption by The Wine institute ranks Mexico at number 161 out of 189 countries, far behind the hedonistic sybarites of Burkina Faso, Uzbekistan and the Faroe islands, for example.    The good news, though, is that the trend is unmistakably upward.  Although domestic wine production still serves only about one third of the market, Mexico’s wineries, concentrated in the Baja California peninsula, have made tremendous strides in quality and are gaining recognition beyond the country’s borders.  The good ones are still on the spendy side though, and this will continue to be a tough obstacle for both domestic and imported wines to overcome in the battle to gain the hearts and minds of the middle class Mexican consumer.  Anyone who buys wine on both sides of the U.S.-Mexico border will notice right away how much more expensive the same bottle is south of the Rio Bravo.  A quick price check, for example, reveals that a bottle of Ravenswood Zinfandel costs about US$8.00 at BevMo in California, while the same bottle will cost you US$18.00 at the La Naval wine shop in Mexico City, which has pretty good prices by local standards.  Likewise, a bottle of Wolf Blass Shiraz Yellow Label generally costs about US$10.00 in the United States and runs about US$22.00 in Mexico, and so on.  I haven’t seen any bottles of Two Buck Chuck on the shelves here yet, but frankly I think I’d be scared to drink any wine that costs under 30 pesos in Mexico.

There is lots of information on Mexican wine on the web, here’s one place to start:   www.bajawine.info

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