Mexico: new administration cites progress, charts recovery

Business America, Feb 20, 1984 by Frederick J. Tower

MEXICO

New Administration Cites Progress, Charts Recovery

In 1984, Mexico looks forward to growth of about 1 percent in the second half of the year if that target can be gained without a resurgence of inflation. No growth is projected during the first half.

U.S. exports 1983-$9,081.6 million

U.S. imports 1983-$16,776.1 million

Calling 1984 the second stage of economic reordering being undertaken by his administration, President de la Madrid has sounded a warning that in 1983 the government of Mexico had begun to triumph over the economic crisis but that its depth and complexity are such that only its most severe manifestations have been controlled so far. He has pointed to accomplishments in containing inflation (down to 80 percent from 98 percent in 1982), corrections in balance-of-payments and public finance disequilibria and a renewal of financial savings. This progress has been made while protecting employment and the productive plant, he said.

The President has noted that the external sector of the economy has made a massive adjustment. He contrasted the 1982-82 exchange rate deterioration of 466 percent to the 1983 devaluation of 49 percent for the controlled rate and just 8 percent for the free market rate.

Mexico's trade balance was forecast to be $12 billion in 1983, and historic high, leading to a $3 billion to $3.5 billion surplus in the current account of the balance of payments, the first in 28 years.

U.S. exports to Mexico in 1983 dropped 23 percent from 1982--the second year of decline for U.S. exports, which were 33 percent lower in 1982 than in the record year of 1981. Total U.S. exports to Mexico in 1983 were 9.08 billion.

In releasing trade figures for the first three quarters of 1983, the Mexican Foreign Trade Institute noted that exports of manufactures in September were at the highest level ever. Manufactured exports for the entire ninemonth period rose to $2.7 billion, 23 percent more than for the same period of 1982. Mexico's exports continue to be oil-dominated, however. Petroleum sector exports were up a nominal 0.6 percent to $11.87 billion, and crude petroleum made up 72.5 percent of the $15.4 billion total of exports for the period. In the first three quarters of 1983, Mexico's export total was only 2.8 percent higher than the total for the same period of 1982.

Mexican imports in 1983 were down in all major categories except agricultural and forest products. Imports by the private sector have been especially affected by the economic downturn. While January-September 1983 public sector purchases of $3.3 billion were down 25.2 percent compared to the same months of 1982, comparable private sector imports of $2.5 billion were down 68.4 percent. By category, imports were down for intermediate goods 42.8 percent, capital goods 68.3 percent and consumer goods 64.8 percent.

Mexico's planners foresee some increase in 1984 imports over the 1983 amount, but a substantial recovery, much less a return to the levels of three years before, is unlikely if business activity remains as slow as expected and new investment plans continue to be deferred in the absence of higher demand.

Despite current difficulties, Mexico remains the third most important trading partner of the United States by virtue of its role as leading foreign supplier of petroleum and its broadranging demand for U.S. products, fourth highest in the world during 1983.

Last year, Mexico rescheduled virtually all its $22.9 billion of public sector debt due in the last quarter of 1982, and the years 1983 and 1984. Over $12 billion in private sector debt, which totaled an estimated $22 billion as of year-end 1982, benefited from rescheduling under various FICORCA (Trust for Coverage of Exchange Risks) plans. (See Business America, Sept. 5, 1983.)

In December, Mexico's Bank Advisory Committee, representing several hundred international lending institutions, approved in principle a $3.8 billion credit to cover foreign exchange needs for 1984. An additional $3.8 billion will come from the U.S. Commodity Credit Corporation, Export-Import Bank of the United States, the Inter-American Development Bank and the World Bank. A $1.2 billion draw is available to Mexico in 1984 under its 1982 agreement with the International Monetary Fund.

U.S. companies wishing to enter the Mexican market or expand sales there should get in touch with the U.S. Trade Center in Mexico City, which will sponsor the following exhibitions in 1984: graphic arts equipment--March; pollution control--April; computer equipment--May; autodiagnostic repair--June; food processing and packaging--August; analytical and scientific instrumentation--October; commercial representations--December.

"Mexico Update' seminars will be sponsored by the Commerce Department District Offices in Cleveland and New York City on March 1 and June 7, respectively.

More information is available from the Commerce Department desk officer for Mexico at 202-377-4464.