Wednesday, July 29, 2020

Mexico’s foreign trade falls 41%

Mexican exports plummeted 41 percent annually in April, their biggest decline in 34 years, in the face of the impact of sanitary contingency measures due to COVID-19.

In the fourth month of the year, the value of merchandise exports was 23.8 billion dollars, which represented a decrease of 40.93 percent at the annual rate, according to data from the National Institute of Statistics and Geography (Inegi) published on Monday. This represented the lowest amount since 2010 and the worst fall since March 1986, when it registered a decrease of 41.96 percent at the annual rate.

Fernando Ruiz Duarte, general director of the Mexican Business Council for Foreign Trade, Investment and Technology (Comce), pointed out that the April figures were already expected, since around 80 percent of sales abroad go to the United States and its economy was practically paralyzed, so it is logical that exports decrease. “We have a structural problem in Mexico, we cannot depend so much on the United States, this is a wake-up call, because we have not diversified our markets, in addition, we have not diversified all of our productive sectors.” he added.

“The impact in Mexico will be much deeper than the contractions of its trading partners, especially the United States,” said Alberto Ramos, chief economist for Latin America at Goldman Sachs. He added that the expectation is that the trade balance will improve slightly in the future, due to an increase in domestic demand and the possible depreciation of the exchange rate. The trade balance report reveals that oil exports had a fall of $ 757.96 million or a 66.4 percent decrease for the fourth month of this year, which represented its deepest decline since July 1986, when it fell 67.64 percent. percent at annual rate. The institute noted that on that date non-oil exports were $ 22.6 billion, its steepest decline since 1980. Within non-oil exports, shipments of manufactured goods were $ 20.3 billion, or a drop of 41.9 percent, which represented its most marked decline since 1981.

On a disaggregated basis, automotive exports fell 79.1 percent, while non-automotive exports sank 20.9 percent, compared to the same period last year. The exception was the foreign sales of the extractive industry, which increased 20 percent annually in April. In the case of agriculture, these registered a contraction of 8.2 percent. “In the agri-food sector, hundreds of producers dedicated to export have had no market options abroad, so they have had to abandon their crops, since they lost the supply line,” said Bosco de la Vega, president of the Consejo Nacional Agropecuario (CNA). He explained that in agriculture the most affected are the producers that supply supply chains for restaurants, hotels and tourist centers. “I have faith in the field, remember that during the first quarter of this year the country’s GDP fell 2.4 percent annually, and the only sector that grew 1.2 percent was agrifood,” he added.

In its monthly comparison, total merchandise exports reported a drop of 37.67% which was the result of drops of 37.54 percent in non-oil and 41.18 percent in oil. On the other hand, merchandise imports reached 26.4 billion dollars, which translated into an annual decrease of 30.48 percent. This represented its worst fall since July 2009, when it decreased 33.06 percent at an annual rate. That figure corresponded to an annual drop of 27.6 percent in non-oil imports and Of 53 percent in the oil companies, broken down, imports by type of intermediate good fell 28.1 percent at an annual rate, while imports of capital goods fell 26.7 percent.

In the first four months of this year, the trade balance presented a surplus of 635 million dollars. Kenneth Smith, former chief NAFTA negotiator, pointed out that difficult months are ahead for foreign trade, between now and the end of the year, but the good thing is that the USMCA will already be in force, which will give certainty to producers. “The best thing that can happen in North America is for the USMCA to come into force on July 1, because it will provide legal certainty and certainty especially to exporters and investors in the region,” he said.

“The USMCA is an opportunity that must be seized to reduce the mistrust and uncertainty generated by the decisions taken by President López Obrador,” said Miguel González Ibarra, coordinator of the Center for Financial Studies and Public Finance of UNAM.

Pemex reduced its export earnings by 49.7 percent during April, compared to the previous month. In the fourth month of the year, the company received $ 502 million in exports, a difference of $ 496 million compared to last March, when they totaled $ 998 million. The drop in its export sales was caused by the drop in the price of the Mexican mix, as its crude sales volumes to other countries registered an increase. In April, Pemex sold abroad – mainly the United States – one million 179 thousand barrels of crude oil daily, 3 percent more than what was sent last March and 15 percent more compared to April 2019.

Source: El Financiero


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