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Peso
strengthens. The Central Bank’s decision
to further tighten credit conditions has bolstered the peso, which has
continued to strengthen since the presidential and congressional elections
on 2 July. Since the end of June, when pre-electoral uncertainty had
driven the peso above the 10 pesos to the US$ threshold, the peso has
firmed to 9.32 pesos per US$ on 11 August.
Trade
deficit continues to widen. While the
stronger peso has helped to drive down inflation, it also has prompted
consumers to buy more imported goods and has led to a widening of the
trade deficit. The 17.9% import growth registered in June was driven
by a 39.2% surge in consumer good imports, while intermediate and capital
goods registered lesser growth rates of 16.1% and 15.3% respectively.
In June, exports increased 15.7% year-over-year. A doubling of oil
exports has accounted for a large share of the expansion - the current
price of the Mexican oil mix increased 85.6% over June 1999 to US$ 26.5
per barrel. Non-oil exports increased 10.3% in June over the same
month last year. As a consequence of quickening import growth, the
June trade deficit rose to US$ 630 million, which drove up the trailing 12
month deficit to US$ 6.1 billion, up from last month’s US$ 5.8 billion
gap. The mounting deficit has started to raise concerns that the
deficit may mushroom in this year.
Fox
on Mercosur-trip. Incoming President
Vicente Fox is preparing to take office on 1 December and has embarked on
a diplomatic trip to Mercosur member states Argentina, Brazil and Uruguay
and associate member Chile. Rather than representing diplomatic
courtesy, the trip is
aimed specifically at dispelling concerns within the region that Mexico
has become over dependent on the United States and to explore the
possibilities of reaching a free-trade agreement with the Mercosur bloc by
2003.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Mexico. For more details please click here.
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