After a week in Monterrey and in Mexico City listening to both business people and consumers there is clearly a more positive outlook in Monterrey than in the capital…yet a resoundingly negative outlook overall as to the internal Mexican economy. This is to some degree ironic since President AMLO’s mandate has been to improve Mexico from the inside out and since Mexico is now, according to the most recent data, the United States’ #1 trading partner as trade with China is plummeting, despite the talking heads insisting it would not happen.
The taxi driver test, now the Uber driver test: unanimously negative and more so in the capital. That said restaurants were packed as usual in both cities.
Arriving in Mexico City the need for a 2nd airport was painfully obvious and Santa Lucia is at best an incomplete long term option.
Generally, the lack of clear direction from the President does not have people in a wait and see attitude but much more in a brace yourself for whatever he does next defensive posture.
Several interesting contrasts between Monterrey and Mexico City. Monterrey still feels like it’s booming – major construction of new skyscrapers easily visible. Export driven manufacturing busy, for example Kia. Mexico City on the other hand construction is clearly frozen by mayoral decree.
Also interesting not much worry about Trump, again the locus of focus is internal.
Many talk about the peso going to 40 to the dollar…. what will the credit reporting agencies say next? Mexico and PEMEX are both on track for another downgrade after Fitch Ratings Inc. cut both sovereign and PEMEX bond ratings last month. And AMLO’s brawl with the Canadians is not at all aiding perceptions. Best quote I heard: “Mexico is still better in that sense than Italy” ….but it’s not. Mexico being rated as junk is certainly not helping. And no the independent rating agencies will not give AMLO “the benefit of the doubt”.
The positive news is that Mexico is exceptionally well positioned to take advantage of the need for non-China manufacturing / sourcing and will be poised to increase production even more so once the US Congress approves the USMCA (“NAFTA 2”).
Andrew Barker MBA
Middle Market Advisory LLC(469) 403-4944
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