U.S. Economy supports manufacturing rebound in Mexico - Oradel
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U.S. Economy supports manufacturing rebound in Mexico

The U.S. economy’s recovery is benefiting some Mexican sectors, and will continue to do so, especially in consumption and manufacturing.

According to Carlos Capistrán, Chief Economist for Mexico at Bank of America (BofA), the economic situation and the reopening of trade activities in the United States are driving Mexico’s recovery.

A BofA report highlighted that this U.S. support occurs through different channels, such as automobile exports and remittances, which have been performing extraordinarily.

This is shown by the fact that remittances from the United States to Mexico grew by a surprising 10.6% annually in the first half of the year, reaching a historic high of $19.1 billion dollars. This is a surprising result, as the unemployment rate in the United States increased from 3.5% in December 2019 to 11.1% in July 2020. 

Remittances represent almost 3% of the Gross Domestic Product (GDP) and 4.5% of consumption, which has a multiplier effect for families, especially in families with scarce resources as they generate consumption of basic products.

Furthermore, the recovery of the U.S. economy is benefiting some Mexican sectors and will probably continue to do so, especially in the export-led manufacturing sector.

According to the records of the Bank of Mexico (Banxico), in June Mexican exports to the United States totaled $27.9 billion dollars, representing a rebound of 93% from May, after the monthly rate fell 22% and 40% in May and April, respectively.

Reviving the Mexican economy through manufacturing

In its report, BofA adds that although Mexico’s economy has been boosted by the reopening of the U.S. economy, a weak recovery is expected. This is mainly due to problems within Mexico, such as limited COVID-19 testing, as well as high interest rates. 

The latest BofA investor survey revealed that 54% of respondents stated that their main concerns about the Mexican economy have to do with the current federal government’s decisions, 36% with the slowdown of the U.S. economy, and finally, 3% are concerned by the COVID-19 pandemic in the country.

According to Ernesto O’Farril, President of Grupo Bursamétrica, manufacturing and exports will benefit from the U.S. economy. He also says that the USMCA could drive recovery, as long as the Mexican government provides certainty to investors. 

In addition, Gabriela Siller, Chief Economist of Banco Base, believes that the entry into force of the USMCA will be an additional boost as some Asian companies have shown interest in investing in Mexico, particularly in the aerospace sector in light of the unofficial trade war between the United States and China. 

Alejandro Saldaña, Chief Economist of Bx+ (Ve Por Más), said that Mexico and the United States have an important, very deep industrial connection in activities like manufacturing of transportation equipment, which is why Mexican exports also bounced back in June after the collapse seen in previous months. 

Oradel Industrial Center is located in a strategic area which provides U.S. companies competitive advantages when establishing their operations in our industrial park, as it is only 10 miles away from the international bridges to the United States.

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