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Mexican Trade Deficit Widens

James Boston
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Mexican Trade Deficit Widens

The Mexican economy is continuing to gather strength. As is often the case where struggling economies start showing signs of embarking on a path to growth, the data metrics exhibit a higher volatility than normal before stability begins to take hold. Trade numbers from Mexico are no exception, the Balance of Trade has displayed increasingly wider swings over the past eighteen months. Today’s release for August is showing a widening deficit of -$1.123Bn, this follows the deficit number of -$0.98Bn in July, most market forecasts pointed towards narrowing to -$0.5Bn in the latest numbers.

Choppiness has been evident in most of the key Mexican economic indicators of late, a snap shot of the economy would suggest that it is still a struggling emerging market that is showing no real signs of any significant recovery. Recent down grades to the country’s GDP growth forecasts would cement the view that there is little in Mexico’s future that points to impending prosperity. Based on the data alone it is difficult to argue the case for Mexico’s economic future.

A closer look at the administration of President Enrique Peña Nieto however reveals a different narrative. Mexico’s government is departing from the traditional script that necessitates short term economic decisions to match up with the electoral cycle. By having the foresight to enlist the support of the opposition parties in the interest of national progress, and for them having the broad mindedness to agree, the President is in a position to play a longer game.

The advantage of a long term strategy and broad political support is that more meaningful and further ranging reforms can be introduced. Mexico has tabled a lengthy reform agenda, all of which will reap positive benefits. One alone, the deregulation of the energy industry, is set to alter the course of Mexico’s economic future.

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