The economic relationship between Mexico and the United States

FROM: Oup Blog / Roderic Al Camp / 17 de febrero de 2018

Mexico and the United States share a highly integrated economic relationship. There seems to be an assumption among many Americans, including officials in the current administration, that the relationship is somehow one-sided, that is, that Mexico is the sole beneficiary of commerce between the two countries. Yet, economic benefits to both countries are extensive.

Mexico has played a significant role in the rapid expansion of US exports in the 1990s and 2000s. It alternated between the second and third most important trade partner of the United States in the last decade. In 2014, the United States exported a total of $240 billion worth of goods to Mexico, with the largest  products coming from the computers and electronics, transportation, petroleum, and machinery sectors. By contrast, China only purchased $124 billion of US exports. Exports to Mexico accounted for approximately 1,344,000 jobs in the United States.

California alone, boasting the eighth largest economy in the world, exported more than 15% of its products to Mexico by 2014, exceeding what it trades with Canada, Japan, or China. As of 2014, Mexico’s purchases of California exports supported nearly 200,000 jobs in the state. In fact, 17% of all export-supported jobs in California, which account for a fifth of all individuals employed in the state, are linked to the state’s economic relationship with Mexico. More than half of those export-related positions can be traced to the North American Free Trade Agreement. California and Texas – the two largest economies in the United States, and two of the three largest state/provincial economies in the world – are significantly influenced economically by Mexico.

In 2014, a heavy portion of exports from six US states were purchased by Mexico: 41% in Arizona, 41% in New Mexico, 36% in Texas, 25% in New Hampshire, 23% in South Dakota, and 23% in Nebraska. As Senator John McCain noted several weeks ago, the Trump administration’s decision to renegotiate, rather than withdraw from NAFTA, prevented a horrific economic impact on Arizona. The GDP of the United States and Mexican border states accounts for a fourth of the national economy of both countries combined, exceeding the GDP of all the countries in the world except for the United States, Japan, China, and Germany.

The United States provides the single largest amount of direct foreign investment in Mexico, but what I want to stress, and to educate Americans about, is that Mexican entrepreneurs and venture capitalists invest heavily in the United Sates. By 2013, Mexico had invested $33 billion, the only emerging economy among the top fifteen countries with direct foreign investments in the United States. In 2015, Pemex, the government oil company, opened the first retail gasoline station in the United States, in Houston, and plans on opening four more in that city. This is a pilot project to test the American market nationally. OXXO, another Mexican firm, has opened two convenience stores in Texas, and plans on investing $850 million to open 900 stores in the United States.

Finally, Mexico also influences the US economy through tourism in the same way that American tourists play a central role in Mexico’s economy. In 2014, 75 million foreigners visited the United States, generating $221 billion dollars. Canada accounts for the largest number of visitors each year, followed by Mexico, which provided 17 million tourists in 2014, who spent $19 billion. Along the border, at the end of the decade, Mexican visitors generated somewhere around $8 billion to $9 billion dollars in sales and supported approximately 150,000 jobs.

Another way to look at the relationship between Mexico and the United States is through cultural influences.  Mexico exerts impact through music, food, film, and language. For example, there are multiple fast-food chains that spe­cialize in Mexican food. Grocery stores stock more items originating from Mexico than any other ethnic cuisine in the world, including beers, beans, hot sauces, peppers, and torti­llas. Corona is the best-selling foreign beer in the United States. Mexican foods such as guacamole and caesar salad are so com­monplace that they have lost their identity as Mexican cuisine.

The use of Spanish words and Mexican slang is evident in ev­eryday language in the United States; such terms range from “mano a mano” to “macho,” “enchilada” to “margarita,” and “rancho” to “hacienda.” According to a Pew Center study in 2011, 38 million individuals in the United States five years or older showed that the majority of them were Mexican, and were speaking Spanish at home. Spanish is also the most widely spoken non-English language among Americans who are not from a Hispanic country. The size of the Spanish-speaking audience in the United States has also influenced the growth of Mexican films. The musical influence has kept pace with cuisine. In 2010, the New Yorker magazine ran an extensive article about Los Tigres del Norte, a musical group from San Jose, California, who represent the norteño musical style. They boast a huge following among music fans. Selena, who died two decades ago, has sold more than 60 million albums, including songs representing the mariachi and ranch­era genres, and the number of copies of her posthumous best-selling album of all time, Dreaming of You, reached five million by 2015. Among young adults (18 to 34 years of age) who listen to the radio, Mexican regional music ranks seventh in popularity.

The relationship between the United States and Mexico has become more complex over time, incorporating cultural, musical, economic, familial, political, and security relationships beneficial to both countries and its citizens. But the most dramatic change in those many facets of our relationship with each other is the degree to which Mexico’s impact on and within the United States has grown in importance. Equally important to consider is that in spite of President Trump’s public criticisms of Mexico, our relationship at numerous levels, public and private, remains strong.



FROM: Oup Blog / Roderic Al Camp / 17 de febrero de 2018

Mexico’s economy rebounds in fourth quarter as elections loom

FROM: Reuters / Michael O´Boyle / 30 de enero de 2018


MEXICO CITY (Reuters) – Mexico’s economy bounced back more than expected in the fourth quarter, according to preliminary data, but signs of slowing growth could feed discontent ahead of the presidential election in July.

Gross domestic product in Latin America’s second-biggest economy grew around 1.0 percent in seasonally adjusted terms in the October-December period, compared with the previous quarter, the national statistics agency said on Tuesday.

A Reuters poll had forecast an expansion of 0.6 percent. The economy rebounded after shrinking 0.3 percent in the third quarter as the country recovered from two devastating earthquakes that dented activity in the July-September period.

Higher interest rates and persistent inflation could weigh on consumer demand that helped support the Mexican economy last year amid uncertainty around U.S. President Donald Trump’s threats to pull out of a free-trade deal with Mexico.

It is still unclear if Mexico, Canada and the United States will be able to renegotiate the North American Free Trade Agreement (NAFTA), adding to concerns about the outcome of Mexico’s presidential race, which a leftist candidate leads in the polls.

“Important investment decisions may potentially be postponed, scaled down or even canceled,” Goldman Sachs economist Alberto Ramos wrote in a note to clients.

Data showed that the industrial sector edged up 0.1 percent in the fourth quarter compared with the prior quarter, crimped by a decline in oil production.

Agriculture grew 3.1 percent on a quarter-on-quarter basis while services grew 1.2 percent.

Mexico’s central bank is expected to hike interest rates again in February to contain a surge in inflation. Higher prices and more expensive loans could weigh on consumer demand, analysts said.

Mexico’s economy grew 1.8 percent in unadjusted terms compared with the same quarter a year earlier, the agency said.

For full-year 2017, the economy expanded at an unadjusted 2.1 percent rate, down from 2.9 percent in 2016. That is the lowest annual rate of expansion since 2013, President Enrique Pena Nieto’s first full year in office.

”The Mexican economy is surviving rather than thriving,” said Neil Shearing, an economist at Capital Economics.

Pena Nieto promised to boost Mexico’s anemic growth rates by passing major economic reforms, such as opening the energy sector to private investment. But an oil price slump sabotaged hopes to supercharge growth, as Pena Nieto had promised.

Slack growth could fuel support for opposition candidates in the July 1 election.

A poll on Monday showed leftist Andres Manuel Lopez Obrador consolidated support in his bid for the Mexican presidency, but the race has tightened as another opposition contender gained ground while the ruling party trailed.



FROM: Reuters / Michael O´Boyle / 30 de enero de 2018

RBC boss says chances of NAFTA being scrapped are rising

FROM: Thomson Reuters / 9 de Enero de 2018

TORONTO — Royal Bank of Canada’s Chief Executive Dave McKay said on Tuesday he believes there is now a greater chance that the North American Free Trade Agreement could be scrapped.

“I think the probabilities are increasing that you’ll have some type of dynamic where there is an announcement of a scrapping of NAFTA,” he said at a Canadian Bank CEO conference hosted by RBC in Toronto.

Canadian bankers have expressed concern about the progress of talks to rework the trade agreement and how renegotiations could hamper the ability of clients to do business with customers in the United States and Mexico.

McKay said he agreed with other business leaders and the Canadian government that no deal would be better than a bad deal.

“We don’t want to be stuck long-term with a deal that hurts our economy,” he said.

McKay also said RBC, Canada’s biggest bank by market value, is now spending $3 billion a year developing new technologies. The bank is one of the biggest Canadian investors in technology such as artificial intelligence and blockchain and has increased the proportion of its technology spending on innovation compared with maintaining existing systems.

© Thomson Reuters 2018

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FROM: Thomson Reuters / 9 de Enero de 2018

Mexico’s Pemex Jan crude output drops 10.6 pct from a year ago

Mexican national oil company Pemex produced 10.6 percent less crude oil in January than in the same month last year, the company said.

January crude output averaged 2.02 million barrels per day (bpd), down from 2.26 million bpd during the same month in 2016, according to company data released on Friday.

Meanwhile, crude oil exports were down 3 percent in January compared to the year-ago period.

Shipments for the month averaged nearly 1.09 million bpd, compared to 1.12 million bpd exported in January 2016.

About half of Mexico’s crude exports currently go to the United States.

The Mexican government is in the midst of implementing a sweeping energy reform finalized in 2014 that ended the decades-long production monopoly enjoyed by Pemex, formally known as Petroleos Mexicanos.

The reform also paved the way for first-ever oil auctions open to private and foreign producers, four of which were concluded last year. While a range of oil companies won the blocks on offer, significant streams of new output are not expected for at least several years.

Mexico’s oil regulator, the administrator of the auctions, is expected to oversee three auctions covering a mix of shallow water and onshore fields, in addition to a deep water auction over the course of this year.

Mexican crude output has declined over the past dozen years from a peak of 3.4 million barrels per day in 2014.

The government expects crude production to average 1.94 million bpd this year, and between 1.9 million to 2.0 million bpd in 2018.


Reuters (Reporting by David Alire Garcia; Editing by David Gregorio) / Hellenic Shipping News

Proposed border tax could harm U.S.-Mexico energy trade: official

A border tax floated by aides to U.S. President Donald Trump is “not a good idea” for bilateral energy trade, a senior Mexican official said on Wednesday, also confirming that Mexico’s second-ever deepwater oil auction would happen this year.

A 20 percent border tax on Mexican imports to the United States has been pitched by the Trump administration as one way to force Mexico to pay for a new border wall, a top campaign promise.

Separately, a so-called border adjustment tax has been proposed by the new administration and its Republican allies in Congress that in theory would tax imports but not exports.

Both proposed taxes face opposition from U.S. oil refiners and automakers, among other sectors, warning they would raise consumer prices.

“We don’t see this kind of a tax as a good idea,” said Aldo Flores, Mexico’s deputy energy minister for hydrocarbons.

“Our position continues to be that free trade and the free flow of these goods has benefited both countries, strengthening the energy security of both,” he said.

Relations between the United States and Mexico are especially tense as Trump has threatened to upend nearly a quarter century of free trade, deport millions of illegal immigrants and build his signature border wall while getting Mexico to pay it, something the Mexican government has said it will not do.

For decades, the two neighbors have nurtured a robust cross-border energy trade, with crude oil produced by state company Pemex sold to U.S. refiners, while American producers sell natural gas and fuels like gasoline and diesel to Mexican buyers.

Last year, the total value of U.S. energy exports to Mexico totaled $20.2 billion, while Mexico exported mostly crude oil worth $8.7 billion to the United States, in a reversal of the historic balance of energy trade between the two countries, according to U.S. Energy Information Administration data.

Similarly, Mexico’s crude shipments could be pressured if the United States approves the new Trump-backed permit for TransCanada’s (TRP.TO) proposed Keystone XL pipeline and the project brings new supplies of Canadian heavy crude to U.S. refineries.

“Supposing that (the pipeline) is completed, that changes the competitive playing field for Mexican crude,” said Flores, adding that producers of oil in Mexico would have to be more creative in how they market their output.



Mexican and Canadian heavy crudes have competed for years for buyers among U.S. Gulf coast refineries.

While Mexico’s oil regulator is planning three new oil auctions later this year, covering shallow water and onshore fields, a new deepwater auction is also planned.

“It will be toward the end of the year,” said Flores, who also sits on the Pemex board and took over as deputy energy minister in August.

He declined to specify where the deepwater blocks would be located.

Flores added that a first-ever auction of shale oil and gas blocks would “probably” be scheduled, noting that necessary regulations would be published before the end of the year.

Last year, Mexico concluded four first-ever oil auctions, part of a landmark energy opening finalized in 2014 that ended Pemex’s decades-long monopoly, including a December deepwater auction that awarded 10 blocks to a wide range of international oil majors.

While Mexican crude output has declined over the past dozen years from a peak of 3.4 million barrels per day, Flores said he expected output to total 1.9 million to 2.0 million bpd in 2018, similar to a forecast of 1.94 million bpd for this year.


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David Alire Garcia and Adriana Barrera / Reuters

Wed Feb 15, 2017 | 8:09pm EST

Trump Promises Business Leaders Major Border Tax, Rule Cuts

President Donald Trump told business leaders Monday he would impose a “very major” border tax on companies that move jobs outside the U.S. and said he would cut regulations by 75 percent.

A breakfast meeting with corporate executives at the White House kicked off the first working day of a president who made the promise of greater economic opportunity for American workers a centerpiece of his campaign. Trump plans to continue the theme Monday by signing executive orders on trade and labor issues, and will meet in the afternoon with labor leaders and U.S. workers, an administration official said.

The meeting, with an advisory panel on manufacturing led by Dow Chemical Co. Chief Executive Officer Andrew Liveris, welcomed some of the nation’s most prominent corporate leaders to the White House. During the transition, Trump at times used his new power as a cudgel against companies that provoked his ire with plans to move jobs overseas or with prices for weapons systems he considered excessive.

The president effusively praised the business leaders as “great people,” yet put them on notice that he was serious about the warnings about moving production overseas that he had issued during his campaign.

“If you go to another country” and cut U.S. jobs “we are going to be imposing a very major border tax” on that product, he told the executives.

Eye on Automakers

Among those in the room was Mark Fields, president and CEO of Ford Motor Co., which canceled plans to build a $1.6 billion plant in Mexico after Trump criticized the company during the campaign for plans to move small-car production from the U.S. to Mexico. Ford announced its plan to scrap the Mexico plant hours after Trump posted a tweet threatening to punish automaker General Motors Co. for building a factory in Mexico, though Ford said at the time its decision was unrelated.

No executive from General Motors was included in the breakfast meeting.

Trump mostly projected an optimistic tone Monday. “What we want to do is bring manufacturing back,” he said, highlighting tax-cut plans he said would rev up economic growth.

“We are going to be cutting taxes massively for both the middle class and for companies, and that’s massive,” Trump said.

He suggested that a roll-back of business regulations would be a particular focus of his economic plan, saying his observation has been that “regulation wins” over tax cuts as the more important factor in promoting growth.

Other business leaders at the morning meeting with Trump included Michael Dell, chairman and CEO of Dell Inc.; Jeff Fettig, chairman and CEO of Whirlpool Corp.; Alex Gorsky, chairman and CEO of Johnson & Johnson; Marillyn Hewson, chairman and CEO of Lockheed Martin Corp.; and Klaus Kleinfeld, chairman and CEO of Arconic Inc.

Also participating were Mario Longhi, president and CEO of United States Steel Corp.; Elon Musk, chairman and CEO of Tesla Motors Inc.; Kevin Plank, CEO and founder of Under Armour Inc.; Mark Sutton, chairman and CEO of International Paper Co.; and Wendell Weeks, chairman and CEO of Corning Inc.



Copyright: Bloomberg.

Five reasons Development Banks hold the key to renewable energy investment boom

New Climate Economy report sets out how Multilateral Development Banks have a crucial role to play in mobilising clean energy investment

The New Climate Economy (NCE) group has this month published a major new report detailing the crucial role development banks need to play in ramping up clean energy investment in developing countries.

The coalition of 20 countries, chaired by former Mexican President Felipe Calderón and Lord Nicholas Stern, has previously said that investments in clean energy are one of the biggest steps that can be taken to close the so-called ’emissions gap’.

By boosting investment to $1tr a year by 2030 yearly greenhouse emissions could be reduced by to 7.5 Gt CO2e, the new report said – an amount bigger than the annual emissions of the United States. Such deep emissions reductions would go a long way towards closing the gap between current projections and the level of emissions cuts needed to stand a reasonable chance of keeping global warming below 2C

However, the new report warns delivering a sharp increase in clean energy investment will require multilateral development banks (MDBs) to play an increasingly active role in supporting the mass deployment of renewable energy in emerging and developing economies.

     1.- Development banks are ideal catalysts for clean energy investment

Clean energy had a record year in 2015, attracting $329bn in global investment. However, this is still far short of what is needed both to limit global warming and provide energy access to the 1.1 billion people who still lack it.

MDBs can leverage up to 20 times the amount of money they invest, the report calculates, meaning a big boost in their spending would have a catalytic effect on private sector investment.

     2.- MDBs are well positioned to take on risks

While renewables are increasingly competitive in many developing markets with more investment now going into emerging markets than established ones, there are still risks that come with investment in these markets. Exchange rate risks, political risks and construction risk, all of which are higher than in OECD countries, are just some of the ways investors can be deterred from otherwise attractive clean energy projects.

However, since MDBs have a specific remit to promote development in the countries where they work, they are well positioned to take on the risks that other foreign investors may not be willing to shoulder. “They all have a public mandate to enable development globally, and from an energy perspective that is both scaling up energy and making it low carbon at the same time in the next 15 years,” Ilmi Granoff, co-author of the report and senior research associate and the Overseas Development Institute, tells BusinessGreen. “It’s making sure that those risks are addressed for clean energy, and relying on some of the older and new tools to scale up clean energy investments as the core of their energy strategy.”

     3.- Co-operation with other players is key

This doesn’t mean that development banks will be taking on all the responsibility alone – a key message from the New Climate Economy is how cooperation between MDBs, governments, and the private sector can allow new projects to be considered that may be too risky for one player to take on alone. Meanwhile, governments will also play an additional important role by scaling up the enabling role they can play in mobilising financing for clean energy, the report notes.

     4.-The money is there

A trillion dollars may sound like an awful lot, says Granoff, but there is no global shortage of global capital. Instead, the challenge is to shift incentives to ensure it is unleash in favour of clean energy.

The New Climate Economy group estimates that if low-cost, long-term financing were available for clean energy projects, the cost of clean electricity could be reduced by as much as 20 per cent in developed economies, and 30 per cent in emerging economies.

But in order to unlock this money, the financing system must be re-adjusted to take advantage of the benefits of renewables – their lack of fuel costs, lower operating costs, and flexibility in deployment – while also dealing with the challenges they bring, such as the need for higher grid investment.

“Clean energy is flexible and scalable, it has very low operating costs and often no fuel costs, so it has a bunch of really critical benefits,” says Granoff. “But it also functions differently: the upfront costs are greater, and so the project’s viability is more sensitive to financing costs than fossil fuel power investments. So there’s a bunch of enabling environment issues that have to happen in order to favour that clean energy framework.”

     5.- Fossil fuels will have to go

The flip side of the coin, of course, is that while moves are being made to promote and support clean energy, they must also be made to revamp an energy financing structure which until now has heavily benefited fossil fuels.

“It’s not simply about scaling up clean energy investment,” observes Granoff. “If we want the incentives to favour clean energy, we have to incentivising and stop subsidising through public financing high carbon energy systems. We need to be phasing out the financing of carbon energy systems, except in exceptional circumstances where there is an absolutely critical development rational without any viable alternative.





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