l l a w t a e e r c g n s e ’ i l o i c s i e x r e f o M Despite a tough year, Mexico remains one of the most promising economies in Latin America. Melodie Michel travels to Mexico City to find out why.
s this magazine went to press, the Mexican peso was dangerously close to the 20-tothe-dollar mark, causing concern in the business community. The country’s current account deficit was the largest since 1999 and rating agencies had cut growth forecasts from around 2.4% to 2% for 2016. Most worryingly, there were rumours that a credit rating downgrade was on the cards if things didn’t improve. Yet at GTR’s Mexico Trade and Export Finance Conference at the end of October, the mood was optimistic. “Latin America is adjusting to a new reality. The US is not growing as much, and US production is suffering a recession. For Latin America, especially countries like Brazil, the adjustment has been quite sudden. Mexico, on the other hand, has been adjusting in a more orderly way. Amongst bad news, this should be considered a good thing,” said Carlos Capistran,
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chief Mexico economist at Bank of America Merrill Lynch (BofAML). To understand the reason why investors are not panicking about Mexico’s apparent troubles, we need to look at the root of these issues. For example, the devaluation of the Mexican peso had a lot to do with the presidential election campaign in the US. In fact, at the time of writing, it had become an indicator of the likelihood of a Donald Trump presidency: when Trump did well in polls or at debates, the peso went down; when he lost popularity, it recovered. On the back of the final presidential debate on October 10, the peso reached a peak of 18.455 against the US dollar. A Trump presidency would be terrible news for the Mexican economy, but as the election result should be announced before many of you read this, and because Hillary Clinton enjoyed a double-digit lead in the polls