2023: A Year of Economic and Global Security Challenges

Roberto Corral

Board Advisor and CoFounder | Innocentro

The previous year, 2022, was an inflation and interest rates roller coaster. 2023 definitely seems to be similar. The more expensive bank loans and credit becomes, there is a bigger risk of a slowing economy in the coming months. Even with all predictions aside, the US is expected to slow down in a potentially harder than soft landing, with the real estate industry forcing a harder fall than the 2008 crisis. Also to be taken into consideration is the illegal invasion of Ukraine by Russia, which has seen its economy semi-demolished, with record low foreign investment and record unemployment.

As far as prices are concerned, almost all commodities have risen by about 30% and, in some cases, even up to 70%. For the travel industry, a year of recovery on the tourism side, the industry is cautious, waiting to see if the new COVID-19 variants will spike back up now that China has entirely opened its borders after three years of lockdown. The “Zero COVID” policy kept China’s economy from getting back on track. Trade tariffs applied by the previous US administration continue to this day, and reshoring, called “nearshoring” here, is heating up. However, while this relocation of overseas companies looking away from China has Mexico well-placed to take advantage, our country lacks enough green energy reserves to relocate the billions of dollars in value these companies have established in China.

The Mexican economy benefits from Mexican nationals who immigrated to the US and who have sent a record 21% YoY more money back to their families in Mexico, greatly helping family economics in the poorest communities. We have one of the best opportunities on the planet when it comes to foreign investment, given our relationship with the US and Canada. Exports surpass imports. Negotiations are underway in terms of food security, border control and the drug war. Most of all, energy trade is now the most important topic. Fiscal reform does not seem like a priority in the next two years despite federal tax collection hitting records in the last four years. The goal is to make it sustainable.

Overall, for the aerospace industry, 2022 was a year for recovery, with traffic back to 2019 levels, pushing passenger and cargo demand to new levels, causing a spike in MRO, retrofitting and makeover work despite a labor shortage. This is forcing even more companies to go digital. Maintaining an efficient, lower cost operation has greatly benefited carriers like Aeromexico, Viva Aerobus and Volaris. The increase in demand for new aircraft has recently also put Boeing and Airbus, the world’s largest OEM aircraft makers, in a better position than the last decade as the economy rises to pre-COVID-19 levels. Companies are looking to expand their operations in Mexico if the current scenario holds, given the upcoming demand for aircraft worldwide. Baja California, Chihuahua, Nuevo Leon and Queretaro are the main hubs for aerospace and newcomer states like Sonora, Yucatan and Guanajuato are making big bets on investment in talent and infrastructure to compete and further integrate the industry.

At the same time, the automotive and agriculture industries will grow but will also require new, qualified talent. If the trend continues, we may be able to overcome most of the lockdown controls entirely and enter the endemic phase of COVID-19 at last in 2023. Many challenges lie ahead but Mexico is well positioned to make this year a very good one if the current economic scenario remains similar to 2022.