The peso was trading at under 17 to the US dollar on Sunday but depreciated to as low as 17.7 on Monday morning according to Bloomberg data. In percentage terms, the peso declined around 4%.

At 10 a.m. Mexico City time, the peso had recovered somewhat to trade at 17.58 to the dollar but was back up to 17.69 by 11 a.m.

Gabriela Siller, director of economic analysis at Mexican bank Banco Base, said on X that the peso had depreciated due to “greater risk.”

She wrote that “80% of peso vs dollar transactions are speculative” and that “the risk-reward trade-off” for investors had changed due to the election result.

“With a majority in the Congress, Morena and its allies could change the constitution,” Siller said.

Janneth Quiroz, director of analysis at the Monex financial group, said on X that the peso depreciated due to “nervousness” among investors following the announcement of preliminary election results.

Those results showed that Morena and its allies, the Labor Party and the Ecological Green Party of Mexico, were likely to win a two-thirds majority in the lower house of Congress, and could also achieve a supermajority in the Senate.

A two-thirds majority in both houses would allow Morena and its allies to approve constitutional reform proposals without the support of opposition parties.

That possibility “generated concern” in the market, said Quiroz, who noted that the peso had depreciated to its weakest position since last November.

Sheinbaum’s victory was widely expected as she maintained a commanding lead in the polls throughout the three-month-long campaign period. But Morena and its allies weren’t widely expected to win two-thirds majorities in the Chamber of Deputies and the Senate.

Buoyed by a large differential between interest rates in Mexico and those in the United States, as well as strong incoming flows of remittances and foreign investment, the peso has performed well against the dollar for an extended period.

In April, the peso reached 16.30 to the dollar, its strongest position in almost nine years.

The low of 17.7 on Monday morning represents a depreciation of around 8% for the peso compared to that level.

Mexico News Daily 

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BBVA Research also reported that avocados have become one of Mexico’s principal commodities for export and domestic consumption. It found that in 2003, avocado farmers across the country earned 22 billion pesos (about US $2 billion back then), whereas in 2022, avocado sales surpassed 66 billion pesos (about US $3.9 billion). 

The study illustrates how the avocado has gained increasing relevance in Mexico’s economy by examining the total area used for avocado farming in Mexico, as well as figures for production, sales and exports. 

The BBVA Research team found that in 2020, there were 241,100 hectares (596,000 acres) dedicated to avocado production, 268.6% more than in 1980, when that number was just 65,400 hectares (161,600 acres). In 2003, 93,500 hectares (231,000 acres) were devoted to avocado farming in Mexico.

As a result, avocado production increased from just over 907,000 tonnes in 2000 to more than 2.5 million tonnes in 2022. Much of this increase was driven by exports, which grew from 89,300 tonnes in 2000 to just over 1.2 million tons in 2021.

The BBVA economists noted that “although the domestic market continues to consume more than half of the avocados produced, the export market has grown from just 9.8% in 2000 to 41% in 2022.” 

That increase by 31.2 percentage points is remarkable when taking into account that domestic consumption also grew by 83% (from 818,000 tonnes to 1.5 million tonnes) during that same period.

Avocado sales peaked in 2019, the year before the COVID-19 pandemic struck, bringing in 74.6 billion pesos (US $4.4 billion).

The BBVA report also broke down revenues by state, with Michoacán and Jalisco leading the way — not surprising given that these are the only two states in Mexico authorized by U.S. officials to export to the United States, which is by far the biggest importer of Mexican avocados. 

83% of the country’s avocado exports go to Mexico’s northern neighbor.

Avocado farming: a recipe for environmental damage?

The increase in land in Mexico used for avocado farming has caused concern for a number of reasons.

In February, six U.S. senators raised concerns about Mexican avocados farmed on illegally deforested land, urging the U.S. government to work with Mexico “to prevent the sale of avocados grown on illegally deforested lands to American consumers.” A November 2023 report by the U.S. nonprofit Climate Rights International documented how forests in Mexico are being illegally cleared in Jalisco and Michoacán to make way for avocado farming, producing avocados that end up exported to the U.S.

Avocado farming is also becoming a water issue in Mexico: last month, Indigenous villagers living alongside Lake Zirahuén in Michoacán dismantled illegal pumping equipment that was siphoning water from the lake to irrigate nearby avocado farms.

The incident occurred just weeks after local and federal authorities had established a joint operation to halt illegal pumping from Lake Pátzcuaro.

With reports from La Jornada and Milenio

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“We have not had any signal change,” said Rivas at a press conference announcing Nuevo León’s upcoming International Mobility of the Future Summit (IMOF). “We are working hand in hand [with Tesla] on the incentive contract,” he assured.

Since Tesla CEO Elon Musk announced the plans for an electric vehicle (EV) factory in northern Mexico in March last year, the start date for construction has been postponed and a lack of information has fueled speculation about the project’s viability. According to Nuevo León’s governor Samuel García, the project will generate US $15 billion in investment.

While Rivas admitted that there’s not an agreed date to break ground, he stressed there’s no doubt that the Tesla gigafactory in Mexico is happening.

“Tesla is coming, it is coming,” Rivas said.

Incentives for Tesla to build their latest factory in Mexico were confirmed last year, and include widening the Monterrey-Saltillo highway (from two to three lanes), building road infrastructure to enter and exit the factory and constructing water treatment infrastructure, as well as tax benefits.

When asked by reporters whether the recent worldwide layoffs at Tesla might have had an effect on the project, Rivas said that layoffs in Mexico were in the commercial area, not those positions related to the development and construction of the Nuevo León plant.

“The engineers working on the plant development … come from abroad and have visited the plant many times,” he said. 

Eduardo Aguilar, a professor at the University of Monterrey (Udem), told the newspaper El País that infrastructure construction by Nuevo León public works officials to accommodate the plant is ongoing at the planned gigafactory site in Santa Catarina — located about 15 kilometers from Monterrey. 

“The land remains the same as it was a year ago, that is undoubtedly true, but all the government works related to the plant’s construction have already begun,” Aguilar said. “The machinery and signage indicate that the promised expansions to access and stormwater infrastructure by the state have already begun.”

Musk himself said last October that while the Nuevo León factory was confirmed, he was not ready to “go full tilt” given global economic conditions. At the time, he said the first phase of construction would begin in early 2024.

Despite the speculation about the gigafactory’s fate, Rivas said that the announcement of the Tesla plant has boosted Nuevo León as an electromobility hub since Tesla has invited its suppliers to relocate to Mexico. 

“Around 30 [Tesla] suppliers are already here in Nuevo León,” Rivas said.

With reports from Milenio and El País

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Bloomberg data shows that the peso depreciated to a low of 16.98 to the greenback on Wednesday morning before strengthening slightly. The depreciation compared to Tuesday’s closing rate of 16.79 pesos to the dollar was 1.1%.

At 2 p.m. Mexico City time, the USD:MXN exchange rate was 16.93.

The Wednesday morning low represents a 2.5% peso depreciation compared to the currency’s strongest level this month — 16.55 to the dollar on May 20. It was the Mexican peso’s weakest position since April 30, when it closed at 17.14 to the dollar, according to Bloomberg.

Among the factors that contributed to Wednesday’s peso depreciation were a general strengthening of the dollar and caution in the market ahead of Mexico’s elections this Sunday.

Mexican bank Banco Base said it was “probable” that “positions in favor of the peso” would decline ahead of the elections due to the risk of “volatility” after preliminary results are announced Sunday night.

“Even though the exchange rate has shown stability during the electoral period, an increase in volatility at the end of the elections cannot be ruled out,” the bank said, adding that the situation will be influenced by “the first statement from the winner.”

On Wednesday, Gabriela Siller, Banco Base’s director of economic analysis, said on the X social media platform that “the impact of the elections on the exchange rate will depend on” five things.

• The winner of the presidential election and her/his “initial speech.”
• The makeup of the Congress (a “majority of one party will be conducive to fear about Mexico”).
• The position of the other [losing] candidates about the election result.
• The reaction of President Andrés Manuel López Obrador.
• “Possible changes in societal stability.”

Siller didn’t offer specific predictions about what will happen to the USD:MXN exchange rate if Claudia Sheinbaum wins — as polls indicate will happen — or if her main rival, Xóchitl Gálvez, scores an upset victory.

Citibanamex recently attributed the stability of the peso to the expectation that Sheinbaum will win and thus continue the current government’s agenda — the so-called “fourth transformation” — after she is sworn in as president on Oct. 1.

The peso has benefited for an extended period from the large gap between the Bank of Mexico’s benchmark interest rate (11%) and that of the U.S. Federal Reserve (5.25% – 5.5%). It has also received a boost from strong incoming flows of remittances and foreign investment.

The board of Mexico’s central bank will hold its next monetary policy meeting on June 27.

Many analysts predict that the Bank of Mexico will cut its key rate by 25 basis points next month, although inflation remains well above its 3% target.

With reports from El Financiero and Expansión 

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The data center region, known as Mexico Central, was inaugurated last week by Governor Mauricio Kuri, federal Finance Minister Rogelio Ramírez de la O and U.S. Ambassador to Mexico Ken Salazar.

Kuri celebrated the launch of what he called one of the largest cloud infrastructures in the world with a message on social media.

“Thanks to the culture of entrepreneurship, talent and innovation, the Microsoft corporation begins operations in Querétaro,” Kuri said. “With the start-up of the Hyperscale Cloud Centers, all small and medium-sized companies and entrepreneurs will have the opportunity to modernize their databases.”

In prepared remarks at the inauguration, Ramírez de la O said the new Microsoft data center in Querétaro demonstrates that Mexico can host high-tech industries. 

“Companies looking to relocate to Mexico can count on secure, state-of-the-art infrastructure that will improve efficiency and add value to their operations,” he said. 

Ramírez de la O added that not only has Microsoft strengthened Mexico’s position as a center of innovation and investment but also has catalyzed the development of a digital ecosystem that will promote economic growth and job creation.

Hyperscale data regions like the one Microsoft just opened in Querétaro are massive business-critical facilities designed to efficiently support robust, scalable applications and typically exceed 5,000 servers and 10,000 square feet. Querétaro will also be the site of an investment of over $5 billion by Amazon Web Services in a cluster of data centers, which was announced in February.

The new facility is the result of a plan announced by Microsoft in February 2020, when the company revealed its intention to invest US $1.1 billion to drive digital transformation in Mexico. 

Ambassador Salazar also praised the new project on social media. 

“The $1.1 billion investment will help advance Mexico’s digital transition and boost North America’s competitiveness,” Salazar said.

Earlier this month, Microsoft announced that its new Querétaro data center will “provide local access to scalable, highly available and resilient cloud services while confirming its commitment to promoting digital transformation and sustainable innovation in Mexico.”

The multinational further said that Mexico Central will “help drive economic growth and contribute to the creation of job opportunities to sustain digital innovation, generating more than 110,000 opportunities for professional services, including jobs directly in their own organizations and jobs generated indirectly in other organizations.”

The business magazine “Mexico Now reported that the center offers small and medium-sized companies, as well as entrepreneurs, the opportunity to modernize in key technologies such as artificial intelligence, the Internet of Things, payments and streaming.”

Mexico Central “will provide security, privacy, and performance and will contribute to the acceleration of the digital transition of organizations and public entities in Latin America,” Microsoft said.

It further establishes Mexico as one of Latin America’s emerging primary technology hubs.

With reports from Mexico Now and Forbes México

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Mexico’s exports were worth US $51.32 billion last month, national statistics agency INEGI reported Friday.

The newspaper El Economista said that the double-digit annual increase in export revenue was partially due to the fact that the Easter holiday period was in March this year while last year it fell in April. Mexico’s export earnings actually fell 2.6% in April compared to the previous month.

In April, auto sector export revenue surged 27.7% annually to $16.47 billion, or almost one-third of Mexico’s export earnings for the month. It was the largest year-over-year percentage-terms increase for auto sector exports since July last year.

Manufacturing exports, including auto exports, increased 12.9% to $45.97 billion, or almost 90% of the revenue total.

Non-auto manufacturing exports increased by 6.1% to just under $29.5 billion.

Revenue from the export of agricultural products also spiked in April, increasing 22.6% to $2.4 billion.

The only export categories for which revenue fell last month were oil and mining.

Oil revenue declined 17.5% to $2.11 billion, while mining earnings fell 3.5% to $830 million. The drop in oil export revenue coincided with a decline in national crude production to its lowest level since 1979.

Over 80% of Mexico’s export revenue comes from goods shipped to the United States. In 2023, Mexico was the largest exporter to the U.S., ousting China from that position.

Meanwhile, the value of Mexico’s imports increased 15.4% in April to $55.06 billion. Mexico was thus left with a trade deficit of $3.74 billion last month.

Imports of non-oil consumer goods surged 48.7% to $7.32 billion last month, while incoming shipments of capital goods — things such as machinery, tools and heavy equipment — increased 32.5% to $5.82 billion.

Imports of non-oil intermediate goods increased 14% to $38.71 billion, while oil imports including ready-to-use fuel fell 28.2% to $3.2 billion.

Mexico export revenue up more than 4% between January and April 

INEGI also reported that Mexico’s export earnings totaled $194.84 billion in the first four months of the year, a 4.1% increase compared to the same period of 2023.

Agricultural exports increased 10.7% in the period, while auto exports increased 10.4%.

The value of imports also increased between January and April, rising 4% to $201.29 billion.

Mexico thus recorded a trade deficit of $6.45 billion in the first four months of 2024.

With reports from El Economista, El Financiero and El Universal 

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The GDP of the primary or agricultural sector increased 4% annually in March while the tertiary or services sector grew 3.8%.

The GDP of the secondary or manufacturing sector also increased on a year-over-year basis but by a more modest 2.1%.

Compared to the final three months of last year, the economy grew 0.3% in the first quarter.

Mexico’s economic growth shows signs of wavering

The 1.9% annual growth rate between January and March is slightly lower than INEGI’s preliminary estimate of 2%. It is also 0.6 percentage points lower than the 2.3% rate recorded in the final quarter of 2023.

The El Economista newspaper reported that Mexico’s annual growth rate has now declined during six consecutive quarters.

The best performing sector in Q1 was the tertiary sector, which recorded 2.4% annual growth. That figure, however, was the lowest year-over-year growth rate for any quarter since Q2 of 2022.

The secondary sector grew 1.5% in the first quarter while the primary sector expanded 0.7%. Within the secondary sector, construction activity increased 10.7% compared to a year earlier.

Q1 growth remains high for the construction sector

Pamela Díaz Loubet, Mexico economist at BNP Paribas, said that the construction sector has been buoyed by government spending on infrastructure projects and private sector spending on facilities for companies relocating to Mexico as part of the nearshoring trend.

While impressive, the 10.7% construction sector growth figure in Q1 is well below the sector’s 24.4% annual growth in the second quarter of last year, and thus a sign that the construction boom is slowing.

Commenting on the economy as a whole in light of the latest data, the chief Latin America economist for Pantheon Macroeconomics, Andrés Abadia, said that “stricter financial conditions” and “difficult external conditions” are among the factors that have recently limited growth in Mexico.

The Bank of Mexico set its benchmark interest rate at a record high of 11.25% for a year until it made a 25-basis-point cut in March.

The Mexican economy grew 3.2% in 2023, but the pace of growth is expected to slow this year.

The International Monetary Fund is currently predicting a 2.4% expansion this year, while the consensus forecast of more than 30 banks, brokerages and research organizations recently surveyed by Citibanamex is that the Mexican economy will expand 2.2% in 2024.

With reports from El Financiero and El Economista

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The newspaper El Economista reported Friday that the “Work in Progress” survey published by Buk, a human resources development company headquartered in Chile, revealed that the average Mexican employee took just six vacation days in the past year.

The Buk survey found that Peruvians took seven vacation days, Chileans enjoyed eight vacation days and Colombians stepped away from work for nine days a year. The study also found that only 13% of Mexicans surveyed took a two-week vacation, whereas across the rest of Latin America, 32% of employees took a two-week vacation.

The results of this study come over a year after Mexico’s Congress approved legislation that doubles the minimum amount of paid vacation days for workers in Mexico in December 2022. 

Prior to the historic legislation, the Mexican Constitution granted workers just six paid vacation days in their first year on the job. The Federal Labor Law now entitles new employees to at least 12 days of paid leave from the outset, with an additional two paid vacation days added onto each of the next three years.

Thereafter, an additional two vacation days are earned for each five-year period of service. The law also allows workers to take their vacations over two consecutive weeks.

Despite the new law, the Buk survey suggests that the Mexican workforce has not changed its approach to vacation days — or that employers are not fulfilling their labor obligations.

Yunue Cárdenas, a psychologist who works for Spanish consulting firm Affor Health and the Workplace Wellness Council, attributes this to Mexico’s work culture. 

“Often, we don’t know what to do with this free time,” Cárdenas told El Economista. “The idea is that when one is working, there is meaning to life. In our culture, time off — even though it is a right — is not valued, and in some organizations, taking vacations is not viewed positively, particularly in small and medium-sized businesses.”

The Mexican workforce may hesitate to take their legally mandated vacation time because employers frown upon it, or because they feel obligated to save vacation days for childcare obligations, for example, when a child is sick at home.

A recent survey by travel company Expedia found that 69% of Mexicans work from six months to a year between days off. The Buk survey also found that 6 in 10 employees who are on vacation attend to office matters while on leave.

According to 2022 data compiled by the OECD, the average Mexican worker works 2,226 hours per year, much above the OECD average of 1,752 hours and second only to Colombia (2,405 hours per year in 2021). 

Another law addressing the issue of Mexico’s overworked labor force is legislation to reduce the constitutionally mandated workweek from 48 to 40 hours. The bill is currently stuck in Congress. 

With reports from El Economista

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The uptick follows increases in inflation in Mexico in both March and April.

The rise in annual inflation in the first half of the month occurred despite a 0.21% decline in consumer prices compared to the second half of April.

INEGI also reported Thursday that Mexico’s core inflation rate, which excludes volatile food and energy prices, was 4.31% in the first half of the month. That rate declined from 4.34% in the second half of April.

Both the headline rate and the core rate were in line with the consensus forecasts of analysts surveyed by Citibanamex. The former rate was slightly higher than a median forecast of 4.75% from analysts surveyed by Bloomberg.

The Bank of Mexico (Banxico) targets a 3% headline rate with tolerance of 1 percentage point in either direction. The central bank’s governing board will hold its next monetary policy meeting on June 27.

The consensus forecast of more than 30 banks, brokerages and research organizations recently surveyed by Citibanamex is that Banxico will cut its benchmark interest rate by 25 basis points to 10.75% next month, and that the key rate will be 10% at the end of the year.

However, Bloomberg reported Thursday that the higher-than-expected headline rate in the first two weeks of May likely fueled bets that “the hawkish central bank will be slow to lower its interest rate.”

Fruit and vegetable prices continue to fuel inflation in Mexico

INEGI data shows that fruit and vegetable prices increased 19.99% annually in the first half of May. That’s up from an 18.57% annual increase in April.

Agricultural products in general — fruit and vegetables, and meat — were 8.75% more expensive than a year earlier. A modest 0.22% annual increase in the cost of meat tempered inflation in that category.

The cost of services increased 5.23% annually in the first two weeks of May, processed food, beverages and tobacco were 4.61% more expensive and energy prices, including those for gasoline and electricity, rose 4.08%. Prices for non-food goods increased 2.29%.

With reports from El Financiero and El Economista 

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The Mexican economy will grow by 2.2% in 2024.

Mexico’s average inflation rate this year will be just above 4.2%.

The Bank of Mexico’s benchmark interest rate will be 10% at the end of 2024.

These are some of the consensus forecasts derived from the latest Citibanamex Expectations Survey, for which more than 30 banks, brokerages and research organizations were asked to provide economic predictions for Mexico.

The survey results, which include forecasts from major banks such as JP Morgan, HSBC and Banorte, were published Tuesday.

The peso’s future: above or below 18?

The peso was trading at just above 16.60 to the US dollar on Wednesday morning, not too far off from the almost nine-year high of 16.30 it reached last month.

The consensus forecast of the banks, brokerages and research organizations surveyed by Citibanamex is that the peso will trade at 17.90 to the dollar at the end of 2024. That forecast was unchanged from that of the previous survey, conducted two weeks earlier.

A USD:MXN exchange rate of 17.90 would represent a depreciation of over 7% for the peso compared to its current level.

The end-of-year USD:MXN exchange rate forecasts ranged from 16.75 (from the bank Natixis) to 19.80 (from the brokerage Masari Casa de Bolsa).

The consensus forecast for the end of 2025 is that the peso will be trading at 18.66 to the dollar.

GDP growth

The consensus forecast that Mexico’s GDP will increase by 2.2% in annual terms in 2024 is below the International Monetary Fund’s current 2.4% prediction. The outlook is unchanged compared to the previous Citibanamex survey.

The highest growth forecast was 2.8% (from Epicurus Investments and Masari Casa de Bolsa), while the lowest was 1.4% (from XP Investments).

The consensus forecast of those surveyed by Citibanamex is that economic growth in Mexico will slow to 1.8% in 2025.

In 2023, the Mexican economy grew 3.2% in annual terms. Growth was 2% in the first quarter of this year.

Inflation 

The most recent inflation data showed that the headline rate was 4.65% in April, up from 4.42% in March.

The consensus forecast is that Mexico’s average inflation rate will be 4.21% this year. That outlook is up from the 4.17% consensus forecast derived from the previous Citibanamex survey.

The highest 2024 inflation forecast was 4.65% (from the Monex financial group), while the lowest was 3.80% (from Oxford Economics).

In 2025, the consensus forecast of those surveyed by Citibanamex is that inflation will average 3.71%.

The Bank of Mexico currently targets inflation of 3% with a “tolerance” of 1 percentage point in either direction.

Interest rates 

The consensus forecast is that the Bank of Mexico will cut its official interest rate by 25 basis points to 10.75% in June.

Around three-quarters of the entities surveyed by Citibanamex — 26 of 34 — predicted that the central bank will make a 25-basis-point cut to its key rate next month.

The others forecast that a cut of the same size will come in either August or September.

The bank’s governing board will hold its next monetary policy meeting on June 27. Its subsequent meetings will take place on Aug. 8 and Sept. 26.

The Bank of Mexico reduced its benchmark rate to 11% from a record high of 11.25% in March. It left the rate unchanged after the governing board’s meeting on May 9.

The consensus forecast is that the central bank will make additional cuts in 2024 to leave its key interest rate at 10% at the end of the year. That prediction is unchanged compared to the previous Citibanamex survey.

The lowest end-of-year forecast for interest rates was 9% (from Oxford Economics), while the highest was 10.50% (from Masari Casa de Bolsa).

The consensus forecast is that the Bank of Mexico’s official interest rate will be 7.88% at the end of 2025.

Mexico News Daily 

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