Thread: USA TODAY: Mexico feels our fiscal pain

Mexico feels our fiscal pain

By Chris Hawley, USA TODAY
NUEVO LAREDO, Mexico — Economists have their numbers, and taco vendor Jorge Flores has his.
From a half-empty parking lot at an industrial park, Flores measures Mexico's economic health in terms of steaming hot tacos, orange sodas and scoops of fiery green salsa. And the taco index is looking shaky.

"I used to come here with 300 tacos and sell them all before noon. Now I sell 180 in the same time," he says, pointing out factories that have cut hours, stopped overtime and frozen hiring. "I don't even come here on weekends anymore."

Like many Mexicans, Flores fears that the U.S. economic crisis is beginning to spill over to Mexico, the United States' biggest trading partner after Canada and China. Migrants are sending home less money, banks are tightening their lending, and U.S. consumers are buying fewer cars, televisions and other Mexican-made products.

"It would be a delusion to say we won't suffer some consequences of this great crisis," Mexican Treasury Secretary AgustÃ*n Carstens said in a speech last week. "Exports, tourism and (migrant) remittances are all going to feel the effects of this phenomenon."

Signs of trouble:

• Manufacturing exports to the United States dropped 3.8% in August, compared with the previous year, and that was before the U.S. stock market took a nose dive in September. Automakers were hardest hit, reporting a 13% decline in exports to the United States, according to Mexico's National Institute of Statistics, Geography and Information Processing.

• Consumer confidence since July is the lowest in at least six years, according to the Bank of Mexico's monthly survey.

• Mexico's IPC stock index declined almost 28% since May.

• Migrants sent home 12% less money in August compared with a year ago, the largest drop on record, the Bank of Mexico says. These remittances are Mexico's second-biggest source of foreign income, after oil sales, and totaled $1.9 billion in August.

Playing it safe

In Nuevo Laredo, on the border with Texas and the crossing point for 40% of all U.S.-Mexican trade, everybody from shipping agents to machinery makers are getting ready for a slowdown.

Trucks rolling into Mexico with U.S. goods or raw materials for factories are down to 4,000 a day from 5,000, says Fabian González, a Mexican customs supervisor.

Nuevo Laredo Mayor Ramón Garza says the decline is costing his city millions of dollars in customs duties that the Mexican Treasury Department shares with local governments.

At Herrajes Méxicanos, a metalworking company that supplies parts for factories, manager Ramón Baez says he cut his staff to 25 from 40 because of a recent 40% drop in sales.

One of his best customers is an electronics maker that buys metal weights to put inside telephone handsets. The client used to buy 70,000 weights a week, but now purchases only 10,000.

"All of my regular clients have lowered their orders," Baez says. "Everyone's waiting for the market to calm down."

In many ways, Mexico is still better off than the United States.

"Usually the people say that when the United States catches a cold, Mexico gets pneumonia. But this is not exactly the case today," President Felipe Calderón told a group of New York financiers last month. "Our country is now better prepared to mitigate the negative effects."

The government says Mexico is safe from a credit meltdown like that plaguing U.S. markets because of careful lending and tight banking rules put into place after Mexico's financial crash in the mid-1990s.

Bad mortgages are less of a problem, too, the International Monetary Fund said in an April study. Millions of Mexicans still build their homes one room at a time, buying blocks and mortar whenever they save the cash. Others buy houses through government mortgages guaranteed by contributions deducted from workers' paychecks. Private lenders, like banks, account for only one-third of mortgages.

The peso has remained strong between 10 and 11 to the dollar. The government is less dependent on foreign lenders, after reducing its foreign debt to 5% of gross domestic product over the last decade, from 40%.

What really worries business leaders is not a financial implosion, but less consumption — as average Americans and Mexicans get nervous about spending money, says Miguel Marón Manzur, president of Mexico's National Chamber of Manufacturers. "That is something that is going to be reflected in the entire exporting sector," he says.

That's bad news for border cities, which are already wrestling with a drop in cross-border tourism because of crime.

Silver lining

Still, Garza, the Nuevo Laredo mayor, and others say there may be a silver lining to the economic crisis, at least for Mexico.

A prolonged U.S. slump could eventually prompt American companies to move more work to Mexico to save costs, says Jaime Loera, president of the Nuevo Laredo Manufacturers Association. High fuel costs make it more expensive to ship goods from China, making Mexico more competitive, he says.

Much depends on how quickly the U.S. economy bounces back, says Carlos Montoya, managing director of another industrial park here. So far, no companies in his park have closed factories or canceled deals.

"There could be a drop, but I think we wouldn't see it until next year or so," he says. "It all depends on the duration of this situation we're living through."

Hawley is Latin America correspondent for USA TODAY and The Arizona Republic
-----------------------------
You can post a comment to this article on The USA TODAY Online site at this link:

http://www.usatoday.com/news/world/2008 ... rets_N.htm

I am tired of reading about how hard Mexicans and illegal aliens here in America have it. Are there any other Americans that are with me?

Wasn't there a saying about putting all eggs in one basket? Unfortunately, that one basket is a globally intertwined economy.
Sure, Mexico is a great neighbor as long as they don't keep sending their citizens here illegally who have anchor babies as soon as they cross the border, and send their most violent drug gangs to produce in meth labs and grow pot in national parks. Then there are the illegal folks that rape, rob, child molest, drive drunk or drive without licenses.
Dear Mexico: We are really sorry that you will not be getting all the remittances you used to, because there are very many jobs legal Americans and immigrants will do. And, unfortunately, crime is one of those jobs Americans amd legal immigrants are willing to do, so we don't need any more help in that field.
Note to Mr. Chertoff: CLOSE THE BORDER!!!

Originally Posted by loneprotester

I am tired of reading about how hard Mexicans and illegal aliens here in America have it. Are there any other Americans that are with me?

Loneprotester, we are all with you on that one!!! BUILD THE WALL NOW!!!

Build me a bridge and cry me a river.

Originally Posted by loneprotester

I am tired of reading about how hard Mexicans and illegal aliens here in America have it. Are there any other Americans that are with me?

You betcha. Us real Americans are having a hard enough time as it is. We need to worry about ourselves first, nevermind worrying about people who shouldn't even be here in the first place and don't even care about us.

Build the damn wall.

"I used to come here with 300 tacos and sell them all before noon. Now I sell 180 in the same time," he says, pointing out factories that have cut hours, stopped overtime and frozen hiring. "I don't even come here on weekends anymore."

Boo Hoo Taco Man! My income was half of what it normally was last month also! Americans are in a world of hurt right now!

added to the homepage

http://www.alipac.us/article3606.html

Mexico's peso hits lowest level against dollar



By MARIA GALLUCCI and MARY CUDDEHE
Associated Press
2008-10-07 04:32 AM Fonts Size:


Mexico's peso fell to its lowest real level against the dollar and the stock market dropped nearly 6 percent Monday to 21,611.5 as the country's economy was pulled into the global economic crisis.
The Central Bank said the peso's daily benchmark fixed rate fell to 11.8 per dollar _ a sharp drop from 11.1 on Friday and well below rates of about 11.4 recorded in June 2006 and 11.6 in May 2004.

The nominal rate is the lowest since 1993, when Mexico's government cut three zeros off the end of peso denominations to create a "new peso" worth 1,000 old pesos.

The currency generally tracks rises and falls in the dollar because Mexico's economy is so tightly tied to that of its northern neighbor.

Mexico's economy is often rocked by U.S. downturns because it sends the majority of its exports north and depends heavily on money sent home by migrants living north of the border.

So far, Mexico has weathered the U.S. economic crisis with low inflation and revenues from this year's high oil prices.

Joydeep Mukherji, Standard & Poor's sovereign credit analyst for Mexico, cautioned that Monday's devaluation and stock downturn didn't mean that Mexico's economy was headed for extended hard times.

"This turbulence is hitting Mexico at a time when the government is still running a budget surplus, not a deficit," he said. "There is some local strength to withstand this pressure."

He said Mexico's banks aren't as exposed to the global crisis as others in the world that lend to foreigners, and he played down the devalution.

"Even when the peso goes from 9 to 11 to 12, it doesn't lead to a big change in day-to-day life," he said. "It's not as if all the prices in the stores are being marked up because the peso weakened against the dollar. People are still pricing things in pesos, not dollars."

Mexicans were nervously watching the news at a local exchange house. Maria Almanza, a retired widow, said the devaluation means it costs her more to send money to her sick son living outside Houston, Texas.

"It's bad," she said. "If there's a crisis there, there's a crisis here. I do what I can to send him money, and now they're charging me more."
But Jose Martinez, 60, shrugged off the devaluation.

"This only makes people who have money nervous," he said. "I'm poor, so what?"





http://www.etaiwannews.com/etn/news_con ... ?id=756994

the devaluation means it costs her more to send money to her sick son living outside Houston, Texas.

Now theres a switch.