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 Business News | November 2006 
Mexico Economy Prepared for U.S. Growth Slowdown, Gil Diaz Says
 Jeb Blount & Oriel Morrison - Bloomberg
| | With a year-to-date growth rate of 4.9 percent through September, Mexico's economy appears set to register its fastest growth since 2000, when it expanded 6.6 percent. |
Mexico's economy is prepared to weather a U.S. slowdown thanks to a growing housing- construction industry and higher-value exports, Finance Minister Francisco Gil Diaz said.
Loans to home buyers expanded during the six-year government of Vicente Fox that ends Dec. 1, sparking a housing boom, Gil Diaz said in an interview at a meeting of the world's 20 largest economies in Melbourne. An improvement in the quality of Mexico's automotive products is increasing money earned from exports.
These factors will limit Mexico's dependence on the U.S., destination of 85 percent of its exports and the source of 62 percent of its foreign investment, Gil Diaz, 63, said. A weak housing market in Mexico's northern neighbor makes a slowdown in the U.S. almost certain, he said.
"The U.S. doesn't seem like a pretty good economy right now," said Diaz, who will leave public office to teach at the University of Southern California in Los Angeles in less than two weeks. "Mexican exports, though, are more competitive and our housing market is strong."
U.S. housing starts rose 5.9 percent in September, the first gain in four months, according to the U.S. Department of Commerce. The September result was 10 percent below the average for the past 12 months.
Starts will fall 5 percent to 1.68 million in October according to the median estimate of 68 analysts surveyed by Bloomberg. The Commerce Department is scheduled to release the October numbers today at 11:30 a.m. in New York.
"If housing falls, everything else comes behind it," Gil Diaz said.
Mexican Growth
Mexican gross domestic product expanded 4.6 percent in the third quarter from the year-earlier period after growing 4.7 percent in the second quarter and 5.5 percent in the first quarter, the Finance Ministry said yesterday.
Latin America's second-largest economy is cooling after posting its fastest growth since 2000 in the first half of the year. The slowdown is mainly the result of heavier-than-normal rains that hurt agriculture, Gil Diaz said. Construction, bolstered by the Fox government's efforts to expand mortgage credit, is expanding, he said.
"Several years ago, we had almost no mortgage market and what we had was illiquid," he said. "In the last year, 750,000 mortgages were issued, a quarter of the total in six- years of Fox's government; money is moving into the economy as never before."
The value of exports is close to a record, Gil Diaz said.
"We are in much better shape than we were six years ago, when Fox took office, and Chinese competition undermined our exports," he said. "We are no longer making the lower end products, our companies have invested in technology and that makes us less vulnerable to downturns."
To contact the reporter on this story: Jeb Blount in Melbourne at jblount@bloomberg.net Oriel Morrison in Melbourne at omorrison1@bloomberg.net
Mexico's GDP Grows 4.6 Percent in Third Quarter
Associated Press
MEXICO CITY – Production of goods and services in Mexico grew 4.6 percent in the third quarter, keeping the economy on track for 2006 to see its fastest growth in six years, according to data released Thursday by the Treasury Department.
GDP also rose 1 percent seasonally adjusted from the second quarter, slower than in the previous two periods. As expected, the rate of growth moderated a bit from the first half of the year, when GDP was up 5.1 percent.
Industrial output rose 5.5 percent in the quarter, led by construction and utilities; services grew 4.7 percent from the third quarter of 2005, led by gains in communications and transport; while agricultural production slipped 0.8 percent, with corn and sugar among crops that were smaller than the previous year.
With a year-to-date growth rate of 4.9 percent through September, Mexico's economy appears set to register its fastest growth since 2000, when it expanded 6.6 percent.
The Treasury Department recently raised its 2006 GDP growth forecast to 4.7 percent from 4.5 percent, while the central bank expects GDP to end the year with growth between 4.3 percent and 4.8 percent.
A deceleration is expected in 2007 as a result of the slowdown in the U.S. economy, which absorbs nearly nine-tenths of Mexico's exports.
In its fourth-quarter outlook, BBVA Bancomer said it expects Mexican manufacturing to grow at a more moderate pace in the months ahead as demand for exports cools, and that the key to growth next year will be services, which account for around 70 percent of GDP. |
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