Published On: Thu, Mar 26th, 2020

How will coronavirus impact the Mexico economy?

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The Mexico economy is a fairly robust economy with a sound manufacturing base. Exporting goods and services around the world, its main foreign markets are the United States and Canada. Cars, vehicle parts, computers, tractors and electro medical equipment are just a few of the major exports.

Given the panic in markets and increasing numbers of governments placing their respective countries on a ‘lockdown’ it may not be long before the US and Canada does the same. At the time of writing, the border between Canada and the USA has been temporarily closed to all non essential traffic. Quite what that means is anyone’s guess.

Slump in tourism

As the corona virus crisis and subsequent panic gathers pace around the world, the Mexican economy is sure to take a hit. Over the past three years, there has been a contraction in hotel and other tourist accommodation bookings. People tend to rein in their spending on non-essential items. The winter of 2019/20 has seen a fall in visitor and vacation numbers to Mexico. Quite how this will affect the economy as things worsen cannot be estimated at this time.

Tourism is what is known as ‘invisible earnings’ for an economy. Mexico relies heavily on the tourist trade. Along with manufacturing, there will be a contraction this year – 2020 – but not a gradual contraction but more a sharp spike. This will affect the spending power of the people as the companies they work for either cut hours or close entirely.

Spending power cut

The largest proportion of Mexico’s disposable income is spent on transport surprisingly enough, with housing, utilities and fuel a close second, followed in third place highest spend on food. Mexicans also spend – on average – about ten percent of their disposable income on recreation, of which about ten percent of that is spent on betting and gaming.

The figure for betting on sites such as casino.netbet.ng looks set to increase as the country now has firm legislation in place which has legalised betting on foreign based sites. This is according to businessinsider.com but it doesn’t breakdown the individual categories of personal spending.

However, that projected increase may be curtailed as a result of reduced income if the economy does fall in to recession, as looks increasingly likely, along with many other countries experiencing the same fallout from the corona virus pandemic.

A brighter note

What may help individual Mexicans and the economy in general is that a lot of expats working around the world will be sending money back to family. The sums they send may well reduce, but the flow will probably continue. According to a news article on CNN, expat Mexicans send home some $26 billion per year, but although this may take a hit this year, there will still be a sizeable sum entering the economy.

On a brighter note, Mexico imports food as most nations do, but not in the quantities you would see in, for example, the United Kingdom, Canada or the US for example. The reliance on imported foodstuffs is not as high as many other developed nations, Mexico having a robust agricultural sector.

While the Mexican economy is susceptible to disruption just as any other economy, there are perhaps more bright spots than might at first appear. How the government deals with the coming disruption, and indeed how the Mexican people deal with it will be judged at a later date.



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