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Weekly Report - 7 October 2003

Tracking trends...

`MAQUILA' INDUSTRY | Downturn continues. The downsizing of the maquila (assembly) industry continued in July, when 47 plants closed, leaving employment in the sector 2.3% below July last year. The official statistical institute, Inegi, reports year-on-year contraction across the board, not just in the more labour-intensive industries: 20% in footwear and leather, 10.5% in chemicals, 8.4% in services, 6.4% in furniture, 4.9% in textiles, 4.5% in electronic materials and accessories. Four industries account for 83% of the maquila sector: electrical appliances, transport equipment, apparel and electronic equipment. Employment in the sector fell by 10% in 2002.

Economy minister Fernando Canales announced last week that the government will amend the legislation governing the sector to make it more attractive to investors and create more jobs.

MINING | July blip in output decline. July figures for metals mining show production running 4.3% higher than a year ago. This was largely the result of an exceptionally low point of comparison, particularly for gold (though another sector showing a substantial annual increase, lead, has seen real output expansion in the main mining company). The sector's output in the first seven months of the year was 2.4% higher than a year earlier.

GROWTH OUTLOOK | Halving of target is official. Finance minister Francisco Gil confirmed to the senate's finance committee that GDP growth this year is now only expected to reach 1.5%, or half of the original target. He expects inflation to reach 3.8%, which is just within the government's projected range of one point either side of 3%.

The good news on the fiscal side is that the average price for Mexico's mix of crudes will be close to US$23.70 per barrel, or US$5 more than the assumption used for this year's budget. Gil warned, though, that the price could weaken next year. He blamed the poor performance of the economy on `the delay in the recovery of the US manufacturing sector' and reiterated that greater future dynamism is closely linked with the approval of proposed economic reforms.

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