Mexico & Nafta - February 2013 (ISSN 1741-444X)

Mexico’s final trade balance for 2012 registered a surplus of US$163m, the country’s first year-end surplus in 15 years, according to the statistics institute (Inegi). On Inegi’s figures, exports increased by 6.2% year-on-year to US$370.9bn, while imports also increased but at a slightly lower rate of 5.7% to US$370.7bn.

The positive trend of the trade balance was also observed in the last month of the year when the surplus was US$961.7m, which at first glance appears to be positive, but upon closer inspection might actually reflect certain weaknesses in the Mexican economy. In its report Inegi also provided seasonally adjusted figures for December which show that the surplus is reduced to US$552m on the back of a 3.38% decrease in imports and a 0.93% decrease in exports. However, the surplus is still a marked improvement on the US$227m deficit recorded by Inegi in November.

Analysts, such as Marco Oviedo from Barclays, pointed out that all this sends “mixed signals” about the performance of the Mexican economy. Oviedo explained that on one hand the results show that the external demand for Mexican goods particularly in the US has not been as weak as was previously expected; but the decline in imports suggests that internal demand in Mexico may be weakening, which is a worrying sign that economic activity could be slowing. The government, which is expected to release its final official economic figures for 2012 by 18 February, seems to believe that there are underlying weaknesses in the economy, either in competitiveness or domestic demand; as such even though its final year forecast for 2012 remains at 3.9% it has pencilled in a slight slowdown to 3.5%  in 2014, below the central bank’s more optimistic forecast.

Pemex too

On 29 January the state-owned oil firm, Pemex, revealed that it had posted a US$20.995bn trade surplus on its hydrocarbons operations, which include the crude oil, natural gas, and petrochemical imports/exports. According to Pemex the result was driven by US$52bn in exports of crude oil compared to US$31bn in imports.

Pemex approves joint venture with Mexichem

On 17 January, the administrative council of Pemex, approved a US$556m joint investment project with Mexico’s largest chemical company, Mexichem, to further develop Pemex’s petrochemical complex in Coatzacoalcos, Veracruz. The deal, under which Mexichem is to provide 60% of the investment capital to upgrade production of vinyl chloride at the ‘Pajaritos’ complex was first announced in June 2011 but stalled after unionised Pemex workers employed by the company’s petrochemical branch, Pemex Petroquímica (PPQ) expressed their opposition to it, on the grounds that their jobs would be threatened.

After months of negotiations with PPQ workers the deal was approved upon assurances to PPQ workers that their jobs were safe. A Pemex statement said the original deal would allow “the exponential increase in vinyl chloride production to 24,000 tonnes in the first year, 146,000 in the second and 217,000 in the third”. It added that the venture would allow Mexico to “improve its competitiveness” as regards vinyl chloride production and “reduce its disadvantages, both from a size and integration perspective, with its North American competitors”. The new energy minister, Pedro Joaquín Coldwell, said that in order for the deal to be approved, the Pemex administrative council was clear that “the industrial process of developing vinyl chloride would be exclusively reserved for PPQ, safeguarding its workers’ labour rights at all times”.