A rising tide lifts all ships...

The rising tide for the peso has been the massive inflows of foreign investment in Mexican peso-denominated money market instruments.  Nearly half of the last year's record US$23.13 billion in foreign investment in money market obligations flowed into the country in the last three months of 2010, spurred by Mexico’s inclusion in the World Global Bond Index (WGBI). To put that figure in perspective, it was almost four times the amount of DFI in Q4.

Portfolio investment last year set an all time record of US$23.77 billion. It was more than in the previous five years combined and only US$5.96 billion less than total portfolio investment in all of the previous decade.

Will the flood continue?

A trade SURPLUS in January

Thanks to oil, Mexico's export income exceeded its import bill by US$63 million in January.Without oil, the trade account would have been in DEFICIT to the tune of US$1.00 billion.

High oil prices are a big help, especially since the inexorable trend is for lower export volumes. In January, Mexico exported 1.444 million barrels a day, well above January 2010's 1.176 million level but a reduction from December's 1.501 million.

Just as the 40.6% year-over-year jump in oil export revenue drove the growth of exports (+28.2%), imported oil products were behind the 25.0% year-over-year rise in imports. Imported oil products climbed 41.0%; non-oil imports increased 22.8%. Fortunately for Mexico's trade and current accounts, imported oil products accounted for only 13.5% of the total import bill in January.   

Spending by the US Government...

For an excellent visual on how the US Governments spends the revenues it collects, check out the following link.


http://dotearth.blogs.nytimes.com/2011/02/22/a-long-deep-view-of-the-u-s-budget/?nl=opinion&emc=tyb2

When the budget debate centers on cutting the 12% of the government's spending that is discretional, one must ask, as in the famous advertisement, "where's the beef?"

Spending by the US Government...

For an excellent visual on how the US Governments spends the revenues it collects, check out the following link.


http://dotearth.blogs.nytimes.com/2011/02/22/a-long-deep-view-of-the-u-s-budget/?nl=opinion&emc=tyb2

When the budget debate centers on cutting the 12% of the government's spending that is discretional, one must ask, as in the famous advertisement, "where's the beef?"

The more things change...

The drama playing out in Ensenada not only undercuts the Supreme Court's approval of Integrated Service Contracts for Pemex, it also reawakens investors' concerns about the rule of law in Mexico.

On February 12, Ensenada's PRI mayor, Enrique Pelayo, sent police to close the Costa Azul gasification plant located 23 kilometers north of Ensenada, in which Sempra Energy invested US$1.2 billion. Now Sempra has put a US$3.5 billion investment in wind power on hold.

Never mind that federal authorities -- both the Environment Ministry and the Energy Regulatory Commission (CRE) -- say that the Costa Azul plant complies with the law. Furthermore, natural gas storage is the exclusive responsibility of the federal government, according to the CRE. Neither is Mayor Pelayo concerned with the electricity shortages in Baja, Tijuana, Ensenada, and Mexicali the Federal Electricity Commission (CFE) says closing the Costa Azul plant will provoke.

It's alleged that if Sempra pays US$16 -60 million, the legal problems the Mayor claims exist will go away.

Is this the message Mexico wants to send?   

GDP in 2010

Mexico’s GDP shot up 5.5% in 2010, measured on a year-over-year basis). Although GDP did not recover its pre-crisis high last year, it came much closer than expected. The Mexican economy should surpass its pre-crisis high by the middle of this year. GDP rose in each quarter of 2010. 

The US uses another methodology for measuring GDP growth rates. The US headline growth figure annualizes the change in GDP versus the previous quarter instead of measuring against the same quarter of the previous year. This methodology better captures changes in the economy’s direction. The year-over-year comparison better portrays how the economy looks compared to a year earlier. 


Mexico’s GDP climbed 5.1% in Q4 using the US reporting methodology. The primary division grew 4.6% while the secondary division grew 5.3%. The tertiary division rose 5.0%. 

Mexican export crude

The average annual price of a barrel of Mexican export crude actually surpassed the price of a barrel of West Texas Intermediate (WTI) several days, a very rare occurrence.  However, this decade has seen a trend in which the price of Mexican crude has come closer to the price of WTI, as the following table demonstrates.

Average	Mexican Export Crude Price as a Percentage of WTI Price
2003 - 2010	82.9%
2003 - 2006	77.5%
2007 – 2010	88.3%
2009 - 2010	91.7%

Tourism in Mexico, 2010

In 2010, incoming and outgoing tourism recovered. Incoming tourism revenues rose 8.5%. Outgoing tourism expenditures grew 2.1%. The US$4.6 billion tourism surplus was its second highest level ever. The high, US$4.8 billion, was in 2008.

Looking at the number of tourists rather than revenues and expenditures tells a different story. The 79.9 million tourists who visited Mexico in 2010 was the lowest number since 1989. 

Mexico: growing above trend in November

The growth cycle indicators published for November this morning show that both the coincident and forward indicators report the economy as growing above trend. The same was true of industrial production. 

Jobs in the US

A long way to go...

The graph is from Economix

http://economix.blogs.nytimes.com/2011/02/04/comparing-recoveries-job-changes-3/?nl=todaysheadlines&emc=tha2

Numbers on illegal immigrants in the US

The Pew Hispanic Center has published the 2010 numbers on illegal immigration in the US. Here are some of the salient findings:

-- 11.2 million illegal immigrants in 2010 vs. 11.1 million in 2009

-- Mexicans comprise 58% of the total (6.5 million)

--The number of illegal immigrants peaked in 2007 at 12.0 million

--In 2010, about 8 million illegal immigrants were working

-- Illegals were roughly 5% of the US workforce

--350,000 babies were born to families with at least 1 illegal parent

--That's 8% of all newborns in the US

--2/3 of the illegal parents of newborns had been in the US at least 5 years

--The number of newborns was basically unchanged from 2009

-- About 400,000 people were deported each year in 2009 and 2010

For more information, see the report at http://pewhispanic.org/