A risky combination

by Macario Schettino.

I greatly appreciate the invitation to contribute biweekly to Mexico Brief. Since this is my first piece, I’d like to dedicate it to reviewing the current state of Mexico’s economy. Virtually all of the data we have predates Donald Trump’s arrival at the White House, though some indicators are more recent and may already reflect part of the impact of the decisions he has made.

From 1980 to 2018, the Mexican economy grew at an average annual rate of 2.2%, despite the domestic and foreign crises experienced during those 38 years. However, beginning in 2018, there is a clear shift in trend. The cancellation of the construction of Mexico City’s new airport had an immediate effect on market confidence, which was reflected in a depreciation of the peso and a rise in interest rates. During 2019, that decision was compounded by the obstruction of the ongoing energy reform, and investment steadily declined throughout the year. Before COVID and the lockdown arrived, there was already a contraction—reaching -1% in the last quarter of 2019 and -2% in the first quarter of 2020, although the final days of that period can already be considered part of the pandemic’s impact.