A sizzling stock market. A strengthening peso. Good economic growth. Someone forgot to tell Mexico that the U.S. has been flirting with recession.
Mexico's gross domestic product expanded at an annualized rate of 2.6% in the first three months of the year compared to the same period a year earlier, according to government figures released Thursday. It's a respectable performance that highlights the nation's surprising resilience in the face of a U.S. slowdown.
Mexico's growth appeared muted compared to the fourth quarter of 2007, when GDP expanded by 3.8%. But there was statistical noise in the first-quarter numbers. The government this year adopted a new international standard for calculating gross domestic product, which is the value of all goods and services produced in the economy. And the January-to-March period was hobbled by this year's early Easter week holiday, which resulted in fewer working days compared to the first three months of last year. Adjusting for those factors, first-quarter GDP growth was a solid 3.7%, according to the Treasury secretariat.
"Mexico . . . is not immune" to what's happening north of the border, said Gray Newman, chief Latin American economist for Morgan Stanley in New York. But, "it's not suffering the kind of downturn that everyone was expecting with weakness in the U.S."
Mexico is the world's 14th largest economy, according to the latest statistics available from the World Bank, with GDP of $839.2 billion in 2006.
Bound to the United States by geography, immigration, trade and investment, Mexico's fortunes have long been linked to those of its northern neighbor. The U.S. housing industry, for example, which employs one in five Latino immigrants, is in a slump, resulting in a marked slowdown of remittances sent to Mexico. A prolonged downturn would undoubtedly hit Mexico hard.
Still, the nation's economy is holding up well. One factor is that the much of the world economy is growing despite the U.S. slowdown. Although Mexico still ships about 80% of its exports to the U.S., its farmers and manufacturers are looking for new customers in Asia, Europe and the rest of Latin America.
That diversification is paying off. During the first quarter, Mexican exports to the U.S. grew just over 16%, while shipments to the rest of the world climbed 32%. Exports to Europe grew 56%.
