This Week in Mexico: June 24, 2018 - June 30, 2018

What’s Up:

Exchange Rate is Up:

Exchange rate is over 20:1 and is expected to continue to rise throughout the year.  This creates special conditions that will affect your buy or sell of real property and must be dealt with before you sign a contract.

Tariffs are Up/Business is Down

International Policies Affect Your Bottom Line:

U.S. tariffs on steel and aluminum effectively halted the renegotiations of NAFTA.  With elections in both the U.S. and Mexico this year, it is doubtful that the talks will pick back up before the end of the year.  This has negative effects on investments, the value of the peso, inflation, and public and private spending, both Mexican and foreign.

Retaliatory tariffs are expected to be put in place by Mexico on U.S. pork, apples, potatoes, cheese and bourbon, to name a few.  

The Jack Daniels company, who looks to Mexico as one of its largest growth markets, now says that it cannot plan or make predictions due to the uncertainty of the U.S. policies.

Mexico is the second largest market for U.S. pork producers with sales of over $1 billion in 2017.  U.S. pork producers provide over 89% of all the pork sold in Mexico.

U.S. pork producers say that this will be devastating for them causing prices to jump 15% – 16%, resulting in inflation and the death of the market.

Tourism is Up

International tourism continues to increase in Mexico faster than previous years.  Mexico is the 6th biggest tourist industry in the world, growing every year by 12%, as compared to 7% in other high-end destination points.  The government is expecting 50 million tourists in the year 2021.

It provides 8.8% of the GDP and 10 million jobs - which account for one out of every 10 jobs in the country.  There were 39.3 million tourists 2017, (up 4.2 million from 2016), who spent a total of $12.3 billion USD.  Of those, 60% were from the U.S.  Mexico is now looking to increase the markets in China and Europe.

The success of Mexican tourism is driven by investment and programs sponsored by the federal government.  It is uncertain whether that support will continue past the current presidential elections set for July 1st.  The front runner is a nationalist with a protectionist agenda.  The World Trade and Tourism Counsel has halted further investment in planned developments until after the election due to the uncertainty of the federal government’s future policies, the U.S. tariffs, and the uncertainty of NAFTA.

So Is Crime

All the growth in the tourism industry comes in spite of the recent increase in crime.  It is estimated that drug traffickers make $40 billion USD per year and account for 500,000 jobs.  There is a common saying in Mexico that goes, “living next to the U.S. is like living next door to a crack house”.

So Is the Temperature

Cooling oceans are causing dryer, hotter conditions in Mexico where temperatures are forecast to be up to 45 – 50 C.  A state of emergency has already been declared in 22 states.  It is important to stay hydrated while visiting.  The human body can lose up to 30% more water than normal in these conditions.

What is the positive side of these extreme temps?  Ice cream and cold soda sales are up producing $13 million USD.