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US Mexico Chamber of Commerce June 11, 2009 Animesh Ghoshal DePaul University

An Analysis of the US Economic Situation and its Impact on the Mexican Economy. US Mexico Chamber of Commerce June 11, 2009 Animesh Ghoshal DePaul University. June 2009: US economy appears to be in very bad shape Comparisons to year ago:.

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US Mexico Chamber of Commerce June 11, 2009 Animesh Ghoshal DePaul University

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  1. An Analysis of the US Economic Situation and its Impact on the Mexican Economy US Mexico Chamber of Commerce June 11, 2009 Animesh Ghoshal DePaul University

  2. June 2009: US economy appears to be in very bad shapeComparisons to year ago:

  3. Channels through which emerging economies are affected • Exports • Capital Flows • Tourism • Remittances • Trade Credit

  4. Mexico appears more vulnerable than most

  5. Mexico particularly exposed to US economy: 80 percent of exports go to US

  6. Mexico a major recipient of FDI

  7. Mexico also a major recipient of workers’ remittances

  8. Tourism: Mexico major destination for tourists, and by some measures, tourism is 3rd biggest contributor to foreign exchange earnings

  9. Tourism: Sharp decline expected in 2009 • Revenue in 2008: $13.3 billion • Revenue expected in 2009: $7.6 billon • Slowdown in US and European economies • Swine flu scare • Hotel occupancy down by 25% in April

  10. June 2009: Mexico’s economy appears to be bad shape • First quarter GDP fell by 8.2% • Decline felt throughout economy • Manufacturing output fell 13.8% • Construction fell 7.7% • Services fell 7.8% • Worst downturn since 1994-95 crisis, when GDP fell 6.2% in 1995 • Near term prospects not good • Economy expected to shrink 5-6% in 2009

  11. But Mexico today very different from Mexico of the past • Inflation • Exchange Rate • Debt Service • Interest Rate

  12. Inflation

  13. Exchange Rate, 1980-1998

  14. Exchange Rate, 1994-2008

  15. Debt Service

  16. Interest Rate

  17. Longer Term Prospects Are Very Good • Close link to US economy • US expected to recover faster than rest of G-7 • Good economic policies • Fiscal stimulus possible • Easing monetary policy possible • Anti-poverty programs • Political stability

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