Overview of the Situation
The Organization for Economic Co-operation and Development (OECD) has revised its growth expectations for the United States upwards, attributing this to a better-than-expected performance in the first and second quarters of 2023, as well as increased demand from the US itself.
Key Factors Driving Growth
Alberto González Pandiella, head of section for Mexico and Costa Rica at the OECD, explained in an interview from Paris that a crucial factor has been the differential treatment the US is providing to exports under the framework of the United States-Mexico-Canada Agreement (T-MEC).
Positive Signals for T-MEC Review
González Pandiella highlighted that the positive and encouraging outlook on the trade landscape can be seen as a signal if the T-MEC review process accelerates.
Export Performance and Sectoral Variations
Behind the upward revision in growth expectations for Mexico lies the positive performance of non-automotive exports, such as machinery and equipment, food products, and mining and metal products. These sectors have shown a positive performance contrasting with the automotive sector.
Future Economic Projections for Mexico
González Pandiella anticipates that Mexico’s economy will gain momentum, potentially growing by 1.3% in the coming year, thanks to a less restrictive monetary policy.
US Economic Outlook and Trade Policies
In contrast, the OECD expects a greater impact on the US economy from migration policies and tariffs in the coming year. Although the effects of tariffs have not been visible yet in the US, either in consumer purchasing power or inflation, as companies anticipated their imports to circumvent tariff implementation.
Tariffs and Inflation
However, once inventories are exhausted, a more noticeable impact on inflation and the economy is expected. This scenario differs from Mexico’s case, where tariffs are applied to countries without trade agreements, but their effects might be mitigated by operational rules.
Judicial Reform and Autonomous Bodies
González Pandiella suggested that the T-MEC review will help dispel global businesses’ uncertainty about investing in Mexico. He also pointed out the need to address long-standing areas for improvement in infrastructure, investment, and education while ensuring respect for the rule of law following judicial reform and the disappearance of autonomous bodies.
Key Questions and Answers
- What factors are driving the upward revision in US growth expectations by the OECD? The better-than-expected performance of the US economy in the first and second quarters of 2023, along with increased demand from the US itself, are key factors.
- How is the US treating exports under the T-MEC framework? The US is providing differential treatment to exports under the T-MEC, which is seen as a positive signal if the T-MEC review process accelerates.
- Which sectors are performing well in Mexico’s exports? Non-automotive exports, such as machinery and equipment, food products, and mining and metal products, are showing positive performance.
- What is the projected growth for Mexico’s economy in the coming year? Mexico’s economy is expected to grow by approximately 1.3% in the coming year, driven by a less restrictive monetary policy.
- What impact is the US expecting from migration policies and tariffs in the coming year? The OECD anticipates a greater impact on the US economy from migration policies and tariffs, with potential effects on inflation and purchasing power once inventories are exhausted.
- How does the judicial reform in Mexico affect foreign investments? The OECD’s head for Mexico and Costa Rica, Alberto González Pandiella, suggests that the judicial reform and disappearance of autonomous bodies will help dispel global businesses’ uncertainty about investing in Mexico.
