WEAK OIL PRICES CONTRIBUTE TO WIDENING TRADE DEFICIT IN JANUARY-AUGUST.
The slump in crude-oil exports was considered the principal factor fueling the wider deficit during the eight-month period. Otherwise, the deficit for January-August would have come in close to the same level as 2000, the SHCP said.
Slowing imports cause deficit to narrow in August
While the overall deficit for January-August was wider, the gap contracted slightly in August. The SHCP reported the trade deficit for the month at US$663 million, compared with US$774 million a year ago. But this was attributed primarily to a sharp drop in imports of intermediate and capital goods, which more than offset a decline in exports during the month.
Exports during August totaled only US$13.5 billion, the largest decline for the month in more than 11 years. Exports of crude oil and petroleum products declined by 28.7%, compared with only a 10% decline in non-oil exports, the SHCP said.
The most notable decline among non-oil exports in August was in shipments from the maquiladora sector, which recorded a 15.9% decline that month, compared with a 2.7% drop in manufacturing exports from non-maquiladora sources. The slump in shipments from maquiladora plants is attributed to the slowdown in the US economy since the end of 2000.
Weakness in the maquiladora sector is expected to worsen during the coming months because of the effects of the Sept. 11 terrorist attacks in New York City and Washington (see SourceMex, 2001-09-26).
The slump in oil exports during August is attributed primarily to a decline in volume, particularly since prices increased slightly from July. Exports of crude oil in August averaged 1.649 million barrels per day, compared with 1.712 million bpd in July. In contrast, the average price for Mexican crude oil increased slightly from July to US$20.79 per barrel, but it was far below the average of US$27.14 per barrel recorded in August 2000.
Weak oil market could hamper federal expenditures
The state-run oil company PEMEX reported the average export price of Mexican crude oil for January-August was US$19.84 per barrel, still higher than the US$18 used by President Vicente Fox's administration to draft the 2001 budget.
Many analysts suggest the price of Mexican crude probably declined below the benchmark level of US$18 during September and could fall even further the rest of the year. In a report published in early August, Casa de Bolsa BBVA-Bancomer said lower prices at the end of the year could bring the average price of Mexican crude oil for all of 2001 to US$18.30.
In a more optimistic forecast, Grupo Financiero Banamex-Accival (Banacci-Citibank) predicted the average price for Mexican crude oil at US$20 per barrel in October-December, which would translate to US$20.10 per barrel for all of 2001.
But other analysts suggest the Banacci-Citibank forecast may be somewhat optimistic, since demand is not expected to keep up with supply, especially if the US economy remains in a slump.
"It's always hard to know where oil prices are going to be a month from now," said private energy analyst David Shields. "But there are signs that oil prices might be as low as they are now, or could even decline further."
The low prices are bound to have a major impact on the federal budget, since oil-export revenues account for a significant portion of the federal budget. Fox has already reduced expenditures twice this year and has come under strong criticism from the Congress for failing to spend all the funds allocated for public works and social programs during 2001 (see SourceMex, 2001-05-16, 2001-08-01).
"The government still hasn't freed up 1.2 billion pesos (US$126 million) for transportation projects this year, which has prevented 21 roads from being built," said Deputy Omar Fayad of the long-governing Partido Revolucionario Institucional (PRI).
But members of Fox's conservative Partido Accion Nacional (PAN) have come to the president's defense. "It is absurd to require the government to spend its entire budget in the face of dropping revenues," said PAN Deputy Luis Pazos.
The Fox administration may not have to resort to another budget reduction this year, with revenues from income tax (impuesto sobre la renta, ISR) and value-added tax (impuesto al valor agregado, IVA) increasing slightly during the first eight months of the year relative to a year ago.
"Tax collections during this period rose by 15.7% in real terms," the SHCP said in a report published in early October. "Collections of the ISR were up 21.6%."
In an interview with the Reuters news agency on Oct. 2, Fox confirmed he did not see the need for his administration to make any additional spending cuts. "Above all we are going to stand firm behind our commitment to a fiscal deficit no greater than 0.65%," Fox said. [Note: Peso-dollar conversions in this article are based on the Interbank rate in effect on Oct. 3, reported at 9.52 pesos per US$1.00] (Sources: The News, 08/31/01; La Jornada, 09/20/01; Novedades, 09/24/01, 09/25/01; El Universal, Milenio Diario, 09/25/01; The Dallas Morning News, 09/27/01; Notimex, 08/07/01, 09/19/01, 09/24/01, 09/25/01, 09/30/01; CNI en Linea, 09/24/01, 10/01/01; Excelsior, 09/20/01, 10/02/01; La Cronica de Hoy, Reuters, 09/25/01, 10/02/01; The San Diego Union-Tribune, 10/03/01)
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|Publication:||SourceMex Economic News & Analysis on Mexico|
|Date:||Oct 3, 2001|
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