Mexico: Tied to the U.S.

Mexico — another major player in the region — may see some challenges ahead because of its close ties with the U.S.

“Mexico is clearly a U.S. driven story,” TD Securities’ Buskas says. “That is its greatest upside, but also its downside.”

“Mexico is much more linked to U.S. dynamics,” BNP Paribas’ de la Fuente says. “We are not all that optimistic regarding the U.S. economy and think it will under perform — and consequently, Mexico will suffer.”

However, Mexico is a large petroleum exporter and the latest rise in global crude oil prices (at 81.50 on Sept. 28) should help underpin the economy.

“Forty percent of government revenues are generated by oil,” Coutino says, pointing out that crude oil represents roughly 17 percent of Mexico’s total export picture.

Mexico’s second-largest source of foreign income remains remittances from abroad — immigrants sending home funds to family members still in Mexico. Coutino notes that to-date remittances total $23 billion in 2007, vs. $22 billion in 2006.

“Remittances have surpassed foreign direct investment since 2003 for Mexico,” he says.