Local Industry Sees Worst Year in a Decade

Mexico’s industries had a rough 2019, as local manufacturing fell 1.8 percent on year, according to the latest INEGI data. Construction and mining led the drop, with declines of 5.0 and 5.1 percent, respectively. Factors behind the decline include low public and private investment, economic uncertainty and insecurity.

Breaking down the data by sector, Mexico’s mining industry remains a powerhouse, but it has suffered several years of weakness, with 2019 marking seven consecutive years of reduced mining activity. The sector was affected, in part, by low oil production, which fell by 7.5 percent during the period. In the construction sector, the negative outcome can be linked to the slowdown in private and public investment. In the latter case, 65 percent of last year’s public budget went unused.

On the other side of the ledger, the manufacturing sector registered a small increase of 0.2 percent, with several segments reporting positive outcomes. This was, however, the smallest annual growth for the sector in a decade. The electronics segment grew 4.8 percent, drinks and tobacco by 2.4 percent, foodstuff by 1.7 and transportation equipment by 1.3 percent. These advances were offset, however, by manufacturing drops in 15 other areas, including the chemical industry, fabrication of machines and equipment, and metallic products and appliances.

Mexico’s industry might face a complex 2020, as several issues that dragged down manufacturing continue unabated this year. Moreover, the industry is vulnerable to international factors as many manufactured products are exported to the US. “Most worrying is that this downward trend will continue throughout the first months of this year, meaning it has not bottomed out,” Jose Luis de la Cruz, Director of the Institute for Industrial Development and Economic Growth (IDIC), told El Universal.

The industry could even be hit by the recent coronavirus crisis, as some fear that the COVID-19 epidemic that has hit China might hurt the supply chain of the electronic, metal-mechanic and automotive sectors. 

The industrial slowdown reflects the country’s own deceleration. Mexico’s GDP contracted by 0.1 percent in 2019, according to INEGI, a sharp drop from the previous year’s 2.1 percent growth.