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News Article

USMCA Will be Key to Reviving the Economy: Arturo Herrera

By Alessa Flores | Fri, 06/19/2020 - 12:21

Yesterday, Arturo Herrera, Minister of Finance, participated in a Podcast by Grupo Financiero Banorte called Norte Económico to discuss the factors that will be key to driving economic growth in Mexico during the second half of the year. The key element to highlight was USMCA. However, Herrera stressed that not all elements of the country's economic recovery will depend on economic reforms but on advances in health.

From a macroeconomic perspective, Carlos Végh, World Bank Chief Economist for Latin America and the Caribbean, believes Mexico has three great opportunities derived from USMCA. The first is the elimination of the sunset clause that required the revision of the trade pact every 5 years. Now that the term increased to 16 years "a planning horizon will be opened" that will allow different industries to get more profit, explained Végh in an interview with Expansión.

The second benefit are the rules of origin. Their change will create greater incentives for Mexican industries to improve their productivity and improve the wages of their workers, explains Végh. The third is investment. Mexico has stood out for its investment attractiveness. Therefore, if it takes advantage of this situation, it could generate a large flow of capital into the country.

However, before reaching the much-desired economic growth, it is believed that Mexico will see one more blow to its economy prior to its reopening. Herrera explained that during the second half of the year, the economic impact will be felt more. Preliminary data from the Ministry of Finance shows the drop is expected to be between 18 and 19 percent in April and perhaps slightly less in May, according to a note by El Economista.

In addition to USMCA, Herrera said "there is a fairly robust financial sector, particularly in commercial banking, with capitalization levels very different from those seen in other crises,” he explained in the same note.

However, other experts consider the analysis should focus on the local reality of Mexico and not just talk about national indicators. The Department of Economic Studies by the College of the Northern Border, explained that the analyses of various experts outline an economic drop between 2.5 and 8.5 percent for Mexico in 2020. However, the report mentions that it is necessary to carry out an analysis of the regional chains, since not all Mexican regions will be affected equally. “In this context, Mexico's economic resilience will depend on its productive complexity and the degree of articulation of its economic sectors,” explains Edgar Gaytán, author or the College of the Northern Border’s report.

The data used in this article was sourced from:  
El Economista, Ministry of Finance
Photo by:   padrinan
Alessa Flores Alessa Flores Senior Journalist and Industry Analyst