Stéphane Feytmans
Country Manager Mexico
View from the Top

Mexico to Continue Fighting Inflation Throughout 2H22

By Cinthya Alaniz Salazar | Wed, 06/15/2022 - 09:15

Q: With a potential domestic and global recession on the horizon, how is Atradius mobilizing to keep its client portfolio from shrinking in 2022?

A: Despite continuous supply chain disruptions, ballooning inflation, the Russia-Ukraine war and recent energy supply concerns, northern economies—including Mexico—have demonstrated resilience and are performing well. As a credit insurance company, we have stayed on top of these developments so we can anticipate changes and counsel our clients accordingly.  

Current data projections indicate that a domestic slowdown will likely take place in Mexico in the latter half of 2022, which is largely contingent on high interest rates and the economic performance of the US. Economic projections were already shaky at the beginning of the year and were further distorted by the Russia-Ukraine war, whose full impact is yet to be felt by the global economy. 


Q: How will these major macroeconomic factors affect Mexico’s manufacturing industries?

A: These developments have prompted an additional review of our portfolio holdings’ most exposed sectors: fertilizer, automotive and construction. Russia is one of the largest exporters of fertilizers in the world but its productive and export capacity has been greatly diminished by the war. The disruption threatens to undo the productive capacity of Mexico’s agricultural sector and, by extension, that of all of Latin America.

On another front, the global economy also depends on Russia for the production of nickel, a metal essential for the production of batteries. Resurgent COVID-19 cases in China are closing aluminum production plants, increasing the price of this commodity by 42 percent at the beginning of 2022, with prices still climbing. These two factors, combined with continued disruptions to the production and supply of semiconductor chips, are likely to significantly hurt Mexico’s struggling automotive sector.  

Within the construction industry, cement manufacturers, which have already been losing steam, will be further crippled by their inability to attract investment and generate trust. This is despite multiple large-scale infrastructure projects that are under development by federal and state authorities. 

Overall, we anticipate a challenging second half of the year for companies but credit insurance will help our clients to keep trading, despite these macroeconomic conditions.  


Q: How are high inflation rates likely to impact companies and, by extension, Atradius in 2022? 

A: Inflation is definitely the main problem. The US was the main reason Mexico was able to grow again after the COVID-19 outbreak. If the US economy slows down, it will certainly impact Mexico. In the US, inflation hit its highest point in 41 years in March 2022. In Mexico, it is now at its highest in two decades. It is impacting both the economy and companies. The economy was recovering from COVID-19 and when we thought that inflation was going to recede but it went up. We expect that inflation will climb further because normally when there is a trend pointing to rising inflation, it means that it has not reached its peak. Therefore, we might expect inflation to continue climbing during 2022. 

The main risk for Mexican economic growth is inflation. Banxico will likely continue increasing interest rates to control inflation but that is a big dilemma for the country. On one hand, inflation has to come under control. On the other hand, higher interest rates will cause a slowdown in the local economy, which could turn into a recession depending on how much rates climb and for how long.


Q: How has the digital transformation influenced the credit insurance market?

A: Innovation is essential to the credit insurance industry. We are modernizing our internal and customer-facing digital platforms to increase our efficiency. By introducing data analysis, AI and machine learning tools into our practices, we are extending our risk underwriting value proposition.

Cinthya Alaniz Salazar Cinthya Alaniz Salazar Journalist & Industry Analyst