Tulsa World: Mexico's economy rebounding, data show

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Mexico's economy rebounding, data show

Workers check the frame integrity on a 2010 Ford Fiesta at Ford Motor Co.'s Cuautitlan assembly plant in Cuautitlan Izcalli, Mexico. Rising oil prices and increased exports are slowly dragging Mexico's economy out of a severe recession. Susana Gonzalez / Bloomberg

By MARTHA MENDOZA & CATHERINE E. SHOICHET Associated Press
Published: 11/21/2009 2:29 AM
Last Modified: 11/21/2009 8:40 AM

MEXICO CITY — Rising oil prices and increased exports are slowly dragging Mexico's economy out of a severe recession, but the nation's financial system still confronts fundamental challenges, national leaders and experts said.

"We are expecting in 2010 the Mexican economy will grow by around 3 percent," said Deputy Finance Minister Alejandro Werner, a huge improvement from a 7.5 percent contraction in 2009.

The Mexican government released figures Friday that showed the economy grew 2.9 percent in the third quarter over the previous three-month period.

Mexico has suffered a severe economic crisis for more than a year, but the new figures support what officials have been saying in recent weeks: The rebound has begun.

Still, the gross domestic product was 6.2 percent lower for July through September than it was for the same period in 2008, and economists sometimes differ on the definition of when a recession begins and ends.

Nobel Prize-winning economist Joseph Stiglitz, in a series of recent speeches, said Mexico's leaders are failing to address serious flaws in their economic system, including many monopolies and a tight-budget spending plan.

Mexico's leaders approved a $244 billion budget for 2010 on Tuesday, a slight increase over 2009.

Mexico took its hits in 2009.

The economy that thrives on oil revenues, exports and tourism was hurt by the swine flu outbreak, which kept tourists away from the famous beach resorts.

And the economic crisis in the U.S. meant businesses and consumers stopped buying from anywhere — including Mexico, which sends 80 percent of its exports north.

But Mexico also planned ahead, hedging oil prices to protect revenue that finances about 40 percent of federal spending.

Sounder fiscal polices, a more robust banking systems and bigger stockpiles of international reserves helped contain the damage from the global financial crisis in Mexico and other countries across Latin America, said Luis Alberto Moreno, president of the Inter-American Development Bank.

"Latin America felt the full force of the world market crash," Moreno said. "But unlike in previous crises, now these downturns no longer need translate into lost decades."

Analysts say the apparent rebound is a sign that the government has learned better ways to handle economic problems since the crippling Tequila Crisis of 1995, when the country devalued its currency and inflation soared. By MARTHA MENDOZA & CATHERINE E. SHOICHET Associated Press

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