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Demand for new vehicles will continue growing, but at a slower pace vis-à-vis 2023 and H1 2024. On the other hand, demand for auto parts might accelerate in 2025, as the US and Mexican economies slow down and consumers trade down. Besides, producer costs will settle down in H2 2024, while consumers will be unwilling to take on price increases after three years of high inflation and high interest rates. Finally, the Mexican auto industry faces a highly dynamic landscape, driven by the emergence of new technologies, players, and geopolitical rivalries. - Pablo Reynoso Brito

On July 17, the US announced the Western Hemisphere Semiconductor Initiative to boost nearshoring for semiconductors production. The initiative includes 12 member countries from the Americas Partnership for Economic Prosperity (APEP) and aims to reduce the supply chains’ reliance on Taiwan, South Korea, and China. Key partner countries include Mexico, Panama, and Costa Rica. This effort, led by the US Department of State with the Inter-American Development Bank (IDB), aims to enhance semiconductor assembly, testing, and packaging (ATP). The initiative also complements the partnership established with Mexico in March 2024, when the US Department of State announced it could allocate part of the $500 million CHIPS Act’s International Technology Security and Innovation (ITSI) fund for workforce development, regulatory improvements, and infrastructure enhancements. While US-Mexico cooperation on semiconductor production is still in the early stages, these initiatives can set the foundation for future joint supply chains. - Pablo Reynoso Brito

The MXN will continue to depreciate through December, averaging 17.7 MXN:USD in 2024, and 18.5 in 2025. Expect higher volatility in September 2024, due to the uncertainty surrounding the judicial reform, and in Q4 2024, due to the US elections and their impact on Mexico. - Pablo Reynoso Brito, FrontierView (part of FiscalNote). #MexicoBusinessNews #MexicoBusiness #MexicoView

Consumption will slow through H2 2024 and 2025. However, firms will still see pockets of opportunity, especially as the new administration bolsters low-income segments, supporting demand for mass-market goods. Companies across both mass-market and premium segments will see rising demand in the north, el Bajío, and some central states. Additionally, states in the south could experience a gradual improvement in mass-market goods demand throughout 2025. - Pablo Reynoso Brito, FrontierView (part of FiscalNote). #MexicoBusinessNews #MexicoBusiness #MexicoView

Mexico’s stock exchange (BMV) and the MXN reacted negatively to MORENA’s landslide triumph on June 2. The stock exchange fell by 6.1% on June 3, its worst decline since March 2020, while the MXN depreciated by 4.4%, its largest fall since June 2020. While Sheinbaum was projected to win the presidency, MORENA and its allies unexpectedly secured a qualified majority in the Chamber of Deputies and the Senate—according to estimated preliminary results. These numbers allow the approval of the controversial constitutional reforms submitted by AMLO in February 2024. Moreover, AMLO mentioned that he will try to pass the Judiciary reform once the new legislature begins, on September 1, a month before Sheinbaum takes possession. - Pablo Reynoso Brito #MexicoBusinessNews #MexicoBusiness #MexicoView

Inflation continues to trend downward across the region, and we expect that the price environment will be largely normalized across Latin America by 2025 - Mariana Zepeda of FrontierView (part of FiscalNote)

After a spike in FX volatility following high levels of geopolitical risk and the likely delay in monetary easing in the U.S., emerging markets currencies, including in LATAM, have stabilized somewhat. While we continue to anticipate that a delay in cuts to the US Fed Funds rate will weigh on LATAM currencies, we expect further FX stability in 2025 - Mariana Zepeda of FrontierView (part of FiscalNote)

Mexico is likely to gain from the recently introduced US tariffs on Chinese products. On May 14, President Joe Biden announced tariffs on electric vehicles (EVs) from 25% to 100%, semiconductors and solar cells from 25% to 50%, syringes and needles from 0% to 50%, and lithium-ion batteries from 7.5% to 25%. However, while these trade barriers may benefit Mexico’s economy, MNCs should also be aware of the risks. - Pablo Reynoso Brito

Mexico is likely to gain from the recently introduced US tariffs on Chinese products. On May 14, President Joe Biden announced tariffs on electric vehicles (EVs) from 25% to 100%, semiconductors and solar cells from 25% to 50%, syringes and needles from 0% to 50%, and lithium-ion batteries from 7.5% to 25%. However, while these trade barriers may benefit Mexico’s economy, MNCs should also be aware of the risks. - Frontierview's Pablo Reynoso Brito

Mexico’s light vehicle (LV) production may surpass its 2019 levels in 2024, finalizing a gradual but steady recovery from the pandemic. Moreover, the LV production industry is experiencing a wave of new entrants from China, particularly electric vehicle (EV) manufacturers. This presents significant business opportunities for MNCs in the industry, but it may also bring competitive pressures and trade risks ahead of the USMCA revision in 2026. - FrontiersView's Pablo Reynoso Brito #MexicoBusinessNews #MexicoBusiness #MexicoView