2010: link to this year's blog below

This year's blog can be found at:

http://economex2010.blogspot.com

Unemployment in the US: who's to blame?

In a survey of people who have lost their jobs, unemployed Americans apportioned the blame for the high unemployment rate as follows:

26% -- President Bush

12% -- banks

8% -- jobs going overseas

8% -- politicians

3% -- President Obama

That 8% of the unemployed blame job flight is bad news for free trade. See the article on the impact of unemployment in the following link:

www.nytimes.com/2009/12/15/us/15poll.html?th&emc=th

Mexico's share of US imports picks up

In the first ten months of 2009, Mexico's exports accounted for 11.2% of US imports, a percentage point more than in the same period of 2008. China's share rose 3.5 percentage points, to 19.1%.

The US imported more vehicles and autoparts to the US (by value) in the first ten months of this year than any other country: nearly one out of every four dollars (23.9%) spent by Americans on imported vehicles and autoparts went to Mexico. Canada was close on Mexico's heels (US$28.2 billion compared to Mexico's US$29.5 billion), followed by Japan (US$25.9 billion). More than two-thirds (67.8%) of US vehicle and autoparts imports came from the three countries in the first ten months of 2009.

Mexico's exports to the US are heavily tilted towards autoparts, which are almost four times as large as the value of exported vehicles. Japan was the largest exporter of cars (US$18.2 billion), followed by Canada (US$17.4 billion), Germany (US$8.5 billion), with Mexico in fourth place (US$7.5 billion).

Changes...

Today President Calderon nominated Finance Minister Agustin Carstens to replace Guillermo Ortiz, whose term as Governor of the central bank (Banxico), ends on December 31. Carstens' nomination was well received.

Ernesto Codero, who was head of Sedesol (the Ministry of Social Development) until today, will replace Carstens in Hacienda. There's the rub. The President knows Cordero well but the markets don't.

Furthermore, putting Hacienda in the hands of a man so closely identified with the PAN and the President virtually ensures that the fiscal reform on tap for 2010 will be dead on arrival when it gets to Congress.

Disinvestment

For the first time in some thirty years (the second quarter of 1967), there was a US$0.64 billion OUTFLOW of direct foreign investment (DFI) in the third quarter of this year. Banco de Mexico, the central bank, tells us it was the result of a single company's repatriation of capital. New DFI was negative to the tune of US$1.06 billion between July and September; reinvested profits totaled US$0.07 billion; and parent companies extended US$0.34 billion in debt to their subsidiaries.

Another figure in the capital account -- the portfolio investment number -- was disturbing. Foreigners increased their net position in Mexican equities and fixed income obligations by US$4.34 billion in the third quarter. The inflow been larger in only four quarters since 1989, when portfolio investment was first broken out. Those quarters were: the first and last quarters of 1993 (US$4.99 billion and US$6.72 billion, respectively); the fourth quarter of 1994 (US$4.93 billion); and the first quarter of 2006 (US$4.34 billion).

Given the magnitude of the portfolio investment in the third quarter, is the strength of the peso a surprise? However, portfolio investment is a shaky base upon which to rely...

How much direct foreign investment has there been in Mexico this year?

When the central bank published the balance of payments statistics for the second quarter almost three months ago, it reported that direct foreign investment (DFI) totaled US$9.98 billion in the first six months of the year. Now, the Ministry of the Economy tells us that DFI in the first nine months of 2009 totaled US$9.75 billion.

Was there an outflow of DFI in the third quarter? Was DFI "overcounted" or double counted in the first part of the year?

Remember what a surprise the second quarter numbers brought? In May, DFI in the first quarter was reported to be US$2.66 billion. Three months later, when the second quarter numbers were published, DFI in the first quarter was revised: what had been US$2.66 billion more than doubled, to US$5.53 billion. Will the third quarter figures contain downward revisions for the first half of the year?

Here's the link to a concise analysis by the governor of Mexico's central bank, Guillermo Ortiz, of the causes and consquences of the crisis, along with his assessment of some of the measures proposed to prevent its repetition.

www.banxico.org.mx/publicaciones-y-discursos/discursos-y-presentaciones/discursos/%7B6D43C45D-EB35-C606-5CDC-F172DEEDCCEE%7D.pdf