Mexico and the impact of US economic weakness

Weakness in the US economy over the coming quarters is likely to result in softer (rather than a collapse in) demand for Mexico’s goods exports as supply constraints fade, but the recovery in the tourism sector will probably grind to a halt and capital and remittance inflows are likely to slow. This feeds into our view that Mexico’s economic recovery will struggle over the rest of this year and next and that the peso will lose some ground against the dollar.