Terrorist attacks bad news for Mexico's struggling economy

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But of course they don't want to lend a hand to the campaign.

http://www.boston.com/dailynews/269/world/Terrorist_attacks_also_bad_new:.shtml

Terrorist attacks also bad news for Mexico's struggling economy

By Will Weissert, Associated Press, 9/26/2001 12:00

MEXICO CITY (AP) Mexico was already in an economic slump when terrorists attacked the United States. Now things here will almost certainly get worse.

Perhaps no country in the world is more dependent on the U.S. economy than Mexico: nearly 90 percent of manufactured goods are exported to the United States and 60 percent of the country's foreign investment pours in from north of the border.

The United States is not technically in a recession, though a drop in industrial production, increasing layoffs and falling consumer spending were pounding the economy even before the Sept. 11 attacks.

But with Americans struggling to cope with the attacks on the World Trade Center and the Pentagon, and with a war against terrorism looming, optimism that America's economy will recover soon has vanished.

''The trend in the U.S. was already menacing,'' said Lawrence Krohn, a New York-based economist who specializes in Latin America. ''Now there will be more bad news.''

President Vicente Fox insists his country's economy is basically strong. By Mexican standards, the country avoided a recession by posting zero growth last quarter.

But according to standards used by analysts in the United States, Mexico is already in a recession, and has been for a year. In recent months, manufacturing has declined nearly 1 percent and retail sales have slipped 2.7 percent.

Fox, who pledged to create 1.4 million jobs in the first year of his administration, has instead seen at least 250,000 Mexicans lose their jobs since January.

''We're hopeful that the U.S. economy can get through this,'' said Michael Hissam of Delphi Automotive Systems, which scaled back the work force at its Mexican plants by 11,000 even before the attacks. ''In the meantime, we must maintain a balance between the needs of our customers and the output of our factories.''

New security is causing hours-long backups at the border, hurting many factories by slowing the shipment of Mexican exports. And the peso, Mexico's currency, slipped sharply after the attacks and has yet to fully recover.

''Before Sept. 11 it looked like we could touch bottom in the coming months and begin a recovery,'' said Mexico City economist Jonathan Heath. ''Now with everything that's happened ... Mexico is going to be dragged down further, then touch bottom and stay there.''

As some businesses tighten their belts by leaving jobs vacant, laying off workers or slashing production, others have criticized Mexico's government for being too reliant on the United States.

Mexico's has reached free trade agreements with countries ranging from the European Union to Ecuador in recent years, but Heath said such pacts cannot shelter Mexico from a U.S. slowdown.

''When you have the world's biggest market right next door and you have a free trade agreement with that country, of course you are going to become very reliant on what goes on economically there,'' he said.

Analysts say Mexico's economy could get a boost if the war on terrorism sharply increases America's need for oil. Mexico is already America's fourth-biggest supplier of oil and state-run Pemex generates a third of this country's public revenue.

Tourism one of Mexico's top industries is another potential trouble spot.

Glenda Juzon said the economic pinch had hurt business at the travel agency where she works. Now she's afraid she might lose her job.

''We knew the economic situation would have many Mexicans saying 'I can't afford to go on vacation to Cuba,''' said Juzon. ''Now the people might not want to get on a plane and go anywhere at all.''

-- Anonymous, September 26, 2001


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