Mexico

In early June, Mexico introduced a four-colour ‘traffic light’ system to guide the gradual reopening of the country. As of the week commencing 31 August, only Colima is coded as red. There are 21 cities coded orange (including Mexico City) and 10 are coded yellow, which will allow the opening of gyms and sports clubs, among other activities.

A few weeks ago, Mexico City changed its pandemic ‘traffic light’ to orange. Restrictions on the use of cars and public transportation were lifted, small stores reopened, and the manufacturing industry went back to work on a four-day week (Monday through Thursday). Local markets are operating, although not at full capacity. New temporary hospital beds are also being established, which will help reduce the hospital's occupancy rate.

Hotels, restaurants and cinemas in Mexico City can now reopen at 30% and 40% capacity respectively, as well as religious services at 50% capacity. City residents are increasingly ignoring the official injunctions to stay at home, either because they cannot afford to or because they have simply grown tired of it.

The Mexico City government has announced plans to ramp up COVID-19 testing to reach an average of 100,000 tests per month (up from 60,000) as part of a state-level programme to combat the virus. The plan will include the daily application of 2,700 tests in hospitals, private pharmacies and laboratories, contact tracing and a mass public information campaign. The programme also includes the provision of medical attention through text message, as well as medical kits and food support for patients.

Other states of the country such as Yucatan, Quintana Roo, Nuevo León, Coahuila and Guerrero have also installed modules to carry out COVID-19 tests in the areas with the highest number of confirmed cases.

For more information on doing business in Mexico, visit myNZTE - our free online portal for curated, in-depth information and guidance. 

Video insights

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NZTE Business Development Manager Yulia Nunez discusses one Kiwi brand's digital push into Mexico, Latin America's fastest-growing e-commerce market.

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NZTE Business Development Manager for Mexico, Yulia Nunez, visits a grocery store and discusses measures businesses are taking in light of COVID-19.

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NZTE’s Trade Commissioner for Mexico, Panama and the Caribbean, Rhianon Berry, shares an on-the-ground perspective on life and business in Mexico.

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Economy and trade

Mexico’s economy continues to face significant headwinds despite the implementation of the federal government’s plan for economic reactivation. As states transition to code orange and yellow, economic activity begins to normalise.

The slow progress in containing the spread of the virus has created significant economic uncertainty, which has been further complicated by state governments taking economic reactivation into their own hands.

The National Institute of Statistics and Geography (INEGI) estimates that COVID-19 has caused about 12.5 million people to lose their sources of income, most of whom are in the informal sector. As a result, Mexico is set to experience a drastic increase in poverty rates.

The National Institute of Statistics and Geography (INEGI) estimates that COVID-19 has caused about 12.5 million people to lose their sources of income, most of whom are in the informal sector. As a result, Mexico is set to experience a drastic increase in poverty rates. 

The Gross Domestic Product (GDP) of Mexico contracted 18.7% annually in the second quarter of this year, according with an INEGI report, published on August 26. This represents the worst drop in history for a Mexican economy affected by the COVID-19 pandemic, whose effects were very considerable in April and May, the two full months of non-essential activity stoppage and generalisation of confinement measures in the country. 

A report released in June by INEGI reported that Mexico’s industrial activity dropped 25% in April compared to March—the largest monthly decline since data collection began in 1993. The construction and manufacturing sectors were hit hardest, dropping 38% and 35% respectively, from the same month a year earlier.

The Mexican economy has been contracting in 2020 under the restrictions put in place to contain the pandemic. The consensus of analysts is that the economy will experience a contraction of GDP by 8.4% this year. The Bank of Mexico at the end of May illustrated three different scenarios for the Mexican economy for 2020 and predicted that the economy could see a GDP contraction in the range of 4.6% to 8.8%. If a contraction of 8.8% is observed, it will be the largest contraction of the Mexican economy since 1932.

The Mexican peso has strengthened against the USD in August, trading at around 22.6 USD:MXN, improving from lows observed in March of around 25.3 USD:MXN. However this is down on the level prior to the pandemic where the exchange rate was around the 18.5 USD:MXN in Jan 2020.

Mexico is New Zealand's largest trading market in Latin America. New Zealand companies targeting Mexico's manufacturing and tourism sectors, including F&B companies, are the most likely to be impacted by the crisis over coming months, mostly due to a decline in demand and investments. The outlook is more positive in the medium term, with some analysts seeing potential gains for Mexico. Additionally, a recent decline in oil prices has added an extra layer of complexity to an already adverse scenario. Mexican manufacturing and tourism are the two most affected sectors.

In some respects Mexico is in a stronger position compared to some of its South American counterparts - like Brazil, Chile, and Peru - as it is less dependent on Chinese demand, and has a slightly more comfortable public account position, with most (78%) of its debt issued in local currency and 81% with pre-fixed rates. However, the longer-term economic impacts of COVID-19 on Mexico will largely depend on how the Pandemic develops over the coming months.

One of the consequences of the crisis has been a boost to conversations around 're-nationalisation' of supply chains for resilience, which began with the earlier heightening of trade tensions between China and the US. Analysts who take this view claim that Mexico is well-positioned to benefit from a shift in supply chains, which may improve the economic outlook in the medium term.

Supply chain, freight & logistics

The transport and logistics sector in Mexico has slightly increased prices of services across all activities, as companies are attempting to normalise merchandise flow after the first weeks of the quarantine. The Ministry of Communications and Transport (SCT) has communicated measures taken in ports in relation to disembarking goods and passengers. The main seaports are applying control and prevention measures instructed by the Ministry of Health's Epidemiology General Management plan.

However, the SCT has allowed access to all cruise boats and passenger boats that had to change their original journey routes, to refill fuel and basic consumables, in order to help them return to their ports of origin.

Government support

Mexico's President Andres Manuel López Obrador (AMLO) stated during his 100th Day Presidential Report that the Federal Government will make additional investments to amplify social programmes as part of the strategy to counter the sanitary crisis of COVID-19. As part of the strategy, AMLO declared that MXN $25 billion will be used to provide drinking water and drainage, as well for the construction of more than 50 thousand houses in vulnerable areas across 50 municipalities.

On 5 April, the Federal government announced 15 proposed economic recovery measures to face COVID-19. The measures largely focused on public sector investment through the creation of new jobs and credits to small family business. However, the timing and availability of these measures is still to be determined.

On 7 April, the Consejo Coordinador Empresarial de México (CCE) - Mexico's most important chambers of commerce - presented a suggested economic reactivation plan to the President, indicating that companies were largely facing liquidity issues. This comes after they had released estimates that GDP will fall by 10% and 1 million jobs will be lost as a result of the economic crisis generated by COVID-19. It is uncertain what the government appetite will be to implement the measures.

Consumer / B2B trends

According to a report published 6 April, Mexico's e-commerce sales will rise up to 60% due to COVID-19. A Latin American e-commerce giant, Mercado Libre, experienced increased sales of between 100% to 400% on sanitary and cleaning items during March.

According to the general director of the Mexican Online Sales Association (AMVO), the epidemic has served as a kind of turning point for e-commerce in Mexico, as once reluctant potential clients now embrace this new form of shopping. In some parts of the country, online sales have shot up by triple digits, after average growth of 35% in 2019.

It's still too soon to predict e-commerce trends in Mexico in the near future, especially with most economists forecasting an acute contraction in economic growth in 2020, some by as much as 8%.

The epidemic has led to numerous people making purchases online for the first time, and for some of them it won't be the last.


Sector insights

As is to be expected, numerous sectors have been impacted by the COVID-19 pandemic. Below you'll find information on any COVID-19 effects across important sectors and industries in Mexico.

Manufacturing

Mexico is an open economy with a manufacturing sector integrated into global supply chains. The current disruption of supply from China is already affecting Mexican plants whose stock parts are close to depletion. One relevant example is the case of auto manufacturers, which account for around 3% of Mexico's gross domestic product (GDP).

Manufacturing in Mexico is beginning to recover; in July 2020, 90% of companies were reported to have resumed operations, according to the Mexican Association of Private Industrial Parks. 

Additional resources

Below you can find information and contact details for other New Zealand government and international agencies regarding their response to COVID-19.

New Zealand Government agencies

Covid19.govt.nz
COVID-19 helpline for businesses
Business.govt.nz
New Zealand Customs
Ministry for Primary Industries (MPI)
New Zealand Export Credit (NZEC)
MFAT Export Helpline
MFAT Safetravel
Callaghan Innovation
Immigration
Ministry of Health
WorkSafe New Zealand
myNZTE

Global agencies

World Health Organization (WHO)
Centers for Disease Control and Prevention (CDC)

Contact NZTE

We're available to talk to you about any issues your export business is facing due to COVID-19.

For existing NZTE customers, please contact your New Zealand-based Customer Manager.

If you're unsure who to contact or haven't worked with us before, you can call NZTE on 0800 555 888 or email below and one of our Customer Advisors will help you.