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UTEP Report: Trade Ambiguity Triggers Lower Mexico Economic Forecast

The potential disruption in trade relations between the U.S. and Mexico was among the reasons why economists who monitor Mexico’s business cycle developments have lowered their 2017 projections of gross domestic product, according to UTEP’s Border Region Modeling Project.

“The Trump Effect” is the title of the fourth quarter Mexico Consensus Economic Forecast that reports a GDP growth rate projection of 1.4 percent, 90 basis points lower than the 2.3 percent rate predicted in September 2016.

The projection includes a climb in the short-term 28-day treasury certificates (CETES) interest rate to 5.9 percent in 2017, while the nominal peso per dollar exchange rate will average P/$20.70 next year.

“Currency market erosion of the peso usually translates into greater direct foreign investment in maquiladora-related manufacturing in Ciudad Juárez,” said Tom Fullerton, Ph.D., director of the BRMP and professor of economics.

“It is not clear, however, that such a dynamic will materialize next year due to Trump administration suspicions about international trade impacts on the national economy. Any investments in export-oriented manufacturing in Ciudad Juárez are also accompanied by additional warehousing and transportation investments in El Paso,” Fullerton Added.

This quarterly report is published by the BRMP, a research unit within Department of Economics and Finance in the College of Business Administration at The University of Texas at El Paso.

The report synthesizes macroeconomic forecasts from nine prominent banks, universities and other U.S. and Mexican institutions.

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