Mexico Tech Market – Update May-Jun 2024
Hello everyone!
May and June were busy months for the markets, and Mexico was no exception. As you know, I’m based out of Monterrey, Nuevo Leon, just south of Texas, where the latest hurricane Alberto, brought intense downpours from Texas down to my home city. We were hit hard, extensively lost power, and had no connectivity, all of this drove us into an unexpected downtime which I’ve used to write up the present update.
Context
Mexico’s general election was held on June 2nd since then the Super Peso lost its punch and slid 10% in parity versus the Dollar. We expect further exchange rate changes during the year's second half, driven by the upcoming American general election and the Mexican transition of power in early December.
General Elections in Mexico
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Bringing you up to speed on domestic politics. The current party in power, MORENA, won the election for a second term. Claudia Sheinbaum has been elected as Mexico’s first female president by an overwhelming 60% of the popular vote.? There have been hints that her external and foreign relations policy would steer away from the sitting president, and sit-downs with Blackrock and IMF among other key global players had been held. Lastly, a trailblazer of Mexican democratic transformation, the Partido de la Revolucion Democratica, PRD, a party with national representation has lost its registry.
Outlook for Nearshoring 2024-2025
In case nearshoring is part of your roadmap, keep in mind that the exchange rate would remain volatile, select members of the finance community place the USD/MXN parity at, 1:20 as the real value, as of today Citi set an 18.11 MXN to USD exchange rate. The markets will be rocky for 2024H2 and 2025Q1 due to upcoming Judicial reforms, and the transfer of power, plus the US general election. None of these reforms would impact the Nearshore industries. The upcoming administration has been vocal about their interest in continuing to facilitate the nearshoring activities.
Upcoming US general elections.
The US general election is key to the immediate future of organizations pursuing nearshoring. American organizations had been vocal about their commitment to invest south of the border, although they haven’t materialized, the higher cost of money, inflation, and the looming doubt on whether Republicans or Democrats will be able to get things back on track play a significant role in the decision-making process on whether to nearshore or not. It’s expected that once the dust settles there will be a clear path forward. The is a new section called "LATAM hot takes", the first post is expected to hit your newsfeed on July 3 morning.