Mexico's Paradox

???? Mexican Companies: A Paradox of Resilience

In a week that saw Mexico's economic indicators cool off, we're diving deep into an intriguing paradox: as the nation's economy slows down, its companies have fared far better. Claudia Sheinbaum's landslide victory has brought mixed consequences, but our analysis reveals a nuanced reality for Mexican businesses.

While the Mexican Peso plummeted and trade metrics contracted, the country's stock market has shown remarkable resilience. Our research indicates that a majority of publicly listed companies in the BMV registered positive month-to-month growth recently.

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Pd. We have an exciting investment announcement

Nido Indicators ????????

Auto Exports: 271,496 units in July 2024 ( ??1.6% YoY)

Consumer Confidence Indicator in Mexico: 47.5 in June 2024 (??1.28% MoM)

Consumer Confidence Indicator in United States: 66.4 in July 2024 (?? 2.64% MoM)

Mexican Remittances: 14105.40 USD Million in the first quarter of 2024 (?? 13.07% QoQ)

Federal Reserve Interest rate: The Federal Reserve maintained the federal funds rate at 5.25%-5.50% for the 8th consecutive meeting in July 2024.

Bank of Mexico Interest rate: The Bank of Mexico held its benchmark interest rate at 11.00% in June 2024.

USD-MXN Exchange Rate: 19.3567

S&P/BMV IPC: 51,776.48 points

Inside Nido: What we are doing

?? We are thrilled to announce our investment in Buo :

Buo, a Costa Rican-Mexican startup, which is making its way into the largest corporations in Mexico, has raised more than three million dollars. With this investment, Buo will have the necessary resources to advance its mission: to develop new prediction technologies that ensure that companies can obtain, retain and grow the best talent possible. Buo uses the highest standards to allow companies to identify what exactly contributes to the success of their employees. Thus, companies working with Buo can define and predict the key talent they need today and in the future, increasing overall profitability per employee.

Want to work for a Nido Portfolio Company?

Palomma:

**Technical Product Manager (1st Product Hire), Medellín

* Founding Engineer, Medellín

* UX / UI Designer (First UX / UI Hire), Medellín

* Product Operations (1st Product Operations Hire), Medellín

Plenna:

* Desarrollador de back-end, Mexico City, Mexico

In the Know with Nido: What we are reading

?? Microsoft Reassesses OpenAI's Role as a Competitor in AI and Search

Microsoft's annual report lists OpenAI as a competitor, reflecting a shift in their partnership after OpenAI's SearchGPT announcement. Despite this competitive stance, Microsoft emphasizes the strength of their foundational relationship. The company is also refining its AI strategy with new leadership, highlighting ongoing dynamics between the two tech giants.(CNBC)

?? Sheinbaum Expands Cabinet with Key Appointments

Claudia Sheinbaum, Mexico's presumptive President-elect, has announced crucial cabinet appointments, including Arturo Zaldívar as Coordinator of Policy and Government and Leticia Ramírez as General Coordinator of Intergovernmental Affairs. These changes aim to bolster her administration ahead of the October 1 transition. More key positions will be unveiled by the end of September. (Excélsior)

?? The EU's Groundbreaking AI Act Takes Effect: Implications for U.S. Tech Giants

The EU's AI Act, effective August 1, 2024, introduces a comprehensive regulatory framework for artificial intelligence, primarily targeting major U.S. tech companies. It imposes strict requirements for high-risk AI applications and bans certain high-risk uses, ensuring responsible AI deployment. Compliance is mandatory for entities affecting the EU, with significant penalties for violations. (CNBC)

?? Querétaro's Aerospace Boom: 1,650 New Jobs from $2.9 Billion Investment

Querétaro's aerospace sector is set to flourish with a 2.946 billion pesos investment, creating 1,650 jobs. Major contributors include Airbus, Diehl Aviation, Safran, and ITP Aero, announced during the Farnborough Airshow. This growth will boost production capabilities and manufacturing in the region, reaffirming Querétaro's status as an aerospace hub. (El Economista)

?? Telmex Faces Record Losses Despite Significant Q2 Investments

In H1 2024, Telmex reported a net loss of 4.385 billion pesos, a 3% increase from last year, with Q2 losses reaching 2.979 billion pesos—the highest in nearly 30 months. Despite this, the company invested 6.315 billion pesos in Q2 to enhance networks and services. (El Economista)

?? Mexican Companies Thrive Amid Challenges in Q2 2024

Major Mexican public companies defied economic and political uncertainties, reporting strong Q2 earnings that exceeded expectations. The consumer sector drove growth, while mining profits surged with rising metal prices. The S&P/BMV IPC index saw an impressive 11.1% increase in operating cash flow, the highest in over two years, with financial firms thriving in a high-interest environment.(Axis Negocios)

?? Mexico's Trade Deficit Expands in June

In June, Mexico faced a trade deficit of $1.037 billion, contrasting sharply with a surplus last year. Exports fell 5.7%, driven by declines in both non-oil and oil exports, while imports also decreased. For the first half of 2024, the deficit improved slightly compared to the previous year. (Expansion)

??? The U.S. Backs Edmundo González as Venezuela's Election Winner

The U.S. has officially recognized opposition candidate Edmundo González as the winner of Venezuela's elections, urging a transition process. Secretary of State Antony Blinken highlighted "overwhelming evidence" of González's victory while condemning threats against opposition figures and calling for peaceful dialogues in accordance with Venezuelan electoral laws. (El Pais)

?? Big Tech's AI Promises Fall Short for Investors

Despite hefty AI investments, major players like Amazon, Microsoft, and Alphabet disappointed Wall Street, leading to significant stock declines. While cloud growth was reported, investors are growing impatient for tangible AI profits. In contrast, Meta Platforms Inc. exceeded revenue expectations, showcasing a mixed outlook on AI's immediate financial benefits. (Bloomberg)

?? Mexico Rises in Renewable Energy Investment Rankings

Mexico has moved up two positions to 33rd in the Renewable Energy Country Attractiveness Index (RECAI). The new Claudia Sheinbaum administration plans a $13 billion investment in renewable projects, enhancing the country's prospects for achieving its 2050 climate goals. EY emphasizes Mexico's potential as a leader in clean energy. (Forbes)

In-depth with Nido: What we are thinking

It’s been an interesting couple of months for Mexico—more so, for Mexican businesses. In June, Claudia Sheinbaum, the former mayor of Mexico City, won the country’s presidential election by a landslide (more on ConteNido). Her victory spread way beyond the presidency, with her party, Morena, winning seven out of nine governorships up for grabs, and majorities in both the country’s executive and legislative branches (more on El País). In fact, it is from this event–from this decisive victory—that we can understand much of what’s happening in Mexico and why the country is entering a glaring economic paradox: as the nation’s economy slows down, its companies have fared far better.

Sheinbaum’s victory has come with a somewhat mixed bag of consequences. In the aftermath of her landslide triumph, the Mexican peso began to plummet in value as international investors grew skeptical of potential widespread reform (more on Bloomberg). More so given an odd period in which, for a month, Mexico’s new congress—and, by consequence, a Morena majority legislature—will take power while the country’s current president, Andrés Manuel López Obrador, remains as chief executive. President López Obrador has promised to use the majority to pass reforms aiming to eliminate independent organisms in government as well as transforming the nation’s Supreme Court to be publicly elected by citizens in national elections (more on El País). Such ambitious reforms have contributed to a generalized skepticism towards Mexico’s government, adding to an overall uncertain global climate ahead of the U.S. elections in November and the possibility of a second Trump administration.

Sheinbaum herself noted the adverse market trends and, in a conciliatory effort, named a number of well regarded politicians to her cabinet (more on ConteNido). Most notably, naming Marcelo Ebrard, a well regarded former mayor of Mexico City, and Sheinbaum’s own rival in Morena’s primary, as Economics Minister. Not to mention the more recent creation of a Business Advisory Council led by businesswoman Altagracia Gomez (more on ConteNido).

Yet even with these decisions, Mexico’s economy has continued to cool off. Most of the country’s key indicators have begun to lack when compared to pre-election months. Just over the last month, the Mexican Peso—arguably the best metric for international expectations about the country—fell by 5.72% (a 9.97% year to year decrease). Similarly, imports and exports in Mexico were down 7.03% and 12.22% respectively—with year to year contractions of 3.58% and 5.69%. There seems to be a generalized skepticism as business people wait to see how Sheinbaum’s first days in office will be and what will happen in a newly competitive U.S. election (more on The New York Times).

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