Mexico in Top Gear

| Feb. 11, 2011 |

Published by Minyanville

The biggest Mexico news story this week was sparked when presenters of BBC’s Top Gear lampooned stereotypes of the country, with Richard Hammond saying: “Mexican cars are just going to be lazy, feckless, flatulent, overweight, leaning against a fence asleep looking at a cactus with a blanket with a hole in the middle on as a coat.”

The comments were not well received, with the Mexican government demanding an apology through their London Ambassador as well as—probably more painfully for the show’s presenters—fellow high profile British comedian Steve Coogan cutting them down in an editorial in the Guardian.

One British car dealer in Mexico wrote that many customers had canceled appointments following the comments’ viral spread around the internet soon after they were broadcast.

However, Mexico's car-manufacturing sector is one of the country's most successful. January sales abroad grew double-digits compared with January 2009. According to the Mexican Automobile Industry Association (MAIA), exports rose to the US, Canada, Latin America as well as Europe, Asia and Africa.

Overall production of cars and light trucks rose 21% in January, to 199,310 units, while exports expanded a staggering 45% to 165,046 units.

In 2010, Mexican-made vehicles had an 11% market share north of the border. Nearly 1.28m of the 2.26m cars produced last year in Mexico headed to the United States.

However, president of the MAIA, Eduardo Solis, warned that the rise in US market share may not be sustainable: "We have a number that historically we've never had before. Fourteen of every 100 vehicles sold in the US are Mexican-made in the month of January. Obviously, we can't say that it marks a trend [or] that it's going to continue like that."

Slip Sliding Away: Mexico’s IPC index hit a three-month low on Thursday as it fell to 36,652 points, a drop of 0.82%. Volume was at 226.1m shares worth $684m. The index achieved a rapid rise late 2010, peaking on 5th January at 38,696 points.

Investors are thought to be taking previous profits from Mexican markets over to more developed and stable ones. Cemex (CX) shares fell 1.5% to 11.50 pesos while Walmart de Mexico (WMT) saw shares fall 2% to 33.88 pesos. There were gains, however, with major bank Banorte's shares rising 1.9% to 53.33 pesos as a large shareholder sold the majority of its 8.8% stake in the firm.

Another company to see shares rise this week was Carlos (world’s richest man) Slim’s America Movil (AMX) which saw shares gain 0.2% to 34.04 pesos. The company—Latin America’s largest cellphone provider—is expecting growth to slow by a third in 2011 as its Latin American market becomes saturated. Fourth-quarter results for the company were “solid but unspectacular”. Revenue was up 6% from the same period in 2009 pushing full year sales to over $50 billion.

Attempting to stave off competition authorities, Slim’s Telcel—the commercial arm of America Movil—has today lowered its charges to rivals who want to connect to its network. In 2004, the connection fee per minute was 1.90 pesos. This decreased gradually until it hit 1 peso per minute in 2010. The rates which come in today are unknown.

Cleaning Cash: According to figures from the Mexican Attorney General’s Office, money laundering reached $10 billion in 2010, growing for 15 consecutive years. "This problem has disrupted banking institutions, investment firms and businessmen, and I believe it is time for a good law that will allow us to strike a blow at the finances of organized crime groups,” said Senator Carlos Navarette.

The problem is not a simple one and is intertwined with the country’s notorious corruption and organized crime. This is becoming an ever bigger threat to the Mexican economy as its wealthiest cities come under attack from drug cartels.

Inflation? What Inflation?: In a generally positive week for the country, the Bank of Mexico’s governors agreed that the risk of inflation has deteriorated, weeks after newspaper headlines in the country warned of its impending threat. Mexico’s actual GDP grew 5% last year after a 6.1% contraction in 2009. The gap between that and potential GDP is set to close in 2011.