“Poor Mexico”, a former Mexican leader once sighed, “so far from God and so close to the United States.” Swine flu is the latest blow, hampering domestic demand and denting tourism, Mexico’s third-largest source of foreign currency, says Lex in the FT.
Yet this week the panic finally abated – America’s Centres for Disease Control and Prevention reckons it may be no more severe than a seasonal flu strain.
The mortality rate in Mexico is dwindling, with Citigroup noting that “the worst of swine flu seems to have passed”. After wobbling last Monday, the stockmarket has regained its footing and continued to rise with other world markets; Mexico’s Bolsa index is up by 30% over the past two months.
That’s partly because 17 of Mexico’s biggest pension funds will now be ploughing all new workers’ pension contributions into stocks. Meanwhile, the IMF recently agreed to make money available to Mexico, shoring up confidence in Mexican debt.
But the rally also reflects the fact that a short episode of swine flu is likely to cost the economy just 0.3%-0.5% of GDP, according to the government. Some analysts had expected GDP to shrink by almost 5% anyway in 2009.
With the virus increasingly under control, the key issue for Mexico remains the state of the US economy, which accounts for 25% of Mexican GDP. And like all emerging markets, it is vulnerable to the murky outlook for global growth.