Outlook for Mexico’s agri-food sector: Coface

French credit insurer Coface released its outlook for Mexico‘s agri-food sector on Wednesday.From January to April, exports of agri-food products grew at a year-on-year rate of 9%, to 19.2 billion dollars.Simon Lacoume, an economist specializing in the agri-food sector at Coface, based in Paris, pointed out that at the end of last May, 88% of Mexico’s municipalities were affected by the drought.According to Lacoume, the extreme heat that has recently hit Mexico, a consequence of «El Niño», could turn around with the arrival of «La Niña». His outlook: this phenomenon could bring heavy rains and significant alterations in the country’s climate, and the extreme precipitation could create the conditions for a more active hurricane season.

Mexico’s agri-food sector

Mexico’s Gross Domestic Product (GDP) from primary activity increased 0.7% in the first quarter of 2024, after growing 2.1% in all of 2023. On the other hand, the industrial production of food in the country fell 0.8% at annual rate during the first four months of 2024, while the industrial production of beverages and tobacco grew 0.6% year-on-year in the same period.

Integration with the United States

On May 14, President Joe Biden’s administration announced a sharp increase in tariffs on imports of Chinese goods, totaling more than $18 billion in 2023. These tariffs are in addition to the $300 billion of imports already affected by tariffs introduced in 2018 and 2019 by his predecessor in the White House, Donald Trump, and which, along with the Covid-19 pandemic, have contributed to a reorganization of Sino-US trade. Thus, the value of US imports affected by these tariff hikes fell by more than 30% between 2017 and 2023.Although the value of US purchases of other Chinese products has been maintained, these developments have contributed to China losing its position as the largest exporter to the US market to Mexico last year. Coface believes that although trade ties between the United States and China appear to have weakened, the reality is more nuanced. The increase in Chinese exports to Mexico and Vietnam in recent years suggests, for example, that the transshipment of Chinese products through third countries could be blurring the reading of trade data. Therefore, Coface added, the conclusion of a decoupling between China and the United States seems hasty at this time.