Results on the peso, GDP, IGAE and ENOE in Mexico

The peso starts the session with a significant depreciation of 1.63% or 33.2 cents, trading around 20.71 units of peso per dollar, with the exchange rate touching a minimum of 20.3714 and a maximum of 20.7565 units of pesos.

The upward movement of the exchange rate is associated with external factors and a greater aversion to risk on the Mexican economy:

First factor

A contagion effect is observed from the South African rand and the Turkish lira that depreciate 2.07% and 1.12% respectively.

On the one hand, the Turkish lira loses ground due to speculation that the Central Bank of that country could be under pressure to avoid continuing to raise the interest rate after the one-month repo rate was adjusted upwards by 675 basis points in the last four months.

For its part, the South African rand loses to a greater perception of internal risk due to doubts that it can meet the objectives of its fiscal budget presented this Wednesday, the rating agency Fitch Ratings reported that for the South African government it will be a political challenge to implement the budget.

Second factor

There is a strong upward movement in the rate of yield on Treasury bonds, as there is still speculation that the Federal Reserve‘s widely flexible monetary policy measures could generate upward pressure on inflation.

The 10-year Treasury bond rate rises 7 basis points and stands close to 1.45%, reaching a maximum of 1.4664%, a level not seen since February 21, 2020.

For now, the dollar weighted index remains stable, showing no changes compared to yesterday’s close, but it is likely to gain strength during the session due to the behavior of interest rates on Treasury bonds in the secondary market.

For its part, the futures market shows that losses could be observed in the US capital market, mainly in issuers in the technology sector.

Third factor

A greater perception of risk persists in Mexico.

Going forward, Mexico‘s economic recovery is expected to be slow due to the vaccination process that has been limited and the implementation of policies and changes in laws that inhibit investment, highlighting the recently approved reform of the Electricity Industry Law in the Chamber. of Deputies.

Likewise, data published this morning from the IGAE to the month of December show a stagnation of the economic recovery to the month of December due to the effects of the pandemic during the month.

The exchange rate reached a session high of 20.7565 units of peso per dollar at 6:51 am, after the publication of these statistics.

The peso and oil

Commodity markets continue their upward trend without this having an effect on the Mexican peso.

WTI hit a new session high of $ 63.79 per barrel, not seen since January 8, 2020. Copper reached a high of $ 9,624 per metric ton, a price not seen since August 4, 2011.

In terms of economic indicators, in the United States during the week ending February 20, 730,000 new applications for unemployment support were reported, below the market’s expectation of 838,000 and decreasing by 111,000 from the previous week.

Continued applications for unemployment support, from those who are already receiving support or continue to wait, decreased from 4.52 to 4.42 million.

Likewise, the second estimate of GDP growth in the United States for the last quarter of 2020 was published, which showed a slight upward revision to 4.1% (quarterly annualized) from the rate of 4.0% previously registered.

Economic growth

The revision of the GDP figures for the fourth quarter 2020 shows a slight upward correction to a real quarterly growth of 3.3% (vs. 3.1% previous estimate).

In annual terms, the GDP contraction was 4.5% in real terms, slightly less than the 4.6% drop previously estimated. It should be noted that the series were revised so that only 5 consecutive quarters of annual falls are observed.

Thus, in 2020 Mexico’s GDP showed an average annual fall of 8.5%, the highest since 1932, when it contracted 14.9 percent.

The data published today shows for the first time the growth within the sectors during the last quarter of the year.

Within the primary activities, agriculture and animal exploitation grew 4.9% annually, spinning two quarters with annual advances.

Therefore, the primary sector averaged an annual growth of 2.0% during 2020, higher than that observed in 2019 (0.5 percent).

The sector’s favorable performance was supported by the crisis, as it was considered essential and in view of the increase in domestic and foreign demand for agricultural food.


Secondary activities contracted at an annual rate of 3.2% in the last quarter of the year (vs. -3.4% previous estimate).

In 2020, the average annual fall of secondary activities was 10.2%, less than the contraction observed in 1995 (-10.9%) although exceeding the fall recorded in the 2009 crisis (-7.3 percent).

In the interior, the construction sector was the one that showed the greatest annual fall during the fourth quarter (-10.1%), spinning nine quarters with annual setbacks and being the longest period of consecutive contractions in record (series begins in 1994).

The construction sector closed 2020 with an average annual fall of 17.4%, only below the contraction of 32.3% observed in 1995.

It is worth mentioning that the performance of this industry depends mainly on investment, so the uncertain environment in the country could continue to slow down the recovery of the construction sector.

On the other hand, manufacturing industries were the sector that showed the lowest annual contraction, falling 0.5% during the last quarter of 2020, driven by the strength of external demand.

However, manufacturing closed 2020 with an average annual decline of 10.3%, higher than the 9.8% contraction observed in the 2009 crisis.

For their part, mining and power generation closed 2020 showing an average annual contraction of 1.1 and 5.1%, respectively.

Services and the peso

Tertiary activities decreased 5.2% annually during the last quarter of 2020 (Vs. -5.3% previous estimate) and averaging a 7.8% drop in 2020, well above the 3.94% drop observed in 2009.

Services have been one of the sectors most affected by the pandemic, due to the great human interaction they require.

Within tertiary activities, the sectors that lag behind and show the deepest annual falls are: leisure services (-53.6% annual 4Q and -53.7% annual average 2020) and temporary accommodation and restaurants (-41.3% annual 4Q and -43.5% annual average 2020).

This is due to the fact that, for much of the year, most of the non-essential businesses faced restrictions on their capacity.

Of the 15 sectors included, only two showed annual growth during the last quarter of the year: business support services (0.03%) and health services (5.7 percent).

Thus, health services closed the year with an average annual growth of 1.7 percent.

The recovery of tertiary activities will depend mainly on the progress in the vaccination process, as it is the only way to achieve a complete reopening and to regain consumer confidence.


During the first quarter of 2021, some events that will have a negative impact on the country’s economic activity have been highlighted:

  • The increase in Covid19 cases that led thirteen states of the country to return to red light during January.
  • The blackouts registered in a large part of the country derived from the low temperatures in the northern region, causing the closure of manufacturing plants.
  • Uncertainty generated by the discussion of reforms such as the Electric Industry Law, which has the potential to slow down investment.

Against this background, the recovery could come mainly from the strength of external demand, boosting Mexican exports to the United States.

In this context, Grupo Financiero BASE estimates a growth in GDP of between 3.0% and 3.8% for 2021, as a rebound effect after the drop of 8.5% in 2020.

The peso and IGAE

INEGI published the Global Indicator of Economic Activity (IGAE) corresponding to December 2020, which shows that during the month the economy grew 0.1% compared to November, in real terms.

This is the lowest monthly growth rate since June 2020, when the economic recovery began after the deep fall in March-May due to the pandemic.

The slowdown is mainly caused by the second wave of coronavirus infections that brought the number of daily cases to new highs in late November and continued to rise until mid-January 2021.

This motivated the authorities to reinforce social distancing measures, imposing new restrictions on hours and capacity in shops and limiting economic activity.

In annual terms, the IGAE at the end of the year shows an annual fall of 3.7% and is still 2.1% below the pre-pandemic level.

By economic activity, the highest increase was in the tertiary sector, also known as the service sector, with a real monthly growth rate of 0.4%.

Commercial section

Within this sector, the wholesale trade subsectors (3.9% monthly) and restaurant, bar and hotel services (2.5%) maintained their dynamism, while there were contractions in retail trade (-1.5%), leisure and recreational (-1.2%), government activities (-1.2%) and financial, real estate and property rental services (-0.7 percent).

Tertiary activity continues to be the most affected in annual terms, with a fall of 4.3% compared to December 2019.

This is because, unlike the secondary sector, sanitary restrictions have been more severe and prolonged, in addition to the fact that many households have chosen to limit their exits voluntarily.

Manufactures and the peso

The secondary sector grew 0.1% in real terms in the month, driven by manufacturing industries that grew at a monthly rate of 1.1%, a significant improvement compared to the 0.4% growth registered in November.

With this, the manufacturing sector showed its first positive annual growth rate since September 2019, growing 0.5% compared to December of last year. Manufacturing is expected to decline during January 2021 due to the partial suspension of activities of some plants in the automotive sector.

On the other hand, the construction sector contracted 2.7% in the month after having grown during October and November.

In annual terms, construction shows a drop of 12.3%, being the 23rd month in which it shows consecutive annual contractions.

The deterioration in this sector began in mid-2018 due to the uncertainty derived from the entry of the new government, which has affected investment in general.

Finally, primary activities, which represent about 4% of the country’s GDP, fell 4.3% in the month, and in annual terms it maintains a positive growth rate of 1.6%. It should be remembered that this sector was the least affected by the pandemic due to its essential nature and in the year it only registered an annual drop in June of 2.4%.


The ENOE of January showed a decrease of 391 thousand people in the Economically Active Population (EAP) compared to December.

The fall in the EAP is the result of the decrease in the employed population by 884 thousand people, the third setback in a row and an increase of 493 thousand in the unemployed population.

Likewise, the decline in the employed population is the result of the deterioration of epidemiological conditions, which caused 11 states to be placed on maximum alert from the 6 registered in December.

It should be remembered that, in April when the confinement began, the employed population decreased by 12.5 million people, of these as of January 2021, 3.8 million people remain to recover their work.

In this sense, given that the decrease in the employed population, most of it was classified as part of the unemployed population, the unemployment rate increased from 3.8% in December to 4.7% in January, the highest level since October 2020.


It is also for this reason that the magnitude of the increase in the Available Non-Economically Active Population (PNEA) (those people who did not look for a job, but would accept one if offered), has been less compared to previous months, in 78 thousand people.

This could indicate that more and more people are deciding to look for a job, since before the population was out of step with the hope of resuming their old job when economic activity normalized or they hoped that economic and epidemiological conditions would improve to have a greater probability of finding a job.

However, due to the long time it has taken to control the pandemic, people have already found it necessary to search for one.

For its part, the underemployment rate stood at 14.9% of the employed population, surpassing that of December of 14.2% and well above the pre-pandemic (March) levels of 9.1 percent.

Going forward, at least in the first quarter the labor market will remain fragile, since in February economic activity remained limited in 13 states of the country due to the high number of coronavirus infections.

In this sense, jobs related to sectors with a high degree of social interaction will continue to be the most affected.

For the second half of the year, employment could recover at a faster rate, although it will depend on the progress of the vaccination plan.

During the session, the exchange rate is expected to trade between 20.33 and 20.88 units of peso per dollar.

The euro starts the session with an appreciation of 0.50%, trading at 1.2227 dollars per euro, while the pound loses 0.03% and is trading at 1.4137 dollars per pound.

Money market and debt

In the United States, the yield on 10-year Treasury bonds increases by 6.2 basis points, to 1.44%, while in Mexico the yield on the 10-year M bonds increases by 5.6 basis points, at a rate of 6.14 percent .

Derivatives market and the peso

To hedge against a peso depreciation beyond 21 pesos per dollar, a purchase option (call), with an exercise date within 1 month, has a premium of 1.93% and represents the right but not the obligation to buy dollars in the aforementioned level.

On the other hand, the interbank forward for sale is at 20.7745 at 1 month, 21.0912 at 6 months and 21.5039 units of peso per dollar at one year.


Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE