Sales have slowed a bit on the Baja, but Mexican banks are not experiencing problems like that of their US counterparts.  Subprime loans were never issued by local banks in Mexico so the American banking crisis has barely hit our radars.  In fact in the first quarter of 2008, Banamex - one of Mexico’s top performing banks, helped out American based Citigroup (it’s parent company) with a $453 million loan.  Although Mexico’s economy is more closely tied to the US than any other country, banking reforms and several other measures in the past years have provided somewhat of an economic shield.  Of the top five banks in Mexico, two are Spanish-owned, one is American, one British and just one Mexican. 

Macro-economic stability in conjunction with and increase in lending and credit to the private sector as well as high consumer banking fees all lend to building such a shield.  Shrewd regulators and growing market sophistication also top the list of strength factors.  Reforms to bank secrecy laws allowing for the creation of a solid credit reporting system and reforms to bankruptcy laws have also provided for a solid foundation for a mortgage backed securities industry. 

According to Mexico’s Deputy Finance Minister, the accumulated increase in Mexican house prices has consistently been less than inflation so there is no bubble - yet.  while growth in Mexico’s economy is slow - a healthy banking industry is a good sign that we’ll weather the storm brewing up North.

For more information about Loreto or Loreto real estate opportunities, please contact Alfredo Cristo.

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Pemex is Mexico’s government run oil company.  In the first half of this year Pemex reported $34 million in sales.  However, they spent almost half of their gross importing fuel and fuel derivatives.  During this time sales actually increased 5.4 %.  Since gas prices in Mexico are controlled by the government, they are at liberty to increase them to suit their needs.  Recently, prices have been hiked to help reduce a subsidy expected to cost $20 billion.  The subsidy is aimed at shielding consumers from high import prices.  Last month prices increased three times to settle at $2.80/gallon for standard grade gas $3.33/gallong for premium).

While this still seems like a bargain to Americans, it represents the largest monthly hike in Mexican gas prices in three years.

Let’s hope the trend slows down a bit!

Recent reports from SECTUR, Mexico’s Federal Ministry of Tourism, state that $2.8 billion US dollars were invested in Mexico tourism in the first four months of 2008.  This is great news in the wake of the problematic US economy and credit crunch.  The Southern Baja brought in about $305 million of the total.  The most popular tourism region was the state of Nayarit, where Nuevo Vallarta is located. 

SECTUR exceeded expectations for the first half of 2008, which is great news for the Mexican economy.  They recently submitted investment requests for seven different beach tourism destinations including Loreto and Cabo.  These investments would help with the costs for urban works and wastewater treatment facilities.  In the first quarter of 08 about half of the private investment came from Spain and the Us while the other half was raised from national capital.

All indicators suggest we are on target to weathering the US storms!

Mexico consumer spending is still strong - supporting the economy despite lower US demand for industrial exports.  Domestic consumer spending is being fueled by readily available credit cards and other types of loans.  This confidence is expected to keep Mexico’s economy growing all year.  Banamex, the largest bank in Mexico, recently reported that it expects a 2.5 percent rise in same store sales for dominant retailer Walmart de Mexico.  So far there are no signs of an unfavorable impact from the US economic slowdown. 

Consumer credit in Mexico has only emerged in the last 10 years.  The lending industry is steadily growing and will help to continue economic growth.  With the free-flowing availability of credit, households can maintain a higher level of consistent spending.  Unlike the US however, interest rates in Mexico are extraordinarily high.  Individuals and companies can expect to spend anywhere from 25-63% to get a loan!

A healthy economy means Mexico real estate will remain strong.  Take a look at the beautiful East Cape locations if you’re looking for your Mexico getaway!

Relocating to the Baja?  Please contact Alfredo Cristo for help with real estate options.

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