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Tough Abroad and Tough at Home for Mexico
Rampant tariff uncertainties have made the auto export sector a difficult place to be, and Mexico has also gradually run out of economic momentum in the local economy.
As before we don't worry about balance sheet risks; the credit cycle is stable if sluggish, debt levels are moderate and the external position is fine. But keep an eye on the budget and the peso. With a worsening budget position and what still appears to be an expensive peso, if Mexico hits further volatility ahead it's likely to come from one of these two sources.
Meanwhile, we stay on the sidelines. We exited our MXN carry position earlier in the year and prefer to remain on the sidelines with regard to Mexican assets today, given the lack of growth at home and the outstanding questions surrounding US-Mexican trade relations.
Tough Abroad and Tough at Home for Mexico (PDF)
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