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Mexico braces for US economic downturn


El Universal

Martes 26 de diciembre de 2006

Mexico is ready to confront a slow down in the U.S. economy in 2007, say financial analysts from the world´s biggest investment banks.

Despite the outcome of pending fiscal, labor and energy reforms, analysts from JP Morgan and Merrill Lynch point to a huge internal demand in the nation´s construction sector that will protect the economy from the negative effects a U.S. downswing might have.

"The close relation between U.S. and Mexican economic cycles seems to have dwindled in recent years," says Felipe Illanes, a specialist in emerging markets for Merrill Lynch. Illanes forecasts that the economy will grow 3.2 percent in 2007 while his counterparts at JP Morgan put the figure at 3.6 percent.

JP Morgan also points out that improved efficiency in federal infrastructure spending has led to higher domestic demand.

The investment house says while an economic downturn in the United States will leave the nation´s manufacturers vulnerable, internal demand should keep the books in the black.

"In Mexico, the construction, mining, electricity and water industries are more dependent on domestic demand now because of a massive expansion in the market," explained David Franco, a specialist in U.S.-Mexico trade relations for JP Morgan.

Another factor in Mexico´s growing economic independence is the nation´s construction industry.

"Low interest rates have spurred a huge surge in home ownership and mortgage lending which has resulted in the construction industry growing dramatically," said Illanes.

Meanwhile, the U.S. government maintains an optimistic outlook despite the unfavorable forecasts by financial experts. "We´re not exactly sure where the economy is heading next year but we´d like to keep a positive face on things," said Steve Norton of the U.S. Commerce Department.

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