When you read this letter, we will be exactly one month away from the presidential elections. After the second debate, in which Xóchitl looked much better than in the first one, I feel that the scales have evened out a little bit, although Claudia is still ahead.
There are two possibilities for Xóchitl to win. The first one is that Jorge Alvarez Maynez, candidate of Movimiento Ciudadano, withdrew from the race and asked his followers to vote for the Fuerza y Corazón candidate, and probably an important group would do so. The second scenario is that a large number of voters will go to the polls.
The first scenario I see as improbable since it would practically wipe Movimiento Ciudadano off the map, and the second one is a little more plausible since, if we follow the example of what happened in CDMX in the last election, in the highly Morenista delegation of Netzahualcoyotl, only 38% of the voters went to the polls, and in Benito Juarez, where the socioeconomic level is higher and the vote favors the opposition, the turnout was 72% and in the end Morena lost the election. The presidential campaign has already entered the phase of insults and aggressiveness. It’s a good thing we are near the end.
In the United States, the confrontation between Democrats and Republicans is also at its peak, although the elections are still six months away. President Biden continues to deteriorate cognitively by leaps and bounds, and his physical and verbal coordination is increasingly deficient. On the other hand, Trump is in a trial that does not allow him to go out to campaign, which was initiated for this purpose, with few relevant charges, but that keeps him tied to the court in New York.
It is curious that, although the economy is not bad, with inflation at 3.5% and unemployment below 4%, the majority of the people are dissatisfied and give Biden a 35% approval rating, the lowest of any president in power in history. The problem of illegal immigration has acquired great importance among voters and, together with the influx of fentanyl and the number of deaths caused by the drug, makes the American people think that they are worse off than four years ago and think about a change.
The problem of student demonstrations in favor of the Palestinians and against Israel in a large number of universities has reached extremely high levels, and the violence has reached proportions not seen for many years. Evidently, this phenomenon is not spontaneous, and in all cases, some agitators are not students. Groups are financing this movement headed by the George Soros and Rockefeller foundations.
Back to the U.S. elections, Trump is ahead 6% in the polls and leads in 6 of the seven key states, but there is still a long way to go, and this could change. The centrist movement No Labels, which sought to run with a less extreme candidate, dropped out of the campaign as it could not find the right individual to take the job.
The cost of housing now takes almost 31% of income, and the ability to purchase a home has dropped from 29% in 2013 to 16% in 2024 due to price inflation and rising mortgage rates. Despite this, the average time it takes for homes to sell is 33 days due to low inventories, currently 3.2 months to sell when the historical average is six months.
The birth rate in the USA is at 1.63 births per couple, the lowest in history, and we know that when it falls below 2.1, the population shrinks with enormous consequences for the economy, as has been seen in Japan, which has been in recession for 20 years. The United States, as Europe did, is trying to supplement domestic growth with immigration with the effects we have seen and the unrest of the American people.
President Biden sent out a series of proposed tax amendments, calling for the demise of preferential treatment for capital gains, a 15% minimum tax on all businesses, and an additional 2% tax on the income of the wealthiest. Remember that the tax cuts Trump introduced during his presidency expire in 2025, and the impact on the average taxpayer will exceed $5,000 annually. In the U.S., 3.4 million taxpayers earn $400,000 or more a year; the President had said the new taxes would affect, but the non-renewal of Trump’s cuts would hit lower-income families hard.
Despite all the initiatives to move away from oil and natural gas in favor of renewable energy, the above are still a more significant contributor to the economy, and the shift has been much slower than proposed four years ago. It is worth mentioning that the United States still accounts for 26.3% of the world’s GDP, despite having only 4.2% of the global population, and that 712 million of our planet’s inhabitants live on incomes of less than $2.19 a day, in what is extreme poverty.
The annual letter of Jamie Dimon, the CEO of JP Morgan, to its shareholders, which this time was 61 pages long, discussed the significant risks to the global economy, emphasizing the slower population growth in first-world countries, the new protectionism and geopolitical problems such as Ukraine, Gaza, and Iran, expressing a pessimistic sentiment. On the other hand, the International Monetary Fund raised its global growth expectation for this year from 3.1% to 3.2%, although it reduced Mexico’s from 2.7% to 2.4% in 2024 and from 1.5% to 1.4% for 2025.
The issue of artificial intelligence continues to be very strong in almost all areas. However, the electricity supply problem now arises due to the enormous requirements of the new technology.
The United States published its trade deficit with various countries of the world, with China still being the largest at $279.4 billion in 2023, a reduction of $102.9 billion from the previous year. Mexico is second with $152.4 billion, and Canada is third with $67.9 billion.
Focusing now on Mexico, the economy continues to do well, although the famous “nearshoring” does not seem to grow despite the strong demand for industrial space at the borders. On the other hand, official data reports a reduction in foreign direct investment. Undoubtedly, the lack of infrastructure such as electricity, water, transportation, communications, and qualified personnel is limiting the appetite of many companies to set up in Mexico, leaving China and taking advantage of the T-MEC. It is interesting to note that many companies entering Mexico are Chinese companies seeking to avoid the high tariffs imposed on them by the United States.
As I do every month, I will list some of the good and bad that happened in April in Mexico.
First the positive:
- Foreign capital inflows to the financial markets were the highest in the last eight months.
- Business confidence reached 55, a 12-month high and the same number as before the pandemic.
- Reserves reached $217.26 billion, shielding the country from a possible devaluation due to capital flight.
- Strong recovery of economic activity with an increase of 4.36% when the projection was 2.32%.
- The Morena candidate expressed slightly different opinions from President López Obrador’s, especially regarding renewable energy and the country’s militarization.
- The Coppel group announced investments of US$700 million, and Walmex announced plans to build more than 500 new stores in the country.
- Large artificial intelligence technology companies asked their suppliers to open subsidiaries in Mexico to supply their local needs.
On the negative side:
- The expropriation of France’s Air Liquide plant is a lousy message for foreign investment.
- The population’s perception of insecurity rose from 54% to 61%, with Fresnillo being perceived as the most insecure city by 95.4% of the population and the Benito Juarez Municipality of CDMX being seen as insecure by only 11.1% of its inhabitants.
- The reported inflation of 4.63% was higher than expected, with agricultural products being the main responsible for the high price increase.
- Candidate Sheinbaum’s confrontation with a roadblock in Chiapas is another example of the strength of the cartels and the danger of driving on some of the country’s highways.
- Pemex reported very bad results in addition to announcing a reduction in crude oil exports in order to supply Dos Bocas.
- I do not understand why Mexico is going to pay $110.00 dollars per month for 6 months to any Venezuelan returning from Mexico to Venezuela.
- The quarrel between Zaldivar, former President of the Supreme Court, and now Claudia’s collaborator against Norma Piña, the new President of the Court, is totally out of place.
- AMLO’s aggressiveness against the United States and demands for economic compensation and support for Nicaragua and Venezuela in exchange for considering reviving the policy of receiving illegal immigrants instead of letting them enter the United States is unacceptable.
- It is curious that Javier Garcia Cabeza de Vaca is a plurinominal candidate for Congressman for the PAN when there are 2 arrest warrants against him for embezzlement during his term as Governor of Tamaulipas.
Commenting on events in other countries, China continues to have an economy with many problems. Its debt doubled from 2015 to 2023 from 40 to 80% of GDP, and apparently, the change of economic model from exporter to domestic consumption did not work. China is once again subsidizing cheap exports by flooding the international market with products that its citizens do not buy.
The famous “Silk and Road” program of investments in third-world countries seems to be in trouble with unfinished infrastructure works and important delays in credit recovery. The domestic mortgage crisis is still going strong, with several more companies going bankrupt.
Taiwan continues to demonstrate its global importance by manufacturing semiconductors for all the large North American companies that develop the technology but do not manufacture the chips, delegating the manufacturing to the Taiwanese.
In South America, Argentina boasts of having reduced its inflation from 70 to 60%, and in Brazil, 67.8 million cardholders are behind in their payments, with 50% of the segment between 30 and 40 years old falling behind in meeting their obligations.
This month, I am going to talk differently about Israel without analyzing inflation, GDP, or economic data, except that Fitch affirmed the sovereign debt rating as A+ but placed it under negative watch, and the United States approved a $26.3 billion economic aid package: $13 Billion for defense, $9.2 Billion for humanitarian aid, $3.6 Billion for security, and $0.6 Billion for discretionary spending.
I find it sad and offensive that the International Criminal Court at the Hague is talking about charging Netanyahu and Gallant with crimes when the army’s behavior has been exemplary in a war situation, taking the utmost care to limit as much as possible the impact on the civilian population. How quickly the world forgot the criminal atrocities of October 7, the 134 hostages still in the hands of Hamas terrorists, and who started the hostilities!
I am still waiting for the United Nations to condemn the acts of Hamas as they do every time there is a terrorist act somewhere in the world. It is very sad to see the rise of anti-Israel and anti-Jewish sentiment all over the world, and I hope that soon this time of insecurity will be over.
On the market side, the stock markets had a pretty bad month, retreating almost 5%, bonds contracted 2.5%, and gold hit record highs before returning to $3,302 an ounce. The dollar was strong, and the peso was very volatile, remaining at $17.10. Bitcoin fell very sharply and is at $57,340 despite authorized production being cut in half.
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