Mexico May Expand 6% This Year, Catching Up With Brazil, De la Calle Says

Mexico’s economy may expand 6 percent this year as domestic demand increases, said Luis de la Calle, the Mexican economist who helped negotiate the North American Free Trade Agreement.

The pace of Mexico’s economic expansion will gain on Brazil’s growth as domestic consumption picks up in the second half of the year, said de la Calle, who is now a partner at Mexico City-based business adviser De la Calle, Madrazo, Mancera SC, speaking in an interview yesterday.

The economist’s call pits him against the average forecast of 30 Mexican economists surveyed by the central bank, who expect 4.4 percent gross domestic product growth in 2010, according to the July 1 report. In the first quarter, Mexico’s GDP expanded 4.3 percent from a year earlier, compared with Brazil’s 9 percent first-quarter GDP expansion. De la Calle points out that few economists came close to accurately forecasting Mexico’s 6.5 percent plunge in GDP last year.

“Growth between Brazil and Mexico won’t be as different as people think,” de la Calle said. “Everyone that’s saying 4 percent, 4.5 percent -- they were all wrong about the contraction, too.”

Brazil’s economy, Latin America’s largest, may grow 7.1 percent this year, compared with 4.5 percent growth in Mexico, the International Monetary Fund forecast this month.

Mexico’s domestic demand has lagged behind as exports drive the recovery from last year’s contraction, the worst since the 1930s. Mexican retail sales fell 0.1 percent in April from the same month a year earlier, the country’s statistics agency said June 18. The agency will report May retail sales July 21.

The peso fell 1.3 percent to 12.9382 at 12:47 p.m. New York time from 12.7720 yesterday. The yield on Mexico’s 10 percent peso bond due 2024 fell one basis point to 6.93 percent, according to Banco Santander SA. The price of the security rose to 127.89 centavos per peso.

To contact the reporter on this story: Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net

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