I've felt like starting so many articles in this series with a sentence on how the country being covered has not followed the typical trend, that I have come to think there isn't really a typical trend in this downturn/recovery cycle. Sure, most countries were in a boom, then went bust and have since recovered, with some then seeing a double dip and some of them since seeing a resurgent recovery. But within that (if you can even call that a trend) there are so many caveats that you might as well just forget about trends anyway.
In Mexico's (one of the MINTs group of countries) case the big difference is the fact that the global crisis didn't hit alone. At the same time as the global economy was imploding, Mexico became embroiled in the global virus scare for the H1N1 virus AKA Swine Flu after cases were confirmed in the country, and to make matters worse violence was erupting in the drugs war as well. Tourism is one of the most important industries in Mexico responsible for one third of the country's GDP, and the industry was hit hard by the combination of the three.
And of course, with tourism comes property. As we all (or most of the people reading this) know, the overseas property boom became a mainstream phenomena, fly to let and holiday home investment in countries where you could buy beach front villas from £13k, even the UK nationals were writing daily about it, I mean what could possibly go wrong? Mexico was one of the countries that got swept up in the fly to let and holiday home investment boom, and when tourism collapsed the property market surely went with it - you can't have a fly to let investment destination when the airlines are reducing their coverage.
However, Mexico also had the long-term market of American expats and retirees buying property. These buyers proved harder to scare off, and would also return much more quickly as fears over H1N1 subsided.
Mexico emerged from the financial crisis well. The recession officially ended with a 2.3% quarter on quarter growth in Q4 2009, although GDP was still down 6.5% year on year. None the less, the growth gave the government the conviction to increase its prediction for 2010 growth from 3.0% to 3.9% citing the 'significant rally' in non-oil exports, vehicle production, trade and transportation. Around the same time the OECD predicted 2.7% growth in 2010 and 3.9% in 2011.
At the time there was consensus that Mexico had indeed entered recovery mode, but that growth would be slow in returning to normal. Economists from Spanish-owned BBVA bank predicted a return to pre-recession performance by the middle of last year. The great thing is that we can check now and see who was right.
By October 2010 they were calling Mexico the comeback kid, with tourism not only up 19% year on year, but also 6% higher than the same period in 2008. The Mexican government put the growth down to its massive advertising campaigns and a streamlined visa process. Others believe that it was more as a result of the fact that fear over H1N1 subsided and people realised that only a small area of the country was affected by the drug-war violence.
Whatever the reason the rapid return to growth in tourism fuelled a rapid recovery in the Mexican economy, although it was helped by other sectors including a 24% growth in exports.
According to the CIA World Factbook Mexican GDP grew 5.4% in 2010. The strong growth continued into 2011, with GDP growing by 4.6% year on year in the first quarter, fuelled by a 10.5% growth in FDI and a 24% growth in exports in the first two months. Tourism growth also continued in 2011, with CNN reporting a 2.1% year on year growth in tourism over the first five months of the year. The growth continued in the second half and 2011 saw another record with 22.7 million people visiting the country. According to the CIA World Factbook Mexican GDP grew 3.8% in 2011.
As I said, the property market is closely related to tourism, what puts off tourists will put off expats and retirees, and anyone buying for investment will most likely be reliant on either economic growth (for residential lettings), tourism growth (for holiday lettings), or both. So the Mexican property market has been in recovery pretty much since 2010. In fact November 2010 saw a return to the type of resort gargantuan that started to spring up at the height of the boom - many of which went on to be cancelled.
Fonatur, Mexico’s tourism development agency saw November as the right time to bring its massive resort, the Pacific Coast Integrally Planned Center (Centro Integralmente Planeado, or CIP) back into the media spotlight with news that $30 million had been invested in the resort - $20 million of that in 2010. Plans for the resort covering 7.5 miles of pacific coastline were originally announced in September 2008 but postponed during the financial crisis.
- Tuesday 20 March 2012