When the USA Sneezes, Mexico ...

by Enrique (Henry) Saldana  (December 2011)

Back in April 2008 I wrote an article that read:

There is an old saying in Mexico that says CUANDO EUA ESTORNUDA, MÉXICO SUFRE PULMONÍA!!! which literally translates as WHEN THE USA SNEEZES, MEXICO CATCHES PNEUMONIA!!! What this actually means is that every time there is an economic crunch in the USA, Mexico’s economy suffers.

This is in effect true in spite of Mexican authorities trying to present a different picture of the actual economic reality of Mexico. Or, as is commonly said in popular speech, "What you do speaks louder than your words," which can be translated into, "Of course the government makes all sorts of promises but, as we all know, actions speak louder than words." And the truth is that the actions of the government in terms of the Mexican economy are not coherent with their rhetoric.

Thus the old saying, "When the USA Sneezes ..." definitively supersedes populist and outrageous comments such as the one presented by Jorge Castañeda, former Mexican Foreign Minister and fellow at the New America Foundation, when making a case against the labeling of Mexico as a failing state: "The government represents the nation abroad, exercises a quasi monopoly on the use of force within its borders, collects taxes and ensures the integrity of its citizens against perils from within and without. By these measures—indeed by any standard definition of a failed state—Mexico is clearly acquitted" at the beginning of the present global economic crises, back in 2009.

But the crude reality, or latent truth, and factual figures of the Mexican economy, such as that 40 percent of Mexico's citizens survive on less than $2 per day—an unacceptable figure for a nation that shares a 2,000-mile border with the world's richest nation—are a shocking reality. This fact simply proves that Mexican policy makers have simply chosen to overlook Mexico's economic opportunities time and again.

Therefore popular sayings should also apply to the prospect of a strong USA economy. And perhaps the old saying, "Poor Mexico ... so far from God and so close to the U.S.," should be modified and Mexicans (including myself) should begin to rely less on God's will and religious beliefs and more on practical economic policies to improve our Mexican economy as a whole.

And, in terms of the real estate present economic situation, the fact that after the crash of the housing market in the USA, though the local real estate market has been surviving somewhat through the increase of Canadian investment and property purchases in the area, the decline of American investment and drop of US property-purchasing clients has definitively been detrimental to the local real estate market economy.

But here is some encouraging news:

"USA home sales are expected to stay on an uptrend through 2012, although the performance will be uneven with mortgage constraints weighing on the market, according to experts at a residential real estate forum at the REALTORS® Legislative Meetings & Trade Expo.

Lawrence Yun, NAR chief economist, said existing-home sales have been underperforming by historical standards and will rise gradually but unevenly. "If we just hold at the first-quarter sales pace of 5.1 million," Yun said, "we expect ... additional gains in 2012 to about 5.6 million—that's a sustainable level given the size of our population."

Mortgage interest rates should rise gradually ... but will remain still relatively affordable by historic standards.

"The problem isn't with interest rates, but with the continuation of unnecessarily tight credit standards that are keeping many creditworthy buyers from getting a loan despite extraordinarily low default rates over the past two years," Yun said.

Frank Nothaft, chief economist at Freddie Mac, holds similar views on the outlook. Nothaft expects the 30-year fixed-rate mortgage to trend up to 5.25 percent ... and for home sales to rise 5 percent.

Therefore, and taking all this information in context and into consideration, we see the real estate outlook for 2012 a lot more optimistic than what we have seen in the past few years.

So to all developers, investors, property purchasers and speculators in Mexican real estate, our wishes to you for 2012 are for the best.

Et Bonne Chance!

This report courtesy of Enrique (Henry) Saldana Mexico Realty Solutions moneylendingbus@hotmail.com Tel: (984) 147-2388 Cel: (984) 111-8743