Category: Regions

If swine flu persists, analysts expect further contraction in Mexico’s economy, which is already under the gun. “Our estimates are that each week that Mexico remains shut down it will lower GDP growth by 30bp,” says Pablo Goldberg, EM strategist at HSBC. Other shops see the overall impact being more tempered. If the outbreak has a length and dimension similar to SARS, Mexico could lose a further 1.0% of annual GDP, estimates Barclays associate director Jimena Zuniga. She explains that for the SARS outbreak retail sales in affected countries fell about 5% in a quarter. In Mexico, she says, “a 5% drop in retail sales for 1 quarter would cost between 0.1% and 0.5% of GDP.” Tourism is in for a hard time too. “During SARS tourism arrivals dropped 50% in one quarter. Assuming a 50% drop in internal and external tourism in Mexico in one quarter, you end up with a drop in GDP of 1.0%,” Zuniga says. However, if the SARS pattern is seen in the new virus, activity is likely to rebound to normal after 3 months. “During SARS, losses were concentrated in 1 quarter. Following that quarter, activity returned to trend,” the economist says. Others are more sanguine. “We expect the flu will shave less than 50bp off this year’s growth,” says Felipe Illanes, head of research at BofA-Merrill Lynch. Mexico’s central bank says the country’s GDP will contract by 3.8%-4.8% this year, and estimates that in Q1, it shrank by 7.0%-8.0%. However, the bank warns that the forecast does not factor in the swine flu impact. Finance minister Agustin Carstens told reporters Thursday that the flu could whack GDP by 0.3%-0.5%, with the economy recovering from the impact in 2-3 months.

Those heading to Mexico on business face new screening measures, according to airports operator Grupo Aeroportuario del Pacifico (GAP). As a result of the health emergency developing globally due to swine flu, GAP is implementing a systematic examination of travelers at risk through a survey. It will also check body temperature with a digital measurement camera and check all passengers before boarding international flights. “In addition, the company is analyzing more practical options in which high technology can be easily implemented in order to avoid actual physical contact with the passengers and enhancing the response rate as not to prolong waiting times at the airports,” says GAP. It advises passengers arrive at the airport 2 hours prior to departure for domestic flights and 3 hours prior to departure for international flights. GAP is working with the ministry of communications and transportation, as well as the federal health department on the initiatives.

Former Merrill Lynch Mexico country head Alberto Ardura is quitting the US shop today for a regional role at Deutsche Bank. He is expected to start later in May as MD and head of LatAm DCM corporate coverage based in New York. Ardura will be reunited with derivatives trading rainmaker Karan Madan, who quit Merrill last month to become the German shop’s new head of LatAm debt. Both are understood to have worked closely together on several high-profile Mexican corporate transactions. At Deutsche, Ardura will report to Madan and Miles Millard, global head of DCM. He replaces David Hinsley, who is moving to London for a promotion to head of global rates structuring. Other senior Merrill LatAm staff are also heard seeking a move to Deutsche – among other shops – though a recent Merrill lawsuit against Deutsche for poaching a US team led by treasurer Eric Heaton deters group defection. Ardura’s exit coincides with several recent high profile departures from Merrill’s LatAm group, including chairman Carlos Gutierrez. Merrill insiders say staff are being made redundant or resigning because of frustration with the takeover by Bank of America. However, Ardura has only good things to say about his employer of the last 7 years. “It’s going to be a very powerful platform once the whole merger is finalized,” the banker tells LatinFinance. “But this is a very good opportunity for me,” he adds. BofA’s Orlando Loera was last month appointed Mexico country head for BofA-Merrill Lynch. Ardura, who was Merrill’s existing Mexico country manager and head of local fixed income, commodities and currencies was confirmed to lead the combined markets areas for both entities in Mexico. MD and head of Mexico sales Pedro Giral is expected to assume Ardura’s responsibilities at BofA-Merrill.