Mexico’s growth rate falls short of expectations

That was an improvement over the 2.6% economic growth rate posted in the first three months of the year. Still, it was lower than the 3.1% pace many analysts had expected.A decelerating manufacturing sector suggests that Mexico is starting to feel the effects of the slowdown in the United States, its biggest export market. And the report contained worrying new evidence that Mexico’s troubled government-run oil industry was starting to weigh on the nation’s economic health.

Mexico’s largest oil field, Cantarell, is in free fall, with July production down 37% from the same month a year ago. The world’s sixth-largest petroleum producer, Mexico relies on oil revenue to fund 40% of its federal budget. But years of under-investment in the sector have left the nation with less than a decade’s worth of proven reserves. Mexico’s Congress is bickering over how to strengthen Pemex and increase production, though some analysts doubt that the proposals offered so far will do much to stop the slide. ‘The situation is bad and it’s approaching a disaster,’ said Alfredo Coutino, Latin America analyst with Moody’s Economy.com ‘Mexico’s oil is vanishing. We’re starting to see it show up in economic growth.’