Machinery sector in México

How has the machinery sector performed in the last six months?

In the machinery sector, performance varies substantially depending on subsectors. In Q2 of 2010 manufacturing of machines and equipment increased 31.9% year-on-year; manufacturing of computer equipment, communication and other electronic accessories 10.6%; electricity generation equipment and other electric accessories 11%; and transport machines and equipment 40.4%. However, this year-on-year growth must be viewed in the context that, in Q2 of 2009, production was at extremely low levels.

What is the current trend in payment delays, payment defaults and insolvencies?

Crédito y Caución does not receive many payment delays from companies in this sector, because buyers of machinery generally have longer terms of sales and therefore more flexibility to raise finance. Our claims ratio has stayed low for the last three years with hardly any insolvencies or defaults. Most machinery in Mexico is imported, so when there are defaults or insolvencies these are usually triggered by peso devaluation against the US$.

What is Crédito y Caucións short term outlook for the machinery sector?

In the first half of this year, manufacturing in the printing, paper, leather and food industries returned or even exceeded pre-crisis levels. However, the index of investment in fixed assets for the construction sector is at the same level as it was a year ago, and indeed as it was in the first half of 2008, and the index for machinery, while slightly higher than in the first half of 2009, was 24% lower than in the first half of 2008. The investment of fixed assets in Mexico declined substantially during the credit crisis and will continue to be extremely limited as the economy recovers only slowly and while those industries reliant on domestic markets continue to show no significant improvements. This will certainly affect future demand for machinery. However, Crédito y Caución is expecting an increase in business for machinery companies that depend on government purchases in the coming months, as government bodies exhaust their remaining budgets.