A History of Terms-of-Trade Shocks in the Mexican Economy: The Fall IV

In July 2016, the terms of trade (TOT), the ratio of export prices to import prices, of Mexico fell 5.2% in an annual base, continuing its free fall that started in September 2013. Has this most recent decline of TOT been the longest and deepest ever recorded? What have we learned from past experiences?

We will be describing the current shock à la Memento[1], namely, showing the most recent events and then going backwards and zig-zagging some facts.

First, we need to tattoo ourselves some basic information just as Leonard[2] did. In our case, the following chart will be the only piece of information that we’ll have and we must recreate some memories from it.


Factual information:

  • In July 2016, the TOT fell 5.2% annually.
  • It seems to be that the worst part of this contraction was almost a year ago (August 2015) when TOT declined 17%, and now TOT are in their way out, but very slowly.
  • Some evidences indicate that TOT first entered into negative territory in September 2013.

So, let’s begin recreating some past facts, why are we sailing these waters? In July 2013, the Mexican mixed crude oil price was around $101 dollars per barrel, three years later is quoted in $38.37 (July 2016). This acute Commodity Price Shock in one of the main commodities exported by Mexico, and an important source of foreign exchange and government budget, has brought Mexico’s total trade to a contractionary phase not seen since the Great Recession of 2009 or the 2001 slowdown[3]. This newest contraction in trade could also be called Global Trade Cooling[4] because of its worldwide scope and has been going on since the beginning of 2015 or even earlier for some economies. Let’s call this decline in TOT as Fall IV – The commodity price shock and global trade cooling.

Being an important player of the global economy and an oil price taker, Mexico could not dodge this TOT perfect storm, could it? Is the inevitability of destiny our only path just as it seems to be Leonard’s case?

What if we craft a new tattoo saying “Do not trust oil again” and as Leonard did in Memento go backwards in TOT history to what we have coined as Fall I – The boom and doom of oil in the 80s?


[1] Seminal film and praised by critics created by Christopher Nolan.

[2] Main character in Memento. He suffered from anterograde amnesia.

[3] See: https://fgsaenzfgs.wordpress.com/2016/02/01/grafica-del-dia-caidas-recientes-en-el-comercio-total-de-mexico-addendum/

[4] See: https://fgsaenzfgs.wordpress.com/2016/01/28/2015-enfriamiento-comercial-global/

Author: Félix González Sáenz


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