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|Atradius’ NAFTA Country Report provides expert insight for UK exporters|
|Monday, 09 January 2017|
Trade credit insurer Atradius has published its analysis of the NAFTA region in its latest economic report.
The Atradius Country Report into the NAFTA (North American Free Trade Agreement) region provides expert insight vital for UK businesses seeking to trade with Canada, Mexico or the US.
Richard Reynolds, said: “The first steps of an export journey should always start with preparation, whether it’s with an existing partner or a new trade relationship. Business is always fraught with risks which are compounded when you’re exporting to markets around the world with different economic and political nuances. Researching a country’s trading landscape can provide vital insights, indicating new opportunities to do business as well as red flags which could impact a customer’s ability to pay.
“Atradius not only protects businesses from the risk of non-payment by paying out claims but also advises on the risks and opportunities of trading with specific customers and within new markets. With unrivalled business intelligence on 200 million companies worldwide and experts on the ground across the globe, Atradius can play a key role in facilitating a safe and successful export journey.”
After a decrease in business insolvencies since 2010, Atradius warns the rate will rise this year by 2% to about 3,150 cases – driven by the more difficult economic environment and low commodity prices.
The Canadian economy saw robust growth between 2010 and 2014, mainly due to increased global demand for commodities, especially oil. However, as the world´s fifth largest oil producer, Canada has been affected by the decrease in oil prices, suffering a major decrease in investment. Economic growth is predicted to slow down to 1.2% this year. Positively, GDP growth is expected to gain momentum in 2017. However, uncertainty has increased with Donald Trump’s presidential win. Any moves towards more protectionist trade policies or renegotiating the NAFTA agreement would have a potential negative impact on the Canadian economy in the future.
Industries in Canada with an excellent or good performance forecast are agriculture, financial services, food and services. In comparison, textiles has a bleak forecast and the paper sector has also been ranked with a poor forecast.
In Mexico, Donald Trump’s success may signal radical change with exchange rate volatility already experienced which has pushed up inflation. Some businesses have already started to delay payments, waiting for the peso to strengthen again. The projected Mexican GDP growth rate of about 2% in 2017 and 2018 could end up much lower if Trump puts into practice some of the announcements made in the campaign.
Mexican industries with a good outlook are automotive, financial services, food, paper and services. However, construction, metals, steel and textiles have all been rated as having a poor outlook.
Economic growth is expected to slow to 1.5% in 2016, followed by a rebound of 2.2% in 2017. While domestic demand is the main driver of economic expansion, manufacturing and exports continue to suffer from a strong US dollar. Downside risks have increased over the last couple of months due to increased volatility in the world economy and international markets, which could hurt US consumer confidence and business sentiment.
Since 2010, corporate insolvencies have steadily decreased in the US. However, they are expected to increase by around 4% this year as exporting businesses struggle with lost competitiveness due to a stronger US dollar and the on-going problems in the oil and gas sector. Household consumption accounts for almost 70% of US GDP and has been the most important engine of growth since 2014. Private consumption is expected to further sustain US economic growth, increasing 2.8% in 2016 and 2.6% in 2017. Household consumption has been aided by a strong USD, low inflation and low interest rates with consumers increasing their purchases of big-ticket items like cars and houses. Another important factor for rising consumer confidence and spending is the lower unemployment rate, increase in job security and modest improvement to nominal wages.
Across the industries, Atradius has ranked automotive, chemicals, electronics, financial services, food and services with a ‘good’ performance outlook. Meanwhile, the outlook of the metals, paper, steel and textiles sectors have been rated as poor.
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