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A Follow-up on the Condition of the Mexican Market: “It’s about the Exchange Rate, Stupid!”
January 25, 2017 by Tom Berrigan
When we at the Inbound Report prepared our 2017 Outlook for Key Source Markets, we more or less treated the political environment at the time—it was a little more than a month after the election of Donald Trump as president—as a net zero (± 0). We did so for several reasons but, essentially, it was because of the belief expressed by key receptive tour operators and industry analysts that both U.S. travel suppliers and DMOs, as well as Mexican tour operators, would not allow political considerations to interfere in the conduct of business—especially when the market is the largest source of visitors to the USA and nearly every Mexican traveler has a relative of some degree working or residing in the United States. That is, the marketplace would remain open for business.
Most tour and travel industry professionals seem to have been operating on the assumption that the amity between Mexico and the United States transcended remarks by President Donald Trump that nearly all Mexicans considered inflammatory. And most people, on either side of the USA-Mexico border, didn’t really believe that, as President, Donald Trump would really build the border wall between the two countries. Mexicans would still be visiting the United States in 2017 and beyond.
Even the top Mexican tourism official seems to have mellowed a little on the situation. On Nov. 11, the news portal REPORTUR.com wrote that Mexico’s secretary of tourism, Enrique de la Madrid, said “Let’s prepare for the worst, working for the best, in case some of Donald Trump’s statements come true, and let’s be ready for any scenario.” A survey conducted by the country’s National Council of Entrepreneurial Tourism (CNET) indicated that 54 percent of those responding suggesting that the election of Trump would have a negative impact, while 36 percent said that everything would remain the same, and just 10 percent indicated that Trump’s election would be beneficial.
It’s the Dollar that Counts: Then, this month, de la Madrid changed his focus. In his remarks to the 6th Anahuac Conference on “Tourism Perspectives for Mexico,” he emphasized the importance of inbound tourism from the United States—it accounts for 60 percent of the country’s inbound tourism market, primarily because the U.S. dollar has become so strong vs. the Mexican peso during the past year. (Click on this link to view an up-to-date chart detailing the value of the peso vs. the U.S. dollar over the past year: http://www.xe.com/currencycharts/?from=MXN&to=USD&view=1Y)
The peso has fallen 20 percent against the dollar since last April. This—not any animosity because of a President Trump—is one of the reasons that Francisco Madrid Flores, the director of the Faculty of Tourism at the Anahuac University, said that for this year 2017 is forecast to decrease travel of Mexicans abroad by two percent.
As a consequence, de la Madrid wants to strengthen the country’s inbound market, and bring visitors to other parts of Mexico, where, currently, 80 percent of travel is concentrated in five destinations.
In the interim, no one in the Mexican tourism industry really wants to talk loudly about the down side of what might happen during a Trump presidency, although talk of deportation and a wall persist in the U.S. and within the Trump Administration: Even Robert Jeffress, senior pastor of the 12,000-member First Baptist Church, Dallas, Texas got into the act, telling an Inauguration Day worship service which  included Trump, “You see, God is not against building walls.”
From what we’ve picked up from our sources, travel and tourism industry lobbyists will be working back channels and through informal contacts to see that the source market that is Mexico is not constrained or cut off. So many thousands of workers in the industry have their roots in Mexico and depend on their jobs—and the industry depends on their work—that a loss of workers because of deportations or fears of a wall would have consequences that no one really wants to contemplate.
So, what will happen?
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