Banco de México released the balance of payments figures for 4Q24 and 2024. There was a current account surplus of USD12.6bn during the quarter driven, as usual, by high remittances, coupled with a surplus in the goods trade balance. This level was last seen in the pandemic-induced recession. However, in annual terms, the current account recorded a USD5.99bn deficit in 2024. Trade has been relatively stable, although exports increased more than imports at the end of 2024 and the non-oil trade balance normalised to a surplus, perhaps anticipating an impending trade war. Meanwhile, within the services balance, only travel services registered a positive flow in 2024. While travel services have a seasonal pattern, this segment has remained somewhat stagnant over the last few years, while demand for foreign services has weakened. Finally, the uptrend in remittances moderated; although in our view this could be reversed given recent data that shows an increase in Hispanic/Latino employment in the US in January.
The financial balance was once again negative during the quarter, with scarce flows in most items, the only net inflow being from derivatives. Direct investment was negative although FDI was USD1.8bn (4Q24). Meanwhile, portfolio investment fell again in 4Q24, this time by USD6.5bn. In annual terms, there was a financial account surplus of USD3.5bn. Accumulated direct investment in 2024 was more than USD31.1bn, with FDI surpassing USD36.8bn, mainly driven by reinvestments by foreign companies that usually take place in the 1Q of any given year. Foreign investors’ portfolio investments totalled USD6.4bn in 2024 with inflows to debt securities (USD11.7bn) partially offset by the aversion to equities (-USD5.3bn). Flows could increase in 2025, as Banxico’s easing cycle continues at a faster pace than last year. On the other hand, in our view, Mexican outflows from other investment reflect idiosyncratic risks, as this totalled USD-8.2bn in 2024. Finally, the BoP recorded an accumulation of reserves in 2024, as investment outflows were more than offset by the current account surplus.