Further deceleration of EU growth could hurt Mexico’s economic prospects, indirectly if the U.S. economy slows as a result, but also directly through less dynamic exports of goods and services to Europe, especially in vehicle shipments which are the most important export item, and lower European investment, likely in manufacturing and financial services, which have been the leading recipient sectors.
Regarding the latter sector, the Mexican banks have healthy balance sheets and are well capitalized, but some subsidiaries of European banks could nevertheless be impinged by events affecting their parents. 3  See, for example, Frankel, J. 2008, “Should Eastern European Countries Join the Euro?