Forbes reported this week that Mexico has become the top choice this year among investors who are interested in emerging markets,surpassing Indonesia and Brazil. Telltale signs of this shift include the fact that Brazil’s economy is projected to grow by only 2 percent this year,while Mexico could grow by as much as 4.5 percent.
Mexico is also looking strong in portfolio investment,with the iShares MSCI Mexico exchange traded fund up an impressive 14.09 percent,compared to the Market Vectors Indonesia (IDX) which is down 5.6 percent and the iShares MSCI Brazil (EWZ) which is down 11.3 percent.
Forbes also reported that Nomura Securities predicted this week that,“over the next decade,Mexico is poised to become Latin America’s largest economy,surpassing Brazil,and become one of the emerging markets’ most dynamic economies.”
Also of note,the recent presidential win by Enrique Pena Nieto and the PRI party is expected to usher in a new era of structural,pro-market reforms. And there is plenty of room for Mexico’s banking sector to grow,with private sector debt to GDP hovering at around 20 percent,compared to an average of close to 50 percent for Brazil.
In more good news for Mexico real estate,the country’s economy and banks are also supported by demographics,and by its close proximity to the U.S.
“The economy has been doing well and that’s got a lot to do with the U.S.,” shared Audrey Kaplan,portfolio manager for the $523 million Federated InterContinental fund (RIMAX). “Plus,wage growth in Mexico is flat and it’s rising in China. A number of our shares in Mexico are up 40 to 70 absolute percentage.”
There is a strong projected population growth in Mexico,and a significant fall in the dependency ration,which is the proportion of young to old people relative to those of working age. This will translate to a larger increase in resources,which is expected to positively impact GDP growth over the coming years,especially when coupled with progressive reforms.