Mexico is quickly gaining the attention of investors worldwide, as the Chinese and Brazilian stock markets have exhibited increasingly disappointing numbers. CNBC notes that Mexico “has been an inviting location for investors” over the last two years, proving that it has what it takes to be recognized as one of the world’s most impressive emerging markets.
In 2012, the Mexican IPC Index has matched the S&P 500, with gains above 8 percent, which easily puts it ahead of the Chinese Shanghai Composite and Brazil’s San Paolo Bovespa.
“It’s pretty dramatic,” said S&P Capital IQ international equity strategist Alex Young of Mexico’s performance. “Mexico has been crushing Brazil for a long time.”
Mexico’s strong economic performance is built upon a solid foundation, including the North American Free Trade Agreement (NAFTA) and a massive trade relationship with the U.S. This position is further strengthened by a steady flow of foreign direct investment from countries around the world and an excellent geographical location.
In addition, Mexico boasts a well-diversified economy, solid GDP growth, competitive labor costs, favorable inflation rates and low unemployment numbers. This recipe for success is furthered by Mexico’s strong central bank and stable currency, as well as the nation’s impressive federal balance sheet and low debt-to-GDP ratio, coupled with large foreign exchange reserves.
“The government is very transparent and it’s a very open economy, especially compared to its Latin American peers,” fund manager Richard Hoff told CNBC. “An open government breeds stability.”
Hoff’s Euro Pacific Latin American Fund (EPLAX) has been adding significantly to its Mexican holdings over the last six months.
“Mexico, not Brazil,s ay analysts, is the export engine of Latin America,” writes CNBC. “Companies that previously outsourced work to China are now relocating to Mexico.”
In addition,Mexico is not dependent on China for trade like many of the world’s emerging economies. This has helped to make it immune to China’s lagging economy and has allowed Mexico to outperform its peers on the world stage.
Mexico real estate is also on the verge of becoming the world’s fourth-largest auto sector producer, and an expected public offering for the state oil company Pemex would be a crucial step to increase the pool of available stocks for both domestic and international investors.