Since Mexico is the closest emerging market to the U.S.,it’s no surprise that Americans consume more than 70 percent of Mexico’s exports. There are also a variety of other positive factors at work to make Mexico one of today’s most attractive alternative investment options,including the fact that Mexico has benefited in recent years from rising wages around the world,especially in China.
To put it in perspective,Chinese labor costs have risen by 12-14 percent each year since 2007,while Mexico’s wage growth has averaged between 3-4 percent annually over the same time frame. Despite its modest wage growth,Mexico has steadily created a growing middle class of consumers,which has also helped to boost the country’s economy. Add to this the fact that higher fuel prices and unfavorable exchange rates have caused shipping costs to jump dramatically in recent years,and it’s easy to understand why so many manufacturers have begun to shift production back to Mexico.
In addition,unemployment in Mexico is currently at its lowest point in more than three years,hovering at around 4.8 percent. All of this has led to healthy growth in domestic consumption and a gross domestic product (GDP) that grew by more than 4 percent in the second quarter of 2012.
The fundamentals of Mexico’s economy are particularly attractive for investors,with credit at only about 20 percent of the GDP. This makes Mexico less exposed to a global credit crisis,which could happen at any time,and leaves plenty of room open for future growth. Inflation in Mexico has also been steady at between 2-4 percent,reducing the risk of a sudden interest rate hike.
Finally there are a number of planned economic reforms in Mexico,such as liberalizing labor markets and opening up energy markets to private investment,which are expected to take hold over the coming year. There are a variety of ways for investors to play this emerging market,including buying Mexico real estate and buying into Wal-Mart’s Mexican subsidiary,Wal-Mart de Mexico,or Spanish-language television giant Grupo Televisa.