Emerging markets have been making a buzz among savvy international investors for decades, but over the last several years, analysts have been increasingly bullish on Mexico as China,India and Brazil experience faltering economies with no predictable course for the future. Mexico, on the other hand, is poised for a boom as the U.S. economy continues to rebound and the gross domestic product (GDP) of Latin America’s second largest economy is projected to grow by at least 4 percent in 2014 alone.
“This represents twice the growth rate expected in the United States and beats the region’s largest powerhouse, Brazil, whose growth is expected to be only 2.7 percent this year, the same as in 2011” writes NASDAQ.com.
Mexican President Enrique Peña Nieto has already managed to improve his nation’s global appeal by pushing for energy reform, labor reform and investing in telecommunications. His plan to open up the nation’s state-run oil monopoly to foreign companies is expected to generate new investments upwards of $13 billion per year, which would add at least two percentage points to Mexico’s projected GDP growth.
“The larger macroeconomic movements stemming from Nieto’s reform policies have yet to really take hold on the market, providing investors with an opportunity to buy ahead of the trend,” writes NASDAQ.
In addition, the peso remains higher than currencies in other Latin American nations, and Mexico’s currency is expected to provide a “safe haven” for investors when inflation kicks in once again in the U.S. In Mexico, inflation remains at a low 3.6 percent, with public debt holding steady at only 35 percent of the GDP and strong industrial centers making up more than 34 percent of the nation’s total economy. Combine all of this with the fact that wages in Mexico are already competitive compared to China – not to mention businesses operating in Mexico can take advantage of lower shipping costs and a larger number of free trade agreements – and its easy to see why investors are cashing in on Mexico’s new dynamic.
According to NASDAQ, the iShares MSCI Mexico Investable Market Index (EWW) or the Mexico Fund (MXF) are two broad-based investments that will expose your portfolio to the Mexican economy, including its robust manufacturing, energy, health care and media sectors. Broadcasting company Grupo Televisa (TV) is another option, as the middle class is growing rapidly and Mexico is expected to see a significant increase among paid television subscribers in the coming years. Finally, NASDAQ reports that specialty steel manufacturer Grupo Simec (SIM) is a good buy, with a $1.7 billion market cap and significant downside protection.
Would you like to know more about how real estate can provide the ultimate investment opportunity in Mexico? Post your questions in the comments section below and we’ll be happy to reply!