Despite a year of economic difficulties in much of Latin America, Mexico’s economy is still looking good, CNN Money reported. With low unemployment, good performance in the stock market and a growing manufacturing sector, Mexico is poised to surpass Brazil as the region’s largest economy.
“Mexico’s economy is growing, unemployment is falling and its debt was upgraded earlier this year.”
This success is happening while other emerging markets throughout Latin America have experienced continued challenges. Take Brazil, for example. Once the region’s greatest success story, today Brazil is experiencing a recession, with its debt downgraded to junk status and a “grim outlook” for the immediate future.
According to Neil Shearing, who serves as Chief Emerging Market Economist at Capital Economics, Mexico is clearly on pace to be the region’s top performer in 2015 and 2016, with the economy growing upwards of 2.5 percent this year. Also, Mexico’s foreign direct investment (FDI) has risen by more than 135 percent so far in 2015, while Brazil’s economy is actually expected to retract by at least 3.3 percent by the end of this year, Bank of America predicted.
Stocks are also doing better in Mexico than they are in Brazil, with Mexico’s stock market index (IPC) remaining positive overall this year, while Brazil’s Bovespa is now down by close to 8 percent over the same time period. According to CNN Money, much of Mexico’s success is no accident, but instead is a direct result of smart economic policy in recent years. All of this is positioning Mexico to surpass Brazil as Latin America’s largest economy in the near future.
Mexico’s unemployment rate is low, coming in at around 4.3 percent right now and dropping, with newfound success in the nation’s job market thanks to a recent round of systemic reforms.
“Mexico’s President,Enrique Pena Nieto, helped pass a wide-sweeping bill through Mexico’s congress (when he was president elect) in 2012 that reformed minimum wage, women’s worker rights and labor union transparency,” writes CNN Money. “Peña Nieto has also passed major reforms to open some of the country’s oil fields to foreign investment and break up Mexican business monopolies.”
At the same time,Brazil is experiencing a job market plagues by recession, with unemployment hitting around 7.5 percent and experts predicting that it may reach into the double digits by the end of 2015. In addition, Mexico’s economy is closely connected to the United States – unlike Brazil, which has hitched its wagon to China over the last ten years.
“Mexico’s economy appears to be pushing Brazil off center stage in Latin America,” reported CNN Money.
Finally,Mexico’s strong manufacturing sector – particularly in the automotive sector – is providing a major boost to the economy, while Brazil is still making ends meet by supplying China with oil, iron ore and sugar.