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Mexico’s Growing Economic Power Trumps Brazil,Forbes Reports

14 October, 2015

This year’s economic growth in Latin America has been overshadowed by a variety of factors,but Mexico has come out on top thanks to smart policies,close ties to the U.S. and a falling unemployment rate,Forbes reports.

“As a result of the appalling situation in Brazil,economic power in the region has shifted rapidly to Mexico,the second biggest economy in LatAm,” writes Forbes contributor Ian Shepherdson of Pantheon Economics.

Shepherdson predicts Mexican growth will hit at least 2.5 percent this year,which isn’t bad considering the original prediction was around 3 percent and falling crude oil prices worked to unexpectedly dampen growth. Still,Mexico’s solid economic fundamentals,combined with the growing U.S. economy,will drive continued Mexican growth throughout the remainder of this year and 2016.

Furthermore,the labor market in Mexico has continued to improve dramatically,with the unemployment rate hovering at a low 4.7 percent and the headline inflation rate down to just 2.5 percent – a historic low that even falls under Banxico’s 3 percent target rate.

Also,Mexico’s main trading partner is the United States (compared to Brazil’s strong ties to China),and the U.S. economy is growing at a steady pace with 2016 set to be a breakout year,based on strong domestic demand and gradually increased capital spending. Shepherdson predicts Mexico will continue to benefit greatly from this relationship,since around 80 percent of its exports go north across the border and the auto market in the U.S. is also booming. According to Shepherdson,Brazil is also much less well equipped than Mexico to handle external risks.

“Looking ahead,Mexico will remain one of the top performers in the region in 2016.”

Former Mexican Ambassador to the U.S. Antonio Garza told World Politics Review in late September that he thinks Mexico will continue to avoid taking on more debt or raising taxes and believes this year’s collapse in oil prices actually provides a good opportunity for the government to streamline and improve finances.

“Mexico is the envy of Latin America right now,” writes contributor Nathanial Parish Flannery at Forbes. “Mexico is a very competitive country. What is one of the most resilient economies in the emerging world right now? My bet is Mexico.”

To back this up,Flannery points out that Mexico’s non-petroleum exports are at $372 billion right now,coupled with the fact that China’s slowdown has little effect on the Mexican economy. Also,out of the LatAm countries,Mexico is the only one currently maintaining its growth,while Brazil,Chile and Columbia all experience slowdowns. Finally,it’s important to point out that in Mexico the automobile and retail sectors are doing very well and remittances are growing from the U.S. due to a favorable exchange rate.