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Mexico: looking good

Monday, February 11, 2013

The last 12 months have been lucrative for anyone who invested in the Mexican stock exchange, whose total market capitalization increased by close to 20%, an impressive result in a slow global economy.

Growth was moderate, at 4% over the year before.

But Mexico is increasingly competitive with China, whose currency is gradually becoming more expensive.

The Mexican peso currently is 25% cheaper than it was five years ago.

By contrast, the value of the yuan has gone up by 15% over the same period.

Lower transport costs and faster turn-around times make it even more attractive for investors in the United States to source products in Mexico.

Brazil, another of Mexico’s major competitors, struggled last year, with growth of less than 3%, and falling levels of investment.

For one thing, many investors – both domestic and foreign – trust the government of Dilma Roussef less than they did that of her predecessor, Luiz Inacio Lula.

In addition, Brasilia has not been able to bring down the price of electricity, third-highest among major industrial countries.

Mexico continues to face problems, including a divided Congress, and a drug war, which has high costs in both lives and money.

On the other hand, the new administration of Enrique Peña Nieto plans to increase the efficiency of the country’s petroleum sector, by reforming Petroleos Mexicanos, which has grown increasingly efficient, during 80 years of monopoly operations.

A revitalized energy sector could push Mexican productivity even higher.