mexico

According to a February 13, 2014 article in the TIMES, Michael Crowley writes that a “Vibrant Mexico” might transform North America.

This is on the heels of a February 6, 2014 Bloomberg report where Ben Bain states that the Mexico Peso is on the rise despite “emerging-market doldrums”.

Bain reported that the Moody’s Investors Service assigned an A3 rating and raised Mexico’s credit rating. In fact, it’s the highest rating the country has ever had and is now higher than the rating for Brazil.

The peso rose 0.1% to 13.2752 per dollar and, since February 3, 2014, has climbed 2%. The pot was sweetened by the new laws instated by Mexico’s President Enrique Pena Nieto.



New Laws New Oil Investors

 

The laws are unpopular with the majority of Mexican citizens who claim Nieto is a traitor by opening up the Mexican oil reserves industry to private investors. This is the first time that foreigners have been allowed to invest in Mexico’s riches of oil, the 11th largest in the world.

The majority of Mexican citizens feel that the tradition of preventing outside investors has protected the country’s wealth, but the reality is that Mexican oil production has dropped 25%. Mexico missed out of the big oil boom while the rest of the world enjoyed high prices for their oil. This is compounded by increased US and Canadian oil-production while Mexico’s domestic production decreases.

Mexico is now positioned to become a rival to Canadian oil sands sector.

The projections of Mexico’s economic growth due to the private investment in oil are being set at 1% by 2018. This is a direct result of the new law allowing foreign investors. Mexico’s gross domestic product is projected to increase 3.42% over the next year. If Mexico continues to grow economically, then their newly acquired A3 rating will also grow.

These changes will place Mexico in a new economic position. According to Crowley, since Nieto took office in 2013, he undertook far-reaching ambitious reforms in social, economic and political arenas. These reforms have placed Mexico in the global economic scope as all eyes turn to Mexico in anticipation of an emerging marketplace.

With the oil reserves now open to foreign investors, Mexico is quickly becoming the investment darling of the market.

mexico/us map

 

Mexico’s Moment

 

These positive economic changes have been dubbed as “Mexico’s Moment”. The news media is buzzing with this catch phrase that describes the bounty Mexico is currently enjoying thanks to Nieto’s reforms. Yet, there’s an underlying worry since it’s a precarious balancing act that could tip either way. Much depends on whether or not Nieto’s Administration can gain control over the crime that still ravages the nation.

Much of the crime and violence are related to the Mexican drug trade and political corruption. Nieto has undertaken an aggressive stance against crime, but it’s a complex problem that won’t be solved overnight. The administration faces a long battle to reclaim that control over the nation.

Investors and politicians are hopeful that Mexico can once more become a competitor to China’s cheap wages. The mission to become a major player in the global market all hinges on Nieto’s reforms having sustainable and far-reaching effects.

If those reforms are successful, then Mexico could indeed emerge as a vibrant new market for investors. With the return of industry to the nation, Mexican citizens would no longer feel compelled to cross the US border in search of work. And, if the new Mexican mission is fulfilled, then the North American continent will indeed be transformed. How that transformation will manifest remains to be seen.