Barron’s Names Mexico the World’s “New Power”

Fri, Dec 13th, 2013

By Yucatan Times

Investors worldwide are increasingly drawn to Mexico’s stable economy, free trade agreements, affordable labor and excellent geographical location as South America’s second largest economy makes strides toward becoming its first.

“When it comes to Mexico versus Brazil”, writes Barron’s.“Today there’s a clear right answer for investors – Mexico.”

 

 

Brazilian and Mexican Flags

Although both nations have economies that are consumer-driven at their core, with more than two-thirds of their annual GDP coming from the service sector, both Mexico and Brazil are also known for their substantial manufacturing base. Despite these surface similarities, the two are actually quite different if you look beyond the obvious.

 

For example, by 2003 the MSCI (Morgan Stanley Capital International) Mexico index had risen a full 20 percent, compared to the MSCI Brazil index, which fell more than 40 percent during the same period. This trend has continued to manifest over the last several years, with Mexico gaining an additional 16 percent and Brazil dropping by more than 20 percent. In addition, Mexico’s economy is more closely linked to the U.S. 

– a bond that is only growing stronger with every passing year – and the U.S. economy is projected to begin growing at a serious pace in 2014.

 

“In Mexico, you have a market where things could go up with the tide,” shared Emerging-Market Portfolio Manager Gustavo Galindo from Russell Investments in an exclusive interview with Barron’s. “A good exchange-traded fund like the iShares MSCI Mexico Capped ETF (EWW) could do the trick.”

 

 

Mexican Flag

Other factors directly influencing Mexico’s rise on the world stage include the unique mix of various sectors that are predominant throughout its benchmarks. For example, MSCI Mexico holds 27 percent of its value in consumer stocks and staples. These areas are currently trading much higher than financials – which is where much of the MSCI Brazil is invested.

 

“There can be little doubt about Mexico’s progress”, writes Barron’s. “You don’t have the risk of its government taking steps that are anti-market.”

 

Finally, current Mexican President Enrique Pena Nieto’s “Pact for Mexico” continues to gain momentum, uniting government officials from various parties and bringing even more positive change to Mexico’s already robust economy. From opening up the nation’s telecommunications and energy sectors, to reforming its education system and tax code, major progress is taking place in Mexico, making it the country to watch in the coming years.

 

Source: online.barrons.com