Mexico - a new emerging economy

Posted on 31 July 2012 by Douglas Chadwick

It's easy to think of the Emerging markets as the BRIC economies, meaning Brazil, Russia, India and China. Well, until recently these economies were expected to lead the world out of the financial difficulties of 2008 and the subsequent recession. This is no longer the case. They face their own problems of falling manufacturing demand, property bubbles and falling commodity prices. However there are a new breed of Emerging markets coming into the limelight. Mexico, The Philippines, Poland and Turkey are four that are worth detailed examination.
 
This article will be about the possible investment opportunity in Mexico. It is not unusual to think of Mexico as controlled by the drug gangs with the country paralysed by violence and disorder. Certainly one has to be aware that their situation would not be normal for the developed world.  There is another side that is worthy of consideration. They have recently elected a new President called Enrique Pena Nieta who has vowed to tackle this lawlessness. Now that is a brave man! However he may be helped by the Politicians and Financiers who do not appear to have the same greed and self destructive urges of their Western counterparts. There is already a drive to collect more taxes by freeing up various local markets from the control of the "Barons." 
 
Mexico is a member of NAFTA  and already exports 20% of its manufacturing to North America, South America and the rest of the World. This is going up exponentially, helped by its weak currency and a young workforce working for competitive wage rates. It is taking on China and winning. Mexico is oil rich, but the State owned Oil Industry lacks financial resources and requires privatisation to take it forward. This is on the governments "to do" list. So there is the potential of greater export volumes, more revenue from the Oil Industry and increased internal tax collection. Now this should lead towards the development of a larger Middle Class as the population moves up the Wealth and Education ladders. The Stock Market should go forward as all this takes place. It must be worth looking for an Emerging Market fund that covers Mexico. One of the ETFs that tracks the Mexican Stock Market is i- shares MSCI Mexico Investible Index.