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Mexico 2011: Extraordinary Year for the Economy!

31 January 2011 No Comment

Mexico is a country that is clearly on the road to economic recovery after the difficult years it has had, according to various sources and experts. After the crisis of October 2008, which resulted in economic losses during the 2009 recession, 2010 was a year of adjustments and it seems 2011 will be a year of strong economic recovery for the country.

There is a consensus among financial institutions analysts that the country will grow at a much faster rate than originally predicted. According to the latest adjustment to the prediction of Banamex-Citibank, the Mexican economy will grow 4.8% in 2011, instead of 3.9% as was earlier predicted. In 2011, the economic recovery will be driven by significant growth in the U.S. manufacturing sector and a recovery in consumption that will bring a strong economic dynamism. Mexican exports to the United States have grown and surpassed Canadian’s, and gained terrain against the Chinese. It has diversified trade to other markets and now “only” 80% of Mexico´s exports go to the United States.

How do we insert this in the world when it is experiencing an economic crisis? Mexico´s news stand-out among the last news about important economies worldwide. Financial brokerages, including Morgan Stanley declined this month its growth expectations for India, for example, by 0.5%. In the case of England, the contraction of the economy, contrary to what was predicted, has now lasted four straight quarters. The final report of England’s decline, released this week, comes amid forecasts that were made of 0.6% growth. Its economy has been completely stalled in recent months. Brazil, on the other hand, maintains a 5.7% unemployment rate and its growth expectations this year fall below 5%.

It is true that a significant amount of financial capital and foreign direct investment has entered Mexico, since the Mexican peso is much undervalued and therefore Mexico is comparatively cheaper in dollar terms. For this reason, expectations about the peso levels place it at $ 12.20. However, the purchasing power of the peso will increase considering that inflation in Mexico is higher than in the United States and this will reactivate the internal market through consumption, making the country attractive for the size of its market.

All these places Mexico in a favorable position, and we still have to address the issue of public debt. Mexico has a government debt that represents 30% of its GDP, making it a much more attractive market than other emerging markets like Brazil, for example, that has a government debt equivalent to 60% of its GDP. According to José Angel Gurría Treviño, Secretary General of the Organization for Economic Cooperation and Development (OECD), “Countries that are better prepared and more willing to take the necessary decisions will do better. Governments are taking steps that can be very important, very difficult, some politically unpopular, but necessary to confront this difficult period of relatively low global economic growth, high unemployment, high deficit in all economies.

Economic growth has a very important component of expectations. Each of us, as an individual, has the power to cause the economy. Such news benefit us all, there are excellent prospects for the country this year, and remember we are all paddling in the same direction.

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