When we consider the many factors that have made Mexico real estate the best option for expats moving abroad and investors, Mexico’s economic growth is most certainly one of the top reasons, continuing to bring good roads, modern communication, large international stores well connected modern airports, and much more.
For this reason it is always good news that Mexico’s economy continues to grow strong with excellent forecasts for the next few decades – so strong, in fact, that a number of analysts are thinking that Mexico might surpass Latin America’s current economic giant – Brazil.
Currently, as of 2011, Mexico’s economy ranked 14th worldwide with a GDP of about $1.155 trillion USD (as per the CIA World Factbook, International Monetary Fund, World Bank and numerous other reliable sources.) Brazil ranks 6th with a GDP of slightly more than double – $ 2.493 trillion USD.
According to an article from CNN, HSBC is predicting that Brazil will remain ahead of Mexico for 2050, but only barely so; Brazil is expected to fall to 7th place (one place below its current position) and Mexico to rise to 8th place (6 places above its current position.)
Some economists, though, (such as those at Nomura) are predicting that Mexico could surge ahead of Brazil in as little as 10 years.
They say that Mexico’s economy could become a “jaguar” economy like “tiger” economy enjoying rapid growth in East Asia, if its newly elected new government succeeds in implementing ambitious economic reforms.
Optimism about the possibility of change in Mexico contrasts to the fatigue of reform in Brazil, where the Government has introduced successive measures to encourage local industry and protect exporters from the strong exchange rate.
Nomura said the gap could disappear by 2022 if the Mexican grows at the top of the estimates of the body, and if Brazil grows at the lower end if predictions.
For the next decade, Nomura projected average growth between 2.75 and 3.25% in Brazil, and 4.25 and 4.75% in Mexico.
If both countries grow at the top or both at the bottom, Mexico would still overtake Brazil, but
a little later around 2028 or 2029.
“If Brazil does not endorse any structural reform and Mexico does, then the scenario of ‘Mexico with high growth and Brazil with low’ seems the most likely,” said Benito Berber, an economist at Nomura.
But if Brazil’s economy grows on the roof of the estimates and Mexico on the floor, the South American giant will maintain its position. According to Nomura, there are more scenarios favoring Mexico to surpass Brazil than the other way around. However, these scenarios are largely dependent on government policy.
The president-elect of Mexico, Enrique Peña Nieto, aims to raise the rate of economic growth to 6% annually, reforming the labor market and the country’s oil sector, and expanding the tax base.
Brazil and Mexico have passed each other as the largest economy in Latin America in recent decades, but the South American country took the lead again in 2005.
While the political stalemate in Mexico cooled growth, Brazil became the darling of investors, supported by demand for its raw materials from China.
But Brazil seems to have touched a soft spot.
Economists polled by Reuters expect growth of 2% for Brazil this year, far from 7.5% recorded in 2010, and 3.7 expected for Mexico.
The difference is helping to attract foreign investment in equity and debt markets in Mexico.
A recent wave of announcements of setting up new factories in Mexico, such as the Italian tire manufacturer Pirelli, Volkswagen’s luxury division, Audi, and Ford, has highlighted the country’s advantages over China to export goods to their neighbor, the United States.
“Mexico is the place where you have to be for companies and investors,” said Geoffrey Pazzanese, who co-directs the Federated InterContinental Fund of Federated Investors.
But economists expect Brazil to regain its step in the second half of the year, throwing the Reuters poll that would register a growth of 4% in 2013, surpassing the 3.5% expected for Mexico.
“Brazil will probably reaccelerate to stronger growth than Mexico in the coming years,” said Pazzanese, noting that the Brazilian economy is more cyclical than the Mexican.
In any case, whether Mexico or Brazil gains the long term lead, one thing is certain; Mexico is advancing rapidly economically, and both expats looking for an escape from America and investors can expect to see good things come out this!
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