Why is Mexico different from other emerging markets?

Market Realist

Why Millennials should try their luck in Mexico (Part 2 of 2)

(Continued from Part 1)

What sets Mexico apart from many other emerging economies is that it has the combination of some key factors for success: a diverse set of resources and industries, its proximity to the world’s largest economy, a relatively stable currency, and—critically—a proactive, democratic government.

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Mexican New Pesos to One US Dollar 2014-06-22

To be clear, I remain bullish on the U.S., and the May jobs numbers are further proof that the U.S. economy is on the right track. But we could learn a thing or two from our neighbors—in particular, the Mexican government’s willingness to take bold steps in order to foster long-term growth.

My enthusiasm about Mexico isn’t without reservations—the government has yet to actually put many of these reforms in place, the drop in GDP growth from 2012 to 2013 is cause for concern, and from an investment perspective, Mexico is a less sure bet in the medium term than some Asian economies.

But ultimately this comes down to potential. Over the next few decades, capital is going to flow more effectively in Mexico, the workforce will become better trained, and it will be easier and easier to do business. It’s the ideal environment for both entrepreneurs and established companies.

So if you’re beginning your career, do you want to make a mark?  Do you want to be part of something exciting, dynamic, and big?  Ve a México.

The opinions expressed are current as of June 2014, and are subject to change.  Reliance upon information in this article is at the sole discretion of the reader. A version of this post first appeared on Larry’s LinkedIn Influencer page.

Market Realist – Mexico is potentially on the brink of fast expansion, driven by several factors, such as those outlined above. The reforms in Mexico, if properly implemented (which is a big if), will bring about changes that will improve Mexico’s competitiveness and ease of doing business. This will attract significant foreign direct investment.

Given the recent volatile swings in emerging market currencies, the stability of the Mexican peso is something investors should value. Additionally, Mexico’s country rating was recently upgraded. This will allow the country to raise money for investment at a lower rate than before.

The U.S. is Mexico’s largest trade partner. The potential of Mexico’s geographical location can’t be taken for granted. A boost in the U.S. economy will eventually reflect in the Mexican economy. The timing, though, isn’t entirely certain since investors may continue to discount emerging markets in general, despite Mexico perhaps being undervalued relative to its potential.

While Mexico is likely a great long-term investment, investors should remain diversified and spread investments across markets. As mentioned above, the U.S. market still offers a possibly bullish outlook that can ultimately boost the Mexican economy.

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