“Mexico is apparently the new Brazil,” affirmed the journalist Jonathan Wheatley in an article published recently in the Financial Times. This former correspondent is Sao Paolo sees a lot of similarities between the two biggest economies in Latin America. In the first decade of the century Brazil went looking for investors and now it looks as if Mexico will have good prospects as well.

Interest in emerging economies has increased due to the as yet unresolved debt crisis in Europe which does look rather risky at present.

The stock exchanges are reflecting this, observed Wheatley. Brazil’s Bovespa index has lost just 3.83% in the last twelve months but the IPC Mexican bourse has gained 14% in the same period. Wheatley notes that the Brazilian exchange is now at the same level as in 2009 – “and this is not what investors expected when they started looking at the country in that year.”

In his opinion “the famous flying Brazilian economy is getting back to normal”. After growing 7.5% in 2010 the Brazilian GDP only managed to expand by 2.7% in 2011 and this year it will struggle to make even 2%.

Wheatley explains why the two countries are swapping roles. Brazil attracted investors because they would benefit from an enormous expanding internal market, pushed ahead by credit – and by the capacity to provide raw materials for growing economies such as that of China.

Mexico never really caught the attention of investors since its economy depended a great deal, on exports to the US. In recent years its companies had to face fierce competition from China – that increased its presence in the US – as well as the financial crisis which caused the US consumers to lose purchasing power.

This year, however, US consumption is staging a cautious recovery which has benefited Mexican exports. Rising production costs in China have also sharpened Mexico’s competitiveness in the US market and with a projected GDP growth of around 4% more investors have decided to bet on Mexico rather than Brazil. This explains the flat to negative performance of the Bovespa when compared to Mexico’s IPC.

The future performance of both countries will depend on government policy – in Brazil bringing down interest rates to make the existing highly expansive consumer credit (around 40%!) more affordable; and in Mexico the new government needs to start economic reforms which will continue to attract fresh investment, especially in terms of the National oil industry.

Watch the following video for a summary of all the factors of these two major emerging market:



Where would you put your money? In Mexico or Brazil? Give us your advice in the comments section below.