President Enrique Peña Nieto’s administration finished off an ambitious first-year reform agenda this past week, pushing historic energy and political reforms through Mexico’s Congress. These reforms—and the earlier labor, education, fiscal, and telecommunication reforms—aim to boost economic growth (which slowed to 1 percent over the past year) and entice foreign investment in once closed-off sectors. Here is a piece that I wrote for the January/February 2014 edition of Foreign Affairs on why, especially given the recent changes, Mexico is a hot market that investors will want to watch.
Just over a year ago, as President Enrique Peña Nieto started his administration, the domestic and international press were touting “Mexico’s moment” and the rise of “the Aztec tiger.” Now, the naysayers have returned. Their pessimism stems in part from disappointing economic results: Mexico’s GDP growth has fallen, from nearly four percent in 2012 to around an estimated one percent in 2013. The negativity also reflects the impatience of pundits and markets, as the economic dividends from Peña Nieto’s ambitious economic reform agenda have yet to appear.
Today’s vocal disappointment discounts the positive changes Mexico has undergone and continues to make. Over the last three decades, Mexico has made the transition from a commodity- and agricultural-based economy to one dominated by manufacturing and services. It is also finally moving forward on a host of overdue domestic reforms. Internationally, the country is firmly situated within North American supply chains, augmenting its global competitiveness. And these advantages should only grow with Mexico’s involvement in both the Trans-Pacific Partnership (TPP) and the Pacific Alliance, two of the most dynamic free-trade negotiations of this century. If Mexico is able to make its legislative changes stick and harness its geostrategic potential, the country will excel over the next five years, benefiting its people and making it a good bet for investors.
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