Mexico Is Catching Up to Brazil [opinion]

The Weekly Standard, 9/17/12

After growing by 7.5 percent in 2010, Brazil ran into a series of headwinds last year, including a slowdown in China (its largest trading partner), a sharp rise in its national currency (which depressed exports), and a worsening of the European debt crisis. The country grew by 2.7 percent in 2011 and by a measly 0.1 percent in the first quarter of 2012. On August 31, the Brazilian government announced that second-quarter growth was only 0.4 percent, prompting Reuters to note that “Brazil may struggle to reach the market’s average expectations for 1.7 percent GDP growth for 2012.”

Mexico, meanwhile, grew by 3.9 percent last year, and analysts expect it to grow by around 3.75 percent this year, according to the latest monthly survey by the Mexican central bank. (Barclays is more bullish, predicting that the country’s 2012 growth rate will reach 4 percent.) Mexico’s car industry has been thriving, and its rapidly expanding middle class now represents a majority of the national population.

Not only is Mexico outpacing Brazil in short-term growth, its long-term economic trajectory is looking better, as well. Last month, economists at the Japanese bank Nomura projected that Mexico would grow at an average rate of 4.25 percent to 4.75 percent during the next ten years, while Brazilian growth would average 2.75 percent to 3.25 percent. If the Nomura forecast proved accurate, and if the coming decade brought high growth in Mexico and low growth in Brazil, then Mexico (current population: 114 million) would have a bigger economy than Brazil (194 million) by 2022.

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