Mexico’s economy: Reality bites

May 24, 2013

cross my fingersThe Economist, 5/24/2013

Investors who were starry eyed about Mexico’s economic potential at the start of the year are now having misgivings. From a record high then, the stockmarket fell to an eight-month low on May 21st. Just to rub it in, stocks in Brazil, which Mexico views as its main regional rival, have recently been performing much better.

The immediate catalyst for the change of mood is the economy. In December, just as President Enrique Peña Nieto came to power promising to increase Mexico’s growth potential, the country’s strong recovery from the 2008-09 global financial crisis hit the skids. In the first quarter of 2013 sluggish sales to the United States, by far Mexico’s largest export market, helped reduce growth to a modest 0.8% compared with the same period in 2012. A fall in public spending as a new party took power contributed to the dip.

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