Nowadays, the emerging markets story is better known, although there’s still only a small amount of North Americans investing overseas. This means fewer rocks left unturned.
This is especially the case in the so-called BRIC economies of Brazil, Russia, India and China. These are the best known of all the emerging markets. Which means they are increasingly well priced. That’s why I look beyond the BRICs—to places not yet on investors’ radars…places where it’s easier to find real bargains.
Like Mexico.
The Mexican economy has grown rapidly over the past decade. And it’s on course for growth of 7.6% this year—about three times that of the U.S. Much of this growth has been spurred by free trade deals with North America, Latin America, Europe and Japan. Mexican stocks nearly quadrupled over the decade before crashing in 2008. Now, they are approaching their pre-crash levels once again.
Mexico still has a big gap between rich and poor. But a large portion of its population has been part of the growing middle class since the late 1990s. This is a big plus, as it means more domestic consumer demand. One big drawback is that close to 80% of Mexico’s exports go to the U.S. It also relies on U.S. tourists crossing the border to visit its beaches and archeological heritage.
This makes the Mexican economy highly dependent on U.S. demand. And it could prove a big drag on growth, as the U.S. works its way out of its slumpy growth phase. With the world’s eleventh largest economy by population and a big increase in the middle class there, I rate Mexico a “buy” for now.