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Pact for Mexico makes nation an emerging market leader

Pact for Mexico makes nation an emerging market leader

While many developed nations remain at risk of having their credit ratings downgraded, analysts have concluded that just the opposite is the case with Mexico. Last month Standard & Poor’s raised Mexico’s credit rating to a near investment grade BBB-plus. This was, in great part, a result of the country’s recent success at getting its economic, political and security house in order. The first step that led to this upgrade was president Enrique Peña Nieto’s success in getting the country’s major political parties to agree to formulate and to participate in a Pact for Mexico shortly after his election in 2012.

As a result of this agreement, Mexico has risen to the forefront of global economics as an emerging market leader. While other developing country powerhouses, such as Brazil and China, face an array of challenges, economists project that Mexico will soon be on a path toward four to five percent annual GDP growth as a result of sweeping reforms in a number of critical areas over the course of the last calendar year. In addition to major changes in the areas of education, labor, taxes and telecommunications, the Peña Nieto administration was recently able to push through a consititutional reform of the nation’s “sacred cow”: its oil and gas industry. Foreign-owned companies will soon be able to legally explore and drill for oil and gas on Mexican territory for the first time in more than seven decades. The energy reform was perhaps the most important of the changes resulting from the nation’s success at implementing its Pact for Mexico.

According to Shannon K. O’Neill, of the Council on Foreign Relations, “the country will excel over the next five years, benefitting its people and making it a good bet for investors.”

Many economist view the changes that have been enacted as a boon to Mexico’s manufacturing sector. Many lower skilled jobs, such as those in textile assembly, for instance, were lost to emerging country rival, China, during the last decade. Although it is not anticipated that positions in this industry will be coming back, it is projected that significant industry will move back to Mexico from China. This is because the Pact for Mexico has made the country an more attractive foreign direct investment destination, as well as due to the increase in cost that have affected China-based manufacturing, particularly in the areas of labor, transportation and foreign exchange.

Read the primary source for this post, and view video, at the Washington Times.

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This quarterly publication will be populated with content that is useful and relevant to readers that are contemplating Mexico investments, have operations already within the Republic, as well as to other individuals that have an interest in Mexico and its manufacturing sector.