Mexican Economy in Sweet Spot

Apr 1, 2011

Mexico’s macroeconomic environment is in good shape, but reforms are required to draw further investment. The drug war weighs on GDP expansion.

by Natalie Feary

After a few rough years, Mexico is poised for strong growth without inflation. However, deteriorating security amid rising drug-related crime may deter investors, and a lot depends on continued US strength.

"The Mexican economy is in a sweet spot, with output, growth and inflation all positive for 2011," says Lupin Rahman, senior vice president of emerging markets portfolio management at Pimco, which has over $1.3 trillion in assets under management.

The GDP growth forecast for 2011 is 4%-5%, according to the finance ministry. A big pick up is expected from the manufacturing sector and domestic demand, says Alfredo Thorne, head of global markets at Banorte.

However, the impact of the security concerns as a result of the drug-related violence in Mexico is shaving 1%-2% off the expansion rate, he adds.

"If Mexico manages to stabilize the security issue, similar to what happened in...

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