Kenneth Rapoza – Forbes, 07/10/2012
Last year, Indonesia was the little darling of emerging market investors. This year, it’s Mexico.
When strategists at big Brazilian investment firms like Itau steer their wealth management clients away from their home country and up north, to Mexico, it’s worth noting. Brazil is a big country. It’s got a diverse economy. But it’s no longer Latin America’s favorite growth story. It’s going to grow around 2 percent this year, worse than it did last year. It’s fortunes are tied to China, to some extent, an economy still facing a hardish soft landing and needing monetary stimulus.
Mexico, on the other hand, has the U.S., which is growing faster than Brazil this year. Plus, Mexico is cheaper now than China.
[...] Economic news featured prominently in Brazilian headlines this week, with a particular emphasis on foreign investment. The evidence indicates that opinions seem to be split on the viability of the market. There is certainly good news; for example, Singapore’s Temasek sovereign-wealth fund and the U.S. biopharma group Quintiles have increased their investments in the country, suggesting that many companies continue to view Brazil’s emerging market as maintaining the high profit-potential projected earlier this year. However, this optimism is tempered by worries that Brazil may have oversold its potential: slipping Brazilian retail sales, growth projections reduced to under 2%, and continuing doubts about the viability of Brazilian stock (such as that of the conglomerates held by magnate Eike Batista) may indicate a less favorable economic climate. Many investors are considering moves to other similar emerging economies with debatably better prospects, such as Mexico. [...]