The country’s annual GDP growth rate is forecast to hit 3.3% in 2022. That’s better than the rate in many developed countries.
Mexico’s Growing Economy
Given Mexico’s proximity to the U.S., the country tends to react more to U.S. events than to those of countries south of its borders. This creates an interesting dynamic for those outside the country who are looking to invest. Mexico’s economy is heavily export-based, compared to many other developed countries, with 39.26% of its gross domestic product (GDP) coming from goods and services in 2018. The OECD ranked Mexican employees as the hardest-working in the world in terms of annual hours. The country’s economy is also making strides when it comes to increased private ownership and favorable business regulation. President Enrique Pena Nieto was elected to office in 2012 based on his promises to make big changes to the way the country was run.
Investing in Mexico With ETFs and ADRs
It’s easy to invest in Mexico with exchange-traded funds (ETFs) that hold a diverse portfolio of securities. ETFs trade on a U.S. stock exchange. The iShares MSCI Mexico Investable Market Index Fund (NYSE: EWW) is the best-known ETF in the U.S., with a net asset value of $1.17 billion as of December 2021. You may also want to think about American depository receipts (ADRs) if you’re looking for more direct exposure. These are U.S.-traded securities that track foreign stocks. They trade on U.S. exchanges so you don’t have to deal with foreign brokerage accounts. You should still expect to pay foreign taxes, and you might see low liquidity in some cases.
Benefits and Risks of Investing
Many in the U.S. know Mexico for its violent drug gangs in the northern states, but the country has grown over the years to become a major global player. Some advantages of investing in Mexico include an export-driven economy. Mexico benefits from stronger global demand. Its automotive industry is known all over the world, with the big three operating in the country. Mexico has very good growth potential. It’s included in many emerging-market indexes. Goldman Sachs’ MIST economies include Mexico, Indonesia, South Korea and Turkey. Some of Mexico’s risks include widespread petty corruption by government officials, which adds about 2% to 10% to the cost of consumer goods and services, with widespread bribing of officials to obtain things like construction permits. Mexico has been in the midst of a drug war that has caused tens of thousands of deaths since 2006. These problems don’t always affect export businesses directly, but they can lead to geopolitical instability.
