By Mark Koba
Long considered a second cousin to its behemoth neighbor to the north — and a source of illegal immigration and drug violence — Mexico may have one of the most underrated and misunderstood roles in the global economy.
The reality, many analysts say, is that Mexico offers investors and businesses a land of opportunity that rivals any other emerging market. Whats surprising — is how surprising it is that as an economic power, Mexico is under the radar for so many businesses and investors, says Jose Manuel Ramirez of tax audit firm KPMG who co-wrote a recent study on investing in Mexico.
To make itself attractive to investors, Mexico has transformed from a small economy to an open and more diverse one. In the last 20 years, the Mexican government has made improvements to its infrastructure and fostered competition in sectors such as transportation, energy and telecommunications.
As a result, Mexico has grown to be the 13th largest economy in the world — 2.4 trillion — and the 11th in purchasing power, according to the World Bank. The Mexican stock exchange — the Bolsa Mexicana de Valores — is valued at some 451 billion, second to only Brazil in Latin America and fifth in all of the Americas.
One of the biggest changes for Mexico has been its trade policies, says Antonio Garza, a former U.S. ambassador to Mexico and currently chairman of Vianovo Ventures, a business development firm.
The North American Free Trade Agreement NAFTA in 1994 was critical to getting Mexico integrated into the global economy,Garza explains. It opened their eyes to trade and the need to compete. It helped start the reforms and improvements to infrastructure and letting more foreign businesses come in.
With NAFTA, nearly 86 percent of Mexican exports and 50 percent of its imports are traded with the U.S. and Canada, making Mexico one of the leading exporting countries in the world. Policy changes are also making Mexico a manufacturing hub, as its now the largest North American autoproducing nation, recently surpassing Canada and the U.S.
And investment dollars continue to pour in. General Motors has announced plans to invest 120 million in a plant in the central state of San Luis Potosi to produce the SUV crossover. And Coca Cola will invest more than 1 billion into its Mexican market this year as part of a 5 billion, 5year investment plan for the country