Mexico as Emerging Market

Article excerpt

There are many ways to define "emerging market." One useful definition is "a country where the process of basic institution building is not complete." You can find institutional deficiencies in any emerging market, as we have in Mexico. But despite the absence of institutional reform, Mexico has not stood still over the last ten years, and it will not over the next two. Its stock market, a relevant indicator, has performed better than the emerging markets' average since the end of 2000, when the PAN came to power.

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This performance reflects Mexico's basic strengths: its size, economic stability, and growing financial system. In population, land area, and US$ GDP, Mexico ranks between tenth and fifteenth in the word. The economic stability achieved by Salinas and Zedillo has been maintained by the PAN with strong finance ministers and stability at the Bank of Mexico. Owing to NAFTA and its geographic location, the Mexican manufacturing base has become even more closely integrated with the United States, especially in the automotive and electronics industries. Workers' remittances and tourism (first and third, respectively, among Mexican exports) are recovering with the U.S. economy and have helped to compensate for the decline in oil exports (now in second place).

With an independent central bank that was established under Salinas, the financial system is dominated by global banks, including BBVA, Citi, HSBC, Santander, and Scotia, and was practically unaffected by the crisis. …