Reuters: “Mexico has been on the wrong side of China’s economic boom for the last decade, but is now seeing an upturn in its fortunes as the Asian powerhouse’s economy slows and international stock pickers look to hedge their bets.
Fund managers are shifting the composition of their portfolios to protect themselves against further slowing in China. That is bad news for exporter Brazil, but good news for Mexico, which has low trade exposure to Asia and which is starting to claw back the export share and wage competitiveness it lost to China.
After China joined the World Trade Organization in 2001, Brazil boomed due to a seemingly endless Chinese appetite for soybeans and iron ore, while Mexico’s manufacturers struggled to compete with cheap goods in their main U.S. market.
Brazil has grown almost twice as fast as Mexico in the last decade and overtook its northern rival as Latin America’s biggest economy in 2005, becoming a darling of investors.
But a recent soft patch in Brazil and a slowdown in China’s breakneck growth are prompting some investors to take another look at Mexico’s strong ties to the United States and the chances its new president will undertake major reforms that could push up growth.”
via Analysis: China worries spur Mexico stock market flows | Reuters.
Nothing ever stands still. At one time Japan was the destination of all new and high tech; then came South Korea’s turn; soon followed by China. But the laws of physics say that everything seeks equilibrium and the lowest common denominator (water seeks its own level). So as China’s minimum wages rise (by law – at 10 to 15% pa), other countries that appeared to be expensive are slowly becoming competitive. China, of course, will not stand still either; but will move up the value chain, as it has been doing steadily over the last 5 to 10 years.
Related articles
- Mexico: The China of the Americas (minyanville.com)
- As China’s wages climb, Mexico stands to win new manufacturing business (chinadailymail.com)
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