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Mexico’s & Brazil’s Projections Are Baffling, Says The Economist

By: Contributor - Aug 23, 2013, 10:33 pm

Brazil-GDPProjections on Latin America’s two largest economies seem upside down, according to The Economist. Mexico unpredictably experienced a 0.7 percent slump in the second quarter of 2013 compared to the first three months, whereas Brazil is set to “show decent growth” in second quarter figures, out at the end of the month, noted the London-based periodical.

Manufacturing output has been doing better in Brazil than in Mexico and adds to the “bafflement.” Mexico has been stronger historically due to its economy’s close integration with the United States. However, Brazil has strengthened its position, The Economist says, citing Neil Shearing of London-based Capital Economics. “Industrial output rose by 1.1 percent in Brazil in the second quarter over the previous three months. In Mexico, adding in construction, it sank by 1.1 percent.”

Growth projections, meanwhile, see Brazil — despite a somewhat healthy first half — for 2013 and next year plummeting with a continued gloom surrounding the currency. The Brazilian real has slumped from 1.53 reales to the US dollar in mid-2011 to 2.42 reales this month. Mexico, on the other hand, has lowered its forecast for this year to 1.8 percent from 3.1 percent, but its economy is expected to pick-up if the US recovery gathers pace, according to the article.

There does appear to be good news in the longer term, since a “falling real may help to shift Brazil’s economy away from import-driven consumption and towards investment,” and in Mexico’s allowing private investment in the oil industry. The Economist wrote that Mexican President Enrique Peña Nieto “is likely to argue … that such bold reforms are the best way to attract investment and wean Mexico off its historical dependence on exports to the United States.”

Source: The Economist. Read More »