Brazil’s Prospects Fall While Mexico’s Rise as Fed Prepares to Ease Bond Buying


The divergent fortunes of global emerging markets can be told through Latin America’s two biggest economies: Mexico and Brazil.

Think of it as a tortoise-and-hare story. For the past decade, Brazil has boomed by selling raw materials to China. Its expanding middle class gorged on a tide of cheap credit unleashed by central banks in advanced economies as they tried to energize their recoveries.

NA-BX975_OUTLOO_D_20130908180915Brazil’s economy averaged 3.6% annual growth over the past decade, peaking at a 7.5% pace in 2010. Its currency surged in value.

All the usual signs of excess were in evidence: Brazilian shoppers cramming stores in New York and Miami; news stories reporting $30 cheese pizzas and $35 martinis in São Paulo.

By comparison, Mexico has seen lackluster growth, partly because it has been tied to a struggling U.S. economy. It has also suffered from deep problems of its own: laws that banned foreign investment in energy, a dysfunctional tax code, a tattered education system and hidebound economy dominated by a handful of near-monopolies. And it suffered a surge in drug violence, deterring tourists and investors.


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