Brazil’s Prospects Fall While Mexico’s Rise as Fed Prepares to Ease Bond Buying
By THOMAS CATAN
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.
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.