Mexico would consistently be among the select group of major nations in size of economy, territory and consumption, writes Alejandro Legorreta…
There are several ways to measure our relevance as a country worldwide, and in almost any area we are a “heavyweight”. Culture, tourism, biodiversity, economy and many other variables allow us to be a country where, if we take our enormous challenges seriously, we can make a big leap forward, towards the progress that many of us are imagining and working on.
If we divide all the countries of the world in percentage, Mexico would consistently be among the select group of 5 and 10% of most important nations in size of economy, territory, consumption and population. By 2030, our population will be larger than that of Russia and our GDP per capita is greater than that of Brazil, China or India.
Together with India, Mexico is one of the emerging countries with the highest estimated growth in its workforce and middle class for the following decades. Perhaps this large domestic market and its dynamism is an important factor to explain the interest of so many companies to enter Mexico and to be able to participate in our market.
For example, a button: A few weeks ago, Amazon launched its “Amazon Prime Day” in Mexico, making us one of the 13 countries in the world (the only emerging one, along with India) where Amazon has a local service. This fact makes clear that our buying power is growing.
In addition, Mexico is an attractive destination for producing goods: we have the 12th place as exporters, and the second emerging after China, and we export $374 billion USD, the equivalent of Brazil and Australia together.
Mexico is globalized and, within the global value chain, is the country with the most trade agreements in the world, and the nineteenth largest recipient of foreign direct investment, with recent success stories, such as the seven rounds of energy reform, in which was committed nearly $50 billion in a difficult context, with low oil prices and low investment in the sector, a clear sign of investor confidence.
In geography, we are also privileged, thanks to the border with the United States and our two oceans. Even the fact that the flight time between the CDMX and NY or San Francisco is less than that between these two American cities shows us the enormous development potential that we still have in commerce, tourism, knowledge, etc.
However, financial markets still do not fully reflect the relevance of our country in the world. Although the Mexican peso struggles with the Chinese yuan for the first place as the most exchanged currency of emerging countries, the stock market has not yet taken its relevance.
The stock exchange reflects the business activity of a country and is generally a vehicle for investors to participate in economic development. Mexico is not the exception. However, the level of investment in the stock market does not correspond to the size of our economy. The Mexican Stock Market represents only 0.51% of the global market capitalization, while Mexico’s GDP is equivalent to 2% of world GDP.
So we can see it in different examples. Such is the case of the MSCI, which is invested 70% in five markets: China (HK), South Korea, Taiwan, India and Brazil. In this index, Taiwan constitutes 12%, while Mexico only 3%, when our economy is twice as big and we export 20% more.
The current allocation of global capital means that the Mexican stock market is valued less efficiently. By definition, this is the breeding ground for investment opportunities and also shows that there are clear actions that we must take to correct this gap.
We are many Mexicans who work every day to combat our main problems (impunity, corruption, poor education, lack of opportunities) and detonate the maximum potential of our country, but it is important to pause and analyze the areas where we are on a good route. Mexico can take that great leap that we imagine, but to do that we all must do our homework.
–By Alejandro Legorreta