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Could Mexico be on the verge of something special? Perhaps, but the reason is not just the news, released this week by the country's national statistics agency, that the economy grew 5.5 per cent in 2010, the highest rate in a decade.
Behind the numbers lies a more intriguing prospect. During the last nine months or so, exports (mainly to the US) have driven the recovery, and there has been little or no sign of any pick-up in the domestic economy. But now, finally, there are signs that the Mexican consumer is also playing a part.
For several months, there had been signs that Latin America's second-largest economy was recovering faster than economists had predicted just a year ago. And even with the impressive fourth-quarter growth results of 4.6 per cent compared with the same period in 2009, Mexico is still only just recovering what it lost in 2009, when the economy shrank by 6.5 per cent.
The surprise in the latest data was the composition of last year's growth and, in particular, the recovery of the service sector, which expanded by 5 per cent. The figure is important because it is the clearest sign yet that recovery has finally seeped into the domestic economy.
For many months now, economists have been pointing out that the only real engine of growth in the Mexican economy has been exports, which grew more than 20 per cent last year. Along with relief that some sort of recovery was finally under way following the disaster of 2009, analysts also expressed a latent fear that the importance of exports was making Mexico rely too much on the US, whose own recovery was far from certain.
But the latest figures confirm a more broad-based recovery and, therefore, a potentially more robust one. Luis Flores, economist at Ixe Grupo Financiero, is now distinctly bullish on Mexico, and even believes that the country could emerge as one of the most attractive destinations for international capital flows within the emerging-market asset class.
His beliefs are not just founded on growth, which he estimates will be a more-than-respectable 4.5 per cent this year: they are also based on the important fact that, unlike many other emerging-market economies experiencing strong growth, Mexico has very little inflationary pressure.
The country's central bank has now maintained benchmark rates at 4.5 per cent for more than 18 months, and the latest inflationary data, which shows inflation actually falling over the last 12 months, suggests that the next interest-rate hike will now probably be postponed until 2012.
That, says Flores, places Mexico in a category all to itself within the emerging-market asset class.
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