Can Mexico reclaim title as region's largest economy from Brazil?
Mexico was once Latin America’s darling, but in the past decade Brazil has far surpassed it as commodities drove economic growth. President-elect Peña Nieto is eager to reposition Mexico.
MEXICO CITY and RIO DE JANEIRO — Mexico’s President-elect Enrique Peña Nieto has embarked on a diplomatic tour of six countries in Central and South America in an effort to reset rocky relationships and reestablish Mexico's position in the region.
Top talking points include the region’s shared security concerns, especially with Guatemala and Colombia, and smoothing trade relations with Argentina and Brazil, both of which have had recent commercial spats with Mexico. Mr. Peña Nieto is also visiting Chile and Peru.
But Brazil looms especially large: Mexico, which in 2005 lost its status to Brazil as the region’s largest economy, is eager to reposition itself as an economic and political leader. If Peña Nieto is going to secure those regional leadership credentials, he must reach out to the continent’s current giant.
Peña Nieto, who will officially take office Dec. 1, is poised to return the Institutional Revolutionary Party, or PRI, to presidential power following 12 years of governance by President Felipe Calderón's National Action Party. Before 2000, the PRI ruled with near-authoritarian control.
On his first visit to Brazil, in which he met yesterday with business leaders and meets today with President Dilma Rousseff, Peña Nieto offered a clean slate in terms of bilateral relations, strained in recent years by Brazil’s rise as a global powerhouse and Mexico’s more recent focus on its ties to its northern neighbor, the United States.
“We are constantly designated as being two economies that are in competition and occasionally in rivalry,” Peña Nieto said in a statement issued in Sao Paulo. “When, really, we should find an opportunity for better integration, for better commercial exchange between both countries.”
Duncan Wood, director of the international relations program at the Autonomous Technological Institute of Mexico, or ITAM, describes Peña Nieto’s approach as “‘Let’s try to reset our relationship. Let’s treat each other as equals and see how we can help each other out.’”
“Because it’s a different political party than the last 12 years, I think it provides that opportunity,” Mr. Wood says. “Can the rivalry be turned into a partnership now?”
Latin American giants
The relationship is not without tension. Mexico was once Latin America’s darling, but in the past decade Brazil has far surpassed it. Commodities drove economic growth, earning it a spot in the BRIC club (Brazil, Russian, India, and China) – the emerging economies to watch, while Mexico’s stable-but-sluggish growth seemed lackluster by comparison. As Mexico faces dwindling oil reserves, Brazil has made a giant oil find. As Mexico’s drug-related violence has been aired around the world, Brazil’s anti-crime initiatives in Rio de Janeiro have been applauded globally.
“I have the sense that we are a lot freer in Brazil,” says Iolanda Villard, who works at the federal tax agency. “Mexico is so dangerous because of the violence of drug traffickers.”
Mexicans lament the fact that, although Mexico is safer overall when compared with other countries in the region (including Brazil), media coverage tends to focus on the drug violence there. According to a 2011 United Nations report on global homicide rates, Mexico’s homicide rate stood at 18.1 homicides per 100,000 people, while Brazil’s hovered at 22.7 per 100,000.
Mexico's economy is also slated to grow at a faster clip than Brazil's this year. A survey of analysts by Mexico's central bank estimates GDP growth above 3.5 percent in 2012, while growth estimates for Brazil have been scaled back to just over 1.5 percent this year.
As Peña Nieto’s team was trying to get him to the presidency, they recalled stronger economic growth in Mexico when the PRI was previously in power. A financial adviser bristled when a reporter questioned the rise of Brazil: He pointed to oft-cited statistics showing that Mexico’s economic growth could surpass that of Brazil. Mexico’s comparably low wages and proximity to the US market make the country increasingly attractive again to manufacturers as wages rise in China.
Lately financial analysts have started saying it is Mexico that is the “new” Brazil.
But Brazilians disagree. "From an economic standpoint, Brazil is the leader," says Andre Delmonte, a civil engineer, working on the Maracana stadium that will be a venue for the 2014 World Cup. He agrees with Ms. Villard that Brazil has reduced violence in a globally noteworthy way.
He says he feels no rivalry with Mexico but understands their sensitivities about calling Brazil boss. "It is normal to want your country to be the leader," Mr. Delmonte says.
Mexico did recently earned one set of bragging rights over Brazil: Mexico’s men’s Olympic soccer team trounced Brazil 2-1, winning its only gold medal of the Games and blocking the five-time World Cup champion from the Olympic soccer gold it has yet to achieve.
Peña Nieto plans to visit Europe in October and the US in November.