Mexico’s Economy Excelled in 2011, Brazil’s Sputtered–Surprised?

Latin America’s two largest economies started 2011 on different notes. Mexico’s growth was set to ring up about 4 percent, with drug violence clipping about a point off growth, according to BBVA Bancomer, and reliance on a weakening U.S. economy wielding another discount. In April, auto production, a key industry in Mexico, experienced a sharp drop in the wake of the tsunami that hit Japan and resulting supply-chain kinks (.pdf, see page 8). By summer, as euro zone problems waxed anew, the US appeared to be headed toward a double-dip recession, with knock-on effects for Mexico: GDP projections dropped to two percent.

Brazil, on the other hand, started the year on high. Finance Minister Guido Mantega belted the opening lines when he announced that GDP expanded 7.5 percent in 2010. Beyond representing Brazil’s highest growth since 1986, the spurt made it the seventh-largest economy in the world. The forecast for 2011 was a palatable slowdown to 5-5.5 percent growth.

Turns out, while they started on different stanzas, the two economies were singing more or less the same song. When the official numbers ring out, Brazil will grow about 3.5 percent in 2011, and Mexico 4 percent.

It’s been a decade since Mexico chalked a higher rate of growth than Brazil. What’s more, this is unlikely to be a blip. Both countries are expected to grow 3-3.5 percent in 2012. However, variation from these forecasts would probably come in the form of Brazil lagging its target and Mexico eclipsing it, for two reasons. One: Mexico, not Brazil, has proven more resilient to global economic headwinds in 2011. Two: Mexico’s growth has discounts baked in—mainly in the form of security concerns and reliance on US consumer demand. In Brazil’s case, major impediments to growth—reliance on commodity exports to China and inflationary consumption—haven’t been given due consideration.