Mexico Edges out Brazil in Not Only Soccer, but also in Economic Growth

Mexico Edges out Brazil in Not Only Soccer, but also in Economic Growth

Mexico and Brazil played a grueling 93 minutes of top notch soccer in the Olympic Men’s Soccer Finals. Mexico pulled through with a 2-1 triumph over Brazil earning Mexico a gold medal. Not only did Mexico’s soccer team beat Brazil’s soccer team, but their economy also seems to be pulling ahead of Brazil’s economy.

According to an article from the Economist, “In recent years Brazil has outplayed Mexico, growing at 6% or more as Mexico bumped along in the slow lane. But lately that has changed. Last year Mexico grew by 4% and Brazil by 2.7%.” Mexico’s economy is on a positive trajectory of growth and expansion, and some predict that Mexico’s economy, which is currently half the size of Brazil’s economy, will be bigger than Brazil’s economy within the next 10 years.

Why are the expectations for the Mexican economy so high? Mexico has multiple factors working in their favor. First, Mexico’s ratio of debt to GDP is not even a third of Brazil’s ratio of debt to GDP. The debt to GDP ratio is an indicator of the wellness of a nation and having a low debt to GDP ratio demonstrates that the country can pay off any debt incurred in producing goods and services. Mexico’s low debt to GDP ratio indicates that the Mexican economy is healthy, and they have potential for growth.  Next, Mexico has the demography for growth due to the ratio of workers in the labor force to those not working. And lastly, in December 2012, Enrique Pena Nieto will become the new president of Mexico, and he promised reforms to encourage economic growth. Currently, Brazil is less open to free trade than Mexico, which also hurts the economy.

Why is Mexico’s economy growing, while Brazil’s economy seems to be decreasing? Brazil’s GDP is projected to be below 2%, while Mexico’s GDP is projected to keep increasing. The Chinese economy has slowed down significantly, which directly affects the Mexican and Brazilian economy. Brazil’s economy benefits by exporting to China, but when China slows down, the number of Brazilian exports also decreases. In opposition, Mexico directly competes with China over exports to the United States. A decrease in the number of Chinese exports creates room in the U.S. for Mexican exports. The growth of the U.S.’s economy allows for expansion of the Mexican economy.

The economic growth projection is difficult to predict, but perhaps the Olympic Men’s Soccer Finals will act as predictor Mexico’s GDP in the coming years.