20Feb

Brazil vs Mexico: Battle of giants

The two countries’ mutual histories are stories of relative success and recurrent disappointments. Brazil has the largest economy in Latin America; Mexico has the second-largest. Brazil is fashionable now; Mexico isn’t.

Financial analysts, scholars and the media see Brazil as a success story; Mexico, a failure. Brazil awaits the 2014 soccer World Cup, the 2016 Summer Olympics, and riches from recently found offshore reserves of so-called pre-salt oil.

Mexico, on the other hand, is seen as a war zone: economically stagnant; prey to drug violence, instability and human rights violations; politically paralyzed; and gradually ever more dependent on the United States, despite Mexicans’ occasional anti-Yankee outbursts.

Mexican business leaders and members of the commentocracy are bothered by the contrast with Brazil – and envious, too. For a sector of Mexico’s political and intellectual left, Brazil’s achievements are a weapon with which to attack the Mexican government: Look how well left-leaning Brazil is performing; let’s do likewise.

Meanwhile, any favourable comparison with Mexico stokes Brazil’s regional and international ambitions: What better reason to sustain Brazil’s leadership than to avoid decline like Mexico’s, with its history of failures and its virtual withdrawal from Latin America? Mexico is tilting north, not south. To the rest of the world, Brazilians are living a fairy tale; Mexicans, a horror story.

One surprise

In reality, though, the numbers don’t add up. One surprise is that last year Mexico’s economy grew more than Brazil’s: 4 percent growth in gross domestic product as compared to Brazil’s 3 percent. For 2012, Mexico expects 3.5 percent growth; Brazil, 3 percent. If the United States sustains its recovery and China and Europe suffer setbacks, it’s possible that Mexico’s economy will outpace Brazil’s for the second straight year.

The data shows that the famous Brazilian miracle is starting to fade. Brazilian President Dilma Rousseff felt the need to reduce the excessive pre-election spending ordered by her predecessor, Luiz Inacio Lula da Silva. And Brazil’s inflation rate is almost double Mexico’s.

It’s true that Brazil’s middle class has grown and today represents a bigger proportion of the population than Mexico’s does. And since 2000, Brazil has done better than Mexico at reducing poverty.

Mexico has fared better than Brazil on indices such as education, environment and health, according to the 2011 UN Human Development Report. Last year, Mexico’s per-person share of gross domestic product was an estimated $15,100; Brazil’s, $11,600.

Brazil’s last two governments and its current one have conjured up a masterful programme of international self-promotion. Mexico’s last two governments did modestly well in proclaiming the country’s achievements. But under current President Felipe Calderon, Mexico’s image has appeared unflaggingly bleak.

The Calderon government has focused single-mindedly on the war against organized crime. The results – an estimated 47,000 dead in five years, according to official statistics – have created a perception of catastrophe in Mexico that doesn’t reflect the country’s economic and social reality.

For one thing, Mexico is better positioned than Brazil to take advantage of current trends in the global economy. Mexico’s principal export is manufactured products (almost three-quarters of its total world sales), mainly to the United States. A healthier U.S. economy boosts the demand for Mexican exports, which in turn creates Mexican jobs.

Brazil, on the other hand, banks more on commodities (raw materials such as coffee, iron ore and soybeans) than manufacturing. Commodities account for nearly 45 percent of Brazil’s exports. China has become Brazil’s top client. China’s red-hot economy is showing signs of cooling, however. And the prices of some Brazilian commodity exports have chilled as well.

Mexico’s stake in manufacturing, and its integration into the greater North American economy, look like good bets. Soon the world’s perspective on Brazil and Mexico will shift. A new Mexican president takes office on Dec. 12 – presumably someone with a fresh approach to the drug war. In 2014, the World Cup will expose Brazil’s deficiencies in infrastructure, communications, tourism and even security, revealing the reality beneath the reputation.

During the last two decades Brazil and Mexico have both behaved more or less alike in terms of their political, economic and social policies, despite the current nostalgia in Mexico for the Institutional Revolutionary Party; and, in Brazil, hubris about the Workers’ Party. The two countries’ mutual histories are stories of relative success – and recurrent disappointments.

Neither country has gained a permanent advantage over the other, except in two realms where Brazilians are infinitely better than Mexicans: soccer and boasting.

Posted in Nearshoring/Offshoring