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Mexico rides global recovery but still faces hurdles

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Abstract

The Mexican economy has grown robustly following the worst recession since the peso crisis of 1994. Gross domestic product (GDP) growth surged 5.4 percent in 2010, surpassing expectations. Though the pace of expansion slowed in early 2011 as the U.S. engine sputtered, forecasts call for a slight pickup in the second half. ; The recovery is the product of primarily three factors: first, a rebound in manufacturing exports, mostly to the U.S. but also to other markets; second, a strengthening internal market fueled by a healthy domestic financial sector; and third, significant capital inflows from advanced economies seeking higher rates of return in emerging markets such as Mexico. ; In spite of the recovery, the country faces significant challenges both in the short and long run, including the worst violence since the Mexican Revolution.

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