Monday, August 13, 2012

Mexico 4, Brazil 2: Football and economics

By: The Economist


Does Mexico's victory over Brazil in Olympic football foreshadow the two countries' economic futures?

Congratulations are due to Mexico, which on August 11th won its first gold medal in the London Olympics, beating Brazil in the men's football final. After 93 frantic minutes, the final score was 2-1 to Mexico. Mass celebrations followed in Mexico City.

This blogs headline isn't a misprint, but a reference to the score in a longer-term competition: economic growth. 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%. This year Mexico is expected to get close to 4% again, whereas some economists reckon that Brazil's rate could dip below 2%. A recent report by Nomura predicted that Mexico's economy, currently half the size of Brazils, could end up the bigger of the two within the next decade.

One reason for the turnaround is China. Its growth has been a boon to Brazilian commodity exporters (who have made a fortune feeding the Chinese economy) and a headache for Mexican manufacturers (who face stiffer competition from Chinese companies in the United States). But with China slowing down, the tables are turned. Demand for Brazilian commodities is cooling, and Mexico is regaining an edge in its main market. The gradual recovery of the American economy will help Mexico further.

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