By Walter Molano, Gleaner Columnist
Like a thoroughbred that sneaks through the pack to pull out into the front, Mexico is converting itself into the leading economy of Latin America.
For the past decade, Mexico has been in the background - eclipsed by the brilliance of Brazil, Colombia, Peru and Chile.
The ascendancy of China shifted the emerging market spotlight on the large commodity producers.
Although Mexico is also a major producer of raw materials, it is better known as a manufacturing hub. Ever since the implementation of the North American Free Trade Agreement (NAFTA) in 1994, Mexico was seen as an integrated component of the United States industrial base.
Unfortunately, the assimilation of China into the World Trade Organization in November 2001 triggered an acceleration of economic activity and a ravenous demand for commodities. Thanks to the marketing wizardry of Goldman Sachs, investors and fund managers were hooked by the BRIC concept, pouring billions of dollars into these economies.
As a result, Mexico was pushed onto the back burner.
The Chinese manufacturing onslaught also ate away at Mexico's share of the US market, as companies moved operations to the other side of the Pacific to take advantage of rock-bottom wages and cheap financing.
However, a decade later, the bloom has come off the Chinese rose, and manufacturers are no longer as enamoured. Chinese wages have steadily climbed for the last 10 years. Meanwhile, productivity remained pretty constant.
On a productivity-adjusted basis, Chinese labour costs are close to even with their Mexican counter-parts. At the same time, Mexican firms continue to move up higher on the value-added chain.
Mexican universities are turning out top-rated engineers, software designers and technicians. Mexican firms are no longer dedicated to low-brow assembly processes; they are now focused on auto parts, airplane components and electronics.
Mexico is also diversifying its trade away from the US, by becoming a manufacturing hub for South America and even the Asian market. Like Speedy Gonzalez coming up from behind, Mexico is making heads turn.
Yet, Mexico is not only interesting for its exporting prowess. It is also a dynamic domestic market. Although Mexico's population is only seven per cent of China's, its per capita income is four times as much.
Likewise, Mexico's median age is 27, while China's is 35. This gives Mexico a much younger and wealthier consumer base, which allows it to have a more vibrant domestic market for national producers.
No one knows this better than Mexican banks and construction companies. They continue to operate at full tilt, attending the demands at home without having to worry about the turmoil in the international marketplace.
The highly porous border with the US also adds a level of sophistication to the Mexican consumer, which is open to trying new products and brands. As a result, retailers, food chains and a wide range of consumer companies are piling into Mexico, bringing in a deluge of investment and new services.
Now, Mexico is poised to benefit from the acceleration of the US economy.
Although still stumbling from the after-effects of the financial collapse of 2008, the US economy is showing signs of life. The fracking revolution is transforming the economy by reducing energy costs. Scores of multinationals are reshoring, shutting down foreign operations to reopen idled factories at home. A visit to a local furniture store will reveal the renaissance of 'Made in America'.
The same is happening in the automotive sector. The US auto sector is booming, and several foreign car companies are breaking ground to open new operations.
Mexico is also benefiting from the recovery of the US auto sector by assembling the new Fiat 500 and producing key components for a slew of other cars. The massive devaluation of the Mexican peso after the onset of the US financial crisis was an important factor in the revitalisation of its industrial base.
The plunge in the dollar against a slew of emerging market currencies, particularly the Brazilian real and Colombian peso, also heightened the competitiveness of Mexican firms against Latin American, Asian and European competitors. Some countries, such as Brazil and Colombia, suffered a period of deindustrialisation, as their firms could no longer hold out against external competitors, such as Mexico.
Today, the wheels are starting to come off some of these economies. They rode the BRIC wave for the last decade, using hype to trump up their stories.
Now, Mexico is boldly breaking away, backed by a young and highly skilled work force, world-class economic management and a hypercompetitive exchange.
As Speedy Gonzalez used to say, "Andalé! Andalé! Ariba! Ariba! Yii-hah!"
Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC. firstname.lastname@example.org