This internal market has accumulated a significant pent-up demand. Just the housing market alone has built up a deficit of over 10 million units (based on my estimates and data from Infonavit – Mexico’s largest mortgage lender). If developed, these units may provide, shelter, assets and collateral to more than 30 million Mexicans and potentially trigger a consumer credit boom.
The icing on the cake for Mexico may come from the upcoming PRI (Institutional Revolutionary Party) administration that has campaigned on the back of long-due structural reforms that seek to enhance competitiveness and drive economic growth. Energy, labor and tax reforms that will soon be introduced to Mexico’s congress are considered highly effective in providing an additional boost to the economy.
Short of a major political upset, these reforms should pass in the next few years and, if so, will be credited with a potential additional growth injection of over two to three percentage points to reach annual GDP growth rates of over 6.5 percent. The risk of a fresh economic slump in the United States makes the need for reforms even more pressing. But even if reforms do not take place, according to the Bank of Mexico, the growth expectations for the country remain positive — in the range of 3.5 to 4 percent per year.
Although the future looks bright for Mexico, the road to development is paved with risks and issues that if not addressed may derail the economy. Just to name a few, the country faces challenges that include levels of poverty and inequality which limit consumption and feed insecurity as well as push young people into the arms of organized crime.
Mexico's economy is still dominated by monopolies in key industries, we continue to experience high levels of corruption, and the educational system is highly deficient. In order for Mexico's growth to be truly sustainable in the long term, the country will have to address these and other social issues.
All things considered, when predicting Mexico's future, the balance remains positive; the country has developed the tools, the market and is on the verge of implementing the reforms that support growth, development and investment. We should expect the conversation to shift from potential to results.
Leo Schlesinger is the CEO of MASISA México, an integrated forestry, chemicals, composite boards and retail leader. He has an MBA from London Business School.
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