Benefits of the Emerging Markets in Mexico - Essay Example

Emerging Markets in Mexico Introduction With the vast variety of markets existing in the world, there is a lot of competition for those marketers whotry promoting new products thereby giving the world the concept of an emerging market. Markets are determined by their extent and demand. The extent of a market may be defined by geographical boundaries or by the cost involved in transporting the goods to far reaching areas. The demand of a market, on the other hand, is determined by factors such as fashions and trends, affordability and the availability of substitute and complement goods. Emerging markets are usually international markets that set their grounds in a foreign setting and try to create a demand for their goods. While developing economies are usually flooded with emerging markets, the concept is not novel to developed economies. It is these emerging markets, which when successful in the future, become economic giants in the industry (Garten, 1997). The emerging markets need to consider a lot of geographical and economic concerns before setting in a foreign country. They may be small enterprises or large projects. This paper seeks to evaluate the industry of emerging markets in the Latin America, particularly in Mexico, and see how successful it has been over the years. It would also analyze how these emerging markets have affected the economy of Mexico and all related economies. Emerging markets have had positive impacts and some negative setbacks and this paper would state both sides of the picture. Latin America is a developing nation striving to make its make its mark in today’s world and it is the emerging markets in and of Latin America that will one day, help it in doing so. Global Overview of the Mexico Mexico is one large country that comes under the flag of Latin America.Latin America is an area of approximately 21 million kilometers square, which is 14.1% of the Earth’s land surface. It holds a population of 570 million and there is a lot of diversity of cultures prevalent in the area. Spanish, Portuguese and French are the three most commonly used languages in Latin America. Its GDP is 4.26 trillion United States dollars and the economy is expanding at a relatively decent rate of 4 percent per annum. The population of Mexico is one of the most diverse in the world. It comprises of different ethnic groups, races, creeds and ancestries. The Europeans or the Whites form the largest community of Mexico contributing to over 80 percent of its population. Other than that, Mexico is home to the Mestizos, Amerindians and Mulattos with Blacks, Asians and Zambos existing as a minority. The religion practiced by most people in Latin America is Christianity. Over 70 percent of the population is Catholic. Other than than, Islam and Judaism are very prominent religions too. According to Goldman Sachs’ BRIMC review of emerging economies, Mexico will be the 6th largest economy in the world by 2050! That indeed shows the strength of Mexico and the vigor with which it is expected to grow in a few decades. Emerging Markets in the Mexico Although Mexico is a not very advanced and developed country but it can sustain its population using its own reserves and local markets. The large emerging markets in Mexico are very important for its growth and financial standing. Not just that, the large international emerging markets situated in Mexico are an important source of growth and development of the world’s economy. These emerging markets, local and international, provide Mexican business families and investors a golden opportunity and stimulus for economic and financial activities. Emerging markets play an important role in the Mexico because Mexico is presently a global hub for most financial and economic activities in the Latin American region. These markets help in the promotion of goods internationally and also help other weaker economies gain from the transactions. No one would prefer to buy a skirt from Indonesia when he has the option of buying it from Mexico. This is because the Mexico has made its market very reliable and superb quality wise over the years. Now, if instead, in Mexico the entrepreneurs incorporate an emerging market of skirts from Indonesia and use their own name to sell the product, the skirts will certainly do exceptionally well. This means the emerging markets in Mexico do not just benefit Mexican economy but it is also fruitful for other economies that get their goods promoted in the Mexico such as Brazil, Argentina, Chile, Venezuela etc. The emerging markets in Mexico, be they the emerging markets of local investors or some international ventures, have been extremely fruitful to the economy of Mexico. Mexico has out ridden Brazil in term of investment and development opportunities making itself the most swiftly growing region in Latin America. Grant Thornton International published a report known as the International Business Report to analyze and appreciate the growing markets of today (Juster, 1997). It also had an emerging markets index which was calculated by assigning weights to important factors contributing to emerging markets such as opportunities for trade and investment locally, growth prospects, political stability and other potential risks. This index has calculated Mexico to be the 4th best country when it comes to the environment of emerging markets while Brazil stands 5th in line (Ramamurti, 2009). Mexico is a very favorable country for emerging markets; this is because international trade forms a substantial part of its economy. Mexico is the second largest trade economy, following China very closely. It also enjoys a very high standard of living. The GDP of Mexico alone is more than the GDP of China, India and Brazil. This is indeed a true indication of the prosperity that lies ahead of all emerging markets in the region. The emerging markets in Mexico have been very successful owing to one major reason. While the other countries in the world have suffered from rocketing inflation rates since the last decades, the stability of Mexican economy has driven it to the path of success. The inflation rates in Mexico have been under control and the Mexican currency, Peso, has been stable against world currencies. Mexico currently enjoys 12 free trade agreements with 43 countries and this is one reason why its exports have surged this rapidly (Agtamael, 2007). Other than that the major contributors in Mexico’s ever flourishing industry for emerging markets have been well trained and educated labor, powerful and up to date manufacturing and processing industries and also its ideal geographical location. It is situated close to United States and so it has a very close global market to export its products to. Mexico however, has been treating the emerging markets quite uncertainly over the last few decades. While it has been very welcoming to some emerging markets, it has been critical to the rest. It has been very open to emerging markets from India, China, Russia, US and other economic giants. This is because Mexico realizes the market in these countries is highly productive and very efficient. It also sees the Indian market as a link with South Asia which has been long known as the golden sparrow for its abundance of resources and spices and other rare commodities. Moreover, the emerging markets by India in Mexico are very productive and quality wise flawless. However, Mexican government is not banning Brazil for emerging markets in Mexico because of the debt crisis. Therefore, before allowing a potential international emerging market in Mexico, the government needs to ensure that it would prove fruitful to the Mexican economy and not seep away its seemingly large but nevertheless finite resources. The nuclear proliferation with India is one big reason for Mexico to allow large emerging markets from India. However, it needs to ensure that the working environment in Mexico is not hampered. Since Mexico is very close to the United States, the United States is one of the biggest shareholders of Mexican emerging markets. Mexico is known for its automobile industry, besides manufacturing plants, it also has assembly plants. This means that it just does not make spare parts but manufacture cars completely. Also, it is known for its electronics industry. These markets are of high value globally adding to Mexico’s international standing All the ventures in Mexico are authorized and work on an agreement with the country’s national association of department stores and supermarkets called ANTAD. This legalized mode of action is favorable to all emerging markets as it stores for them a legal place in the industry. Otherwise, the other giants in the industry would crush them away because of economies of scale and other benefits that large, established firms receive. On the other hand, the emerging markets in Mexico have brought with them a lot of vices too. For example, the Mexican unemployment rates have soared higher in the last decade owing to a lot of large emerging markets from all countries in the world. The local population of Mexico has little scope since the local goods and services have little demand. Chinese substitutes have overridden the demand for Mexican goods since they are cheaper, almost as durable and much more abundantly produced. The quality has been slightly compromised in Chinese goods but they last long enough to gain customer loyalty. The Mexican goods have thus suffered badly by this competition since they are not able to meet up with the international pricing standards. They are much more expensive and due to the global recession that prevails, many try and avoid them. However, internationally Mexican goods have been in high demand seeping out any negative effects that low local demand may have caused. Ideological, Economic and Political Factors Mexico is the most strategically important country in Latin America. It has a widely covered communication network and the most modern, up to date technology. Moreover, the development in the industrial sector is very rampant, attracting a lot of emerging local and international markets. The currency is stable giving the investors a chance to try their luck in a market that is secure and prospering. The economic conditions of Mexico are very favorable for emerging markets. There exists a thriving industry for processed and raw goods. Also, the facilities of transportation and communication are very smooth. It is linked to all the major countries in Latin America making itself the hub of all economic activities in the region. The region is also renown for the attraction it holds for the tourists. Since tourists are attracted to the country, the emerging markets of Mexico gain international recognition by these tourists (Roubini, 2004). The political conditions in Mexico have not really enhanced the prospects of emerging markets in the country. As a matter of fact, they have done the contrary. This is because the Mexican political environment is undergoing a period of transition. The political uncertainty, could perhaps adversely affect the economic conditions in Mexico. Conclusion As realized in the preceding parts of the paper, the emerging markets in Mexico can have mixed effects on its economy depending on what is being marketed and how and what is at stake. The answers to all of these will tell what benefit or danger does an emerging market hold for the Mexican economy. In any case, it is important for a country like Mexico to work towards budgetary reality checks, crisis resolution and poverty reduction planning. These would tell if Mexico is better off without the new emerging market or worse off. Future decisions should then depend on the data that is collected. However, at present the emerging markets have given more to Mexico than taken away from it. The unemployment of local citizens and increase job insecurity are small threats that can be tackled effectively if the Mexican government takes them seriously and encourages more interaction with the international marketers. Mexico however, should never stake its position for money in the sense that it should never take in more emerging markets than it can handle just for financial reasons. It is already a well developed nation and it needs to hold to that position than look for alternatives for fast money. References Garten, E. (1997). The Big Ten: The Big Emerging Markets and How They Will Change our Lives. Basic Books. Juster, K. & Simon, L. (1997). Making Economic Policy Work: An Assessment of the National Economic Council. Brookings Institution. Roubini, N. & Setser, B. (2004). Bailouts or Bail-ins? Responding to Financial Crises in Emerging Markets. Institute for International Economics. Agtamael, A. (2007). The Emerging Markets Century. Free Press. Ramamurti, R. & Singh, G. (2009). Emerging Multinationals in Emerging Markets. Cambridge University Press. Read More