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Mexico: The China of the Americas

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While investors talk about BRICS, PIIGS, Tiger Nations, and other dynamic developing economies, few have looked into the story going on just south of the US border.

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Mexico also has international trade agreements with 44 different countries. That means companies can open manufacturing plants and source materials from a wide range of countries and avoid hefty duties.

The enforcement of intellectual property rights in China is a serious problem for Western manufacturers of all stripes. In contrast, Mexican courts typically enforce companies' rights to intellectual property. Mexico also has relatively strict environmental laws, reasonable health and safety monitoring and inspections, and strong child labor laws.

Even while much of the global economy struggles, Mexico has been doing just fine, thank you. In early 2012, Mexico's Gross Domestic Product (or GDP) grew at an annual rate of 4.6%.

The recent electoral triumph of Peña Nieto on July 1 and the return of the pro-business Partido Revolucionario Institucional to power has also made Mexico an increasingly attractive destination for foreign investments.

The iShares Mexico Investable Market Index Fund replicates the MSCI Mexico Investable Market index, and consists of stocks traded primarily on the Mexican Stock Exchange. This ETF has already risen 15.9% this year.

Nevertheless, there is plenty of upside left in the Mexican market - particularly if the newly elected president Peña Nieto and his government enact market-friendly economic reforms.

Editor's Note: This article was written by Nicholas Vardy of The Alpha Investor Letter.

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