Mexico is a country in transition right now, but what’s the outlook for their economy and exchange traded fund (ETF)?

Mexico’s economy is set to shrink 2.8% this year based upon falling exports, underscoring the deep troubles that led it to seek help from the International Monetary Fund. Miguel Angel Gutierrez for Forbes reports that Mexican factories that make everything from cars to vacuum parts are reeling from the dropoff in orders from the United States, where the economy has contracted sharply in recent months.

This forecast was much more bleak than a previous outlook for a 1% contraction in 2009 and was roughly in line with private-sector views. Meanwhile, Mexico’s Felipe Calderon faces a defeat in mid-term elections that could hobble the rest of his presidency. He is also trying to stave off the recession while dealing with deadly drug gangs.

Since he took power in late 2006 and launched a war on drug cartels, drug killings have skyrocketed and not much has improved, says Catherine Bremer for Forbes. The global financial crisis is now spilling over the borders and into the country. Getting control of this situation will be imperative for this country’s growth and stability.

President Barack Obama is readying for a visit to the country on Thursday in a show of support in Calderon’s efforts to fight the drug violence, David Alexander reports for Reuters.

  • iShares MSCI Mexico Investable Market Index (EWW): up 0.5% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.