Mexico’s economy and exchange traded fund (ETF) took a drubbing in the economic downturn. But now the Latin American country is looking to the future and figuring out its next step.

Mexico’s economy is showing early signs of recovering from its deepest recession since 1995. Economic activity rose 2.5% month-over-month in July, and industrial output and services are on the rebound. Tourism could put a dent in economic growth, as receipts are predicted to decline 16% this year, reports the Latin Business Chronicle. Many visitors have stayed away because of drug violence and the H1N1 flu outbreak.

As the country pulls itself out of a recession, the government is examining fiscal policy and reform, states Ken Parks for The Wall Street Journal.

The government wants to raise income and excise taxes, as well as slap a special 2% sales tax on all goods and services as it tries to replace lost oil revenue and stave off a sovereign rating downgrade.  The final answer should come by mid-November as Congress puts together its budget.

Mexico’s IPC index rose a remarkable 20% during the third quarter and 28% year-to-date, however, it has started to ease as U.S. economy continues to show signs of a wary recovery.  The United States buys 80% of Mexico’s exports and employs millions of migrant laborers who sent home $25.1 billion in remittances last year.

  • iShares MSCI Mexico Investable Mkt Idx (EWW): which is up 42.3% year-to-date.

For more stories on Mexico, visit our Mexico category.

Kevin Grewal contributed to this article.

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.