Despite the debilitating effects of the escalating violence between Mexico’s drug gangs, Mexico’s economy expanded for the first time in more than a year, and the its exchange traded fund (ETF) may continue to improve as trade increases between the United States and Mexico.

Mexico’s GDP expanded by 4.3% in the first quarter year-over-year as exports to the United States increase, report Jens Erik Gould and Jonathan J. Levin for BusinessWeek. Manufacturing rose by 9.9% in the first quarter year-over-year, and services increased by 3.8%. Industrial production grew 7.6%, with production of vehicles jumping 69.6% in the month of April year-over-year. The Central Bank estimates that the economy will grow by as much as 5% this year. [Latin America’s ETF Hot Spots.]

While those numbers are good, drug violence could keep them from being much better.

Gabriel Casillas, chief economist at JPMorgan Chase & Co. in Mexico City, believes that Mexico is losing 1.5% growth each year due to drug-related violence. Finance Minister Ernesto Cordero believes that violence tied to the drug cartel cut 1% from economic growth. [ETFs for Strengthening BRICs.]

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