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Economic prospects reverse in Latin America Over the past decade, Brazil boomed and grew rich by selling raw materials to China. Brazil's economy averaged 3.6% annual growth, peaking at a rate of 7.5% in 2010. Its currency, the Brazilian Real, substantially increased in value. By comparison, Mexico saw lower growth, partly because it was tied to a faltering United States (US) economy. Mexico also suffered from deep problems of its own, for example, a poor education system and a rise in violent crime, deterring tourists and investors. Mexico's economy averaged 2.6% annual growth over the past decade, while its currency, the Mexican Peso, fell slightly in value. From 2011, it was Brazil's turn to struggle as China's demand for its raw materials decreased. In 2013 alone, Brazil's currency depreciated by more than 10%. The Brazilian Government largely wasted the boom years, investing little in roads and other infrastructure that could have supported its development. In addition, many households borrowed money to finance a consumer boom including a rapid rise in imports of luxuries from the US. As a result, a significant trade deficit in goods and services developed. Meanwhile, the Mexican Government used the past decade to significantly strengthen its economy, improving the education system and making its telecommunications, financial and energy sectors more efficient. Economists now expect the country to grow more rapidly when Mexico's biggest trading partner, the US, recovers economically. Also, Mexico exports manufactured goods to a growing European market. At the same time, Mexico has maintained a relatively small trade deficit that can be financed easily by long-term foreign investment in its companies and factories Source: The Wall Street Journal, September 2013 Fig. 1: A Tale of Two Countries Gross Domestic 3.0 Product in US$ 2.5 Brazil (trillion) 20 1.5 1.0 -. Mexico 0.5 2003 2005 2010 2013 Percentage change 100 in how many US$ 75 each currency buys -Brazilian Real (%) 50 25 Mexican Peso 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (a) Use production possibility curves to compare Brazil's economy in 2013 with its economy in 2003. [2]