When it comes to the Americas, many investors overlook Mexico, dismissing it in favor of the region's de facto rising star, Brazil. But Mexico offers more than just beautiful beaches and margaritas. Its resilient, export-driven markets have thrived in the post-NAFTA years, and year-to-date, Mexican stocks have already outperformed those in the U.S.—and even Brazil.

Mexico's only pure-play ETF, the iShares MSCI Mexico Investable Market Index Fund (NYSEArca: EWW), is up slightly year-to-date (0.39 percent), while its Brazilian counterpart, the iShares MSCI Brazil Index Fund (NYSEArca: EWZ) has fallen 6.61 percent over the same period. Over one year, EWW is up 109 percent.

The Mexican economy has its pitfalls, most notably the over-concentration of its markets in a few big names, and drug-related lawlessness along the U.S.-Mexican border. Still, this diverse economy, with its rich natural resources and manufacturing might, offers investors a different take on the Latin American story.

"We're bullish for long-term American growth, so we see Mexico coming right along for the ride," said Peter Zeihan, vice president of analysis at Austin, Texas-based global intelligence firm, Stratfor.

Mexico: A Latin Economic Hub

With 111 million citizens, Mexico is among the 10 largest economies in the world, according to Zeihan, and the second-largest Latin American economy after Brazil. It produces hundreds of raw materials and manufactured goods for export, and the country is rich in natural resources, including silver, oil, copper and farmland. Oil is particularly important to the Mexican economy, as crude exports are the government's largest source of revenue.

Because of NAFTA, Mexico remains intimately tied to the U.S., which purchases some 80 percent of the country's exports annually.

"Mexico will always have the advantage of location," said Zeihan. "They have the cost advantage in terms of supplying the U.S. If the U.S. weren't next door, they'd basically look like Iran or Afghanistan."

When the U.S. economy suffers, so too does Mexico's, a fact that has led to double-digit unemployment and drug-fueled violence in the country's northern, industrial states. To reduce this dependence, Mexico has recently tried to better diversify its trade partners, signing agreements with China, the European Union, and other Latin American countries.

Unlike many of its emerging market neighbors, Mexico's economy nose-dived in 2009, with gross domestic product contracting 6.5 percent, according to Bloomberg News. Direct foreign investment fell by more than 50 percent to just $11.4 billion, its lowest level in 10 years. The government enacted strict budget cuts and tax increases, which has generated some improvement. The government now predicts 3.9 percent GDP growth for 2010, with the possibility of further increases in estimates.

Investing In The Mexican Stock Market

EWW, the only pure-play Mexico ETF, tracks an index designed to replicate 99 percent of the total capitalization of the Mexican stock market. Launched in 1996, the fund has attracted healthy investor interest, with $949 million in assets and 3 million shares traded daily. It has an expense ratio of 0.55 percent.

EWW has outperformed Latin America as a whole, beating the one-year returns of the broad-based iShares S&P Latin America 40 Index ETF (NYSEArca: ILF) and the year-to-date returns of both ILF and the SPDR S&P Emerging Latin America ETF (NYSEArca: GML).

EWW, which consists of 44 companies, mirrors the broad composition of the Mexican economy. Telecom firms, at 41.14 percent, comprise the biggest chunk of assets, followed by producers of cyclical and noncyclical consumer goods (27.37 percent) and industrial companies (10.71 percent).

But EWW also reflects the Mexican tendency for concentration, as many Mexican industries tend to be dominated by a few big companies, or even monopolies. The fund's top 10 holdings comprise over two-thirds of the fund's assets; America Movil (MXK: AMXL), Latin America's largest mobile phone company, makes up 23.1 percent of the fund alone, followed by Wal-Mart de Mexico (MXK: WALMEXV) at 9.54 percent and Cemex S.A.B. (NYSE: CX) at 5.83 percent.

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