The year 2022 may be remembered in history due to the war between Russia-Ukraine, but every year, May 5 is remembered for a different war — between Mexico and France.  Cinco de Mayo, meaning the fifth of May in Spanish, is a day of gratification for all Mexicans.

The day honors the Mexican army's incredible victory over the French militia in the Battle of Puebla in 1862. Though the victory was short-lived as the French finally took over, the day became commemorative of Mexican ethnicity and is widely celebrated even in the United States.

So, let’s play a mock war between Mexico and France. This mock fight will give investors a fair idea of the present stock market scenario of the two countries.

iShares MSCI Mexico Capped ETF (EWW Quick QuoteEWW - Free Report) – Down 2.4% YTD (as of May 4, 2022) versus 12.6% decline in S&P 500

The Mexican economy expanded 0.9% sequentially in the first three months of 2022, after a flat reading in the previous period and below market expectations of a 1.1% gain. Though the primary sector shrank 1.9%, the manufacturing and services sectors increased by 1.1%, according to preliminary estimates. The country's economy advanced 1.6 % year over year, following a 1.1% gain in the previous period and below market expectations of a 1.7% increase.

Mexico is an energy rich economy. The latest spurt in energy prices gave the economy a boost. The war in Ukraine actually hurt France more (as Europe is dependent on Russian energy). The IMF projected Mexico’s new growth for 2022 at 2.0%.

iShares MSCI France ETF (EWQ Quick QuoteEWQ - Free Report) – Down 15% YTD (as of May 4, 2012)

France's economy unexpectedly stalled in Q1 of 2022 compared with market forecasts of a 0.3% expansion and after an upwardly revised 0.8% rise in Q4. Household consumption shrank due to high energy cost and worsening supply chain due to the war in Ukraine (marking a decline of 1.3% versus a gain of 0.6% in Q4).

Fixed investment slowed (0.2% in Q1 of 2022 vs 0.3% in Q4 of 2021), as information and communication made up for lost investment in both transport equipment and construction. At the same time, net trade contributed only slightly to the economy (0.1 points). Year on year, the GDP advanced 5.3% in Q1, after an upwardly revised 5.5% in Q4. The IMF projects the country’s growth for 2022 at 2.9%, which is higher than Mexico’s.

The Winner

Like the actual war, the Mexican economy and market emerged winner in 2022. Its ETF has also performed better than the France ETF so far this year. However, over the long term, the battle might present us with a different victor if the situation in East Europe improves and energy and commodity prices calm down.

Plus, IMF-projected GDP growth forecast for 2022 is better for France. Moody’s Analytics Director Alfredo Coutiño said in a report Friday that Mexico’s economy had not recovered its pre-pandemic level of output. “Its weakness has extended and prospects for the year have been revised down,” Coutiño wrote, as quoted on apnews. Hence, France could see a change in luck as the year proceeds.