I’m not going to downplay the social impact and human suffering that the drug war is causing. And I’m not ignoring the unfairness and inequality created by the pernicious spread of corruption. But the fact is, Mexico’s economy is powering on regardless of these evils. And while high-profile accidents and drug battles are scaring away retail investors, a lot of the ‘smart money’ is already in the country. For example, during the first three quarters of 2012, institutional investors poured $57bn into Mexican stocks and bonds. That’s five times more than went to Brazil. Why is that happening?
Firstly I’m not surprised. I’ve spent a lot of time in Mexico, including a stint reporting there for a US mining publication, and I’ve always been impressed how far removed life in Mexico City is from the drug problems. Indeed, if it wasn’t for the local press’s penchant for gory pictures of bloodstained drug lords lying sprawled on roadsides, I would have forgotten all about it. But it’s been a few years since I was last there, so I got in touch with one of my contacts, Eduardo González, a lawyer with Mexican firm Creel.
The newfound urgency among Republicans to improve their standing among Hispanic voters is not the only reason that an immigration policy overhaul may have a better chance this year than in 2007, when Congress last tried to confront the issue and failed. By some key measures, the problems underlying illegal immigration — the economic and demographic pressures that have drawn Mexicans north for decades in search of jobs and a better life, and the challenges for the United States of securing its borders — have diminished over the past six years.
The Mexican economy, while still riddled with inefficiency and inequality, is nonetheless humming along, providing many more job opportunities for Mexican workers. And in Mexico, the source of about 6 in 10 illegal immigrants in the United States, the birthrate has plummeted over the last few decades, shrinking the pool of potential emigrants.
The two biggest financial markets in Latin America swapped their long-held roles in 2012, with Mexico surging ahead and Brazil lagging, catching many U.S. fund investors in the region off guard. Stocks in Brazil, which had benefited over the past decade from a fast-growing consumer class and Chinese buying of commodities, suffered as the government increased regulation of key sectors of the economy and Asian demand waned. In the third quarter of 2012, Brazil’s economy grew only 0.9 percent from a year earlier, while Mexican growth was 3.3 percent.
The New York Times, 12/02/2012
Enrique Peña Nieto became president of Mexico early Saturday, beginning a six-year term in which he has promised to accelerate economic growth, reduce the violence related to the drug war and forge closer, broader ties with the United States.
“This is Mexico’s moment,” he declared.
He said he would increase support for the victims of violence, enact changes to the penal code to attack rampant impunity and move forward on economic changes to remake Mexico into a middle-class society that his advisers say will help reduce crime.
Wall Street Journal, 11/20/2012
Mexican stock-exchange officials have exciting news they want to share: The booming local market is primed to continue booming, no matter how frothy its rally may seem.At present, the Mexican stock market has several things going for it, observers say, including steady domestic growth, abundant global liquidity and low returns on fixed-income investments to entice traders to take on risk.
Wall Street Journal, 11/16/2012
Mexico’s economic growth slowed down in the third quarter as the export engine of Latin America’s second-largest economy started to feel pain from U.S. growth and fiscal worries. Mexican gross domestic product expanded 3.3% in the July-September quarter compared with a year earlier, the national statistics agency said Friday. GDP was up 0.45% compared to the second quarter in seasonally adjusted terms, equivalent to an annualized rate of 1.8%.
Market Watch, 10/24/2012
Economic activity in Mexico rose in August from a year ago, but was down from July as industrial output slowed from the previous month. The National Statistics Institute, or Inegi, said Wednesday that the IGAE index of economic activity, which measures most of gross domestic product, rose 3.5% in August from the year-earlier month but slipped 0.41% from July in seasonally adjusted terms. The increase from August 2011 was below the 3.8% median estimate of 10 economists polled by Dow Jones Newswires.
Mexico’s incoming and outgoing presidential administrations are finding common ground on the need to ease foreign investment caps, including a 49 percent limit on holdings of land-line phone companies.
President-elect Enrique Pena Nieto may support a bill by Felipe Calderon’s administration to lift foreign direct investment limits in some sectors, Ildefonso Guajardo, a top Pena Nieto economic adviser, said in an interview in Mexico City today.
However, as we’ve pointed out already, these four seem to have hit the buffers. So now Goldman has come up with another shiny package of ‘must-have’ nations.
The catchy acronym this time? MIST – Mexico, Indonesia, South Korea, and Turkey.