Global Investment Guide: How To Invest In Mexico

5/18/16 Forbes

Mexico BricksLooking at the country through an economist’s lens, Mexico’s economy can be described as mostly predictable and rarely volatile. However, the same cannot be said of Mexico’s stock and bond markets and currency. Given strong links to the United States’ economy, Mexico’s macroeconomic variables tend to move broadly in conjunction with the ups and downs of its northern neighbor. When the U.S. is expanding, so is Mexico; if the U.S. is in a recession, so is Mexico. However, Mexico’s asset prices tend to act and react to their compatriot emerging market asset classes – which are much more volatile. That said, Mexico’s principal asset classes tend to be “low beta” versions relative to most emerging markets (EM), so that when EM equities or bonds do very well, Mexico lags, but when EM sells off, Mexico acts like a relative safe haven. The Mexican peso is another matter.

Mexico has several things going for it. As mentioned above, the country has forged strong links with the U.S., especially after the formation of NAFTA. As the country has an abundance of relatively cheap labor, it was an ideal, close-proximity destination for manufacturing plants from the U.S. and Canada. Through time, the country has benefited from technology transfer and has been able to increase the skills of its workforce. Second, for most of the last few decades, well-trained and well-respected policymakers have been at the helm of Mexico’s central bank and finance ministry. Under their leadership, Mexico has been able to weather several global crises and also transitions to different presidential leadership, by implementing conservative fiscal policy and prudent monetary policy.

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Mexico central bank seen holding rates steady after peso gains

5/5/2016 Reuters 

pesoMexico’s central bank is expected to hold its key lending rate steady on Thursday after peso gains tamed concerns about higher inflation.

All 25 analysts surveyed said they expect the Banco de Mexico to keep the benchmark interest rate MXCBIR=ECI at 3.75 percent. The central bank is due to announce its decision at 1300 local time (3 p.m. ET) on Thursday.

Mexico’s peso has gained about 6 percent since the central bank unexpectedly raised rates by 50 basis points in February and directly intervened in the foreign exchange market for the first time since 2009 to try to halt a slide in the currency.

The peso’s comeback has eased concerns that currency weakness could hit inflation expectations, while weak U.S. data has sown doubts about how quickly the U.S. Federal Reserve could raise interest rates this year.

Mexico is expected to raise borrowing costs along with the Fed to prevent foreign investors from dumping local debt as U.S. interest rates rise.

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INTERVIEW-Mexico finance official sees growth sustainable, oil hedge for 2017

5/3/2016 Reuters 

aportela
DAVOS/SWITZERLAND, 24JAN13 – Fernando Aportela Rodriguez, Undersecretary of Finance and Public Credit of Mexico makes a point during the session ‘G20 Outlook – Building Resilient Institutions’ at the Annual Meeting 2013 of the World Economic Forum in Davos, Switzerland, January 24, 2013.. . Copyright by World Economic Forum. . swiss-image.ch/Photo Remy Steinegger

May 3 Mexico can sustain its current solid level of economic growth over the next few quarters as strengthening internal consumer demand combines with a robust industrial sector and a rebound in U.S. growth, Mexico’s deputy finance minister said on Tuesday.

Fernando Aportela also told Reuters in an interview in Washington that Mexico expects to continue its oil price hedging program next year at a level that is “compatible” with its 2017 budget, which assumes an oil price target of $35 a barrel.

Mexico’s economy grew faster than expected in the first quarter, with preliminary data last week pointing to a 2.9 percent expansion over the year-ago period, compared with analysts’ forecasts of about 2.3 percent.

Speaking on the sidelines of a U.S. State Department conference on growth in the Americas, Aportela said the first-quarter acceleration was largely powered by strong internal consumption, rising employment and wage growth.

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Recent reforms will help Mexican economy

3/16/2016 Plastics News 

drawing bar chartThe Mexican economy, as measured by the inflation-adjusted gross domestic product data, will expand 2.5 percent in 2016.

This follows similar gains of 2.5 percent in 2015 and 2.3 percent in 2014. Our forecast for a steady pace of growth in the coming year is based on expectations that a decline in domestic economic activity resulting from the recent drop in oil prices will be mitigated by an increase in demand for Mexican exports from the U.S.

Regrettably, Mexico is not yet able to benefit fully from the strengthening U.S. economic recovery. The Mexican industrial sector is still struggling from a need for infrastructure upgrades and other types of structural reforms necessary to support a more rapid expansion of its industrial capacity. Under current conditions, an annual growth rate of 2.5 percent in its GDP is about all that can be expected in terms of long-term economic growth. And this pace of growth is not fast enough to raise the standard of living for most Mexicans. Recent fiscal reforms will help to attract the necessary investment, but it will take a few years for this process to produce more rapid growth in industrial capacity.

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Global Oil’s Woes Come Home To Roost At PEMEX

3/16/2016 Forbes

pemex21MEXICO CITY — Back in August 2014, when Mexico passed the enabling legislation for an historic energy reform that opened its oil and gas sector to private sector investment for the first time since World War II, the market price for West Texas Intermediate (WTI) crude was just over $96 per barrel (pb) and hopes for the country’s energy sector ran nearly as high.

In markets—as in life—timing is everything, and the precipitous drop in global oil prices that began in October that year has required Mexico and its erstwhile national oil monopoly, PEMEX, to rein in spending to weather a period when sharply lower oil and gas revenues changed the country’s fiscal picture. About twenty percent of Mexico’s federal revenue is dependent on oil exports.

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Mexico’s growth slows in fourth quarter

1/29/2016 Financial Times

drawing bar chartAfter an encouraging third quarter, Mexico’s economy lost steam again as the weak peso failed to give a much hoped for boost to the country’s manufacturing sector and low crude prices continued to batter the energy sector.

Gross domestic product grew 0.6 per cent in the last three months of 2015 from the previous quarter, according to preliminary figures released by country’s National Statistics Institute on Friday.

The pace of expansion — in line with market expectations — is a shade weaker than the 0.8 per cent rate recorded in the third quarter.

Overall, Mexico grew 2.5 per cent in 2015, up from 2.1 per cent in 2014.

After a rocky start to the year, there was hope that Latin America’s number two economy was regaining its vigour following solid third quarter growth. But the strong gains being made in the services sector, powered by the pick up in consumer spending, are still being offset by the slump in the energy sector.

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Mexico’s Growth Outlook Raised

12/1/2015 The Wall Street Journal

mexican pesosMEXICO CITY—Private economists surveyed by the Bank of Mexico raised their expectations for the country’s economic growth this year, reversing a series of forecast cuts in recent months, as domestic demand is showing strong signs of recovery.

Mexico’s economy is likely to grow 2.44% this year, according to the median estimate of 37 economists polled by the central bank during November. The growth estimate was 2.29% in October and had fallen steadily for most of the year.

The rise in forecasts comes after the Mexican economy expanded at an annualized rate of 3% in the third quarter, the fastest in two years and well above expectations, as employment and wage growth along with record-low inflation fueled household consumption and the service sector.

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