In January of this year the theme of emerging markets became more of a primary investment rather than that of an alternative one. Many people ventured toward countries that have had rocket high growth over the last few years such as the BRIC countries of Brazil, Russia, India and China which received the preponderance of excitement in the emerging market approach.
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Today, the BRIC countries have been challenged to maintain upward momentum. The simmering down of the American market crisis and the expanding concerns for the Eurozone present a dilemma and are showing the effects. The Institute of International Finance (IIF), a global association of financial institutions, says that “net private capital flows to emerging market economies remain quite volatile and subject to disturbance from the euro area”. According to the research, data capital flows fell in 2011 to $1.03 trillion from $1.09 trillion in 2010 and are expected to fall again this year to $912 billion before rising to $994 billion in 2013.
The woes of the Eurozone monetary crisis have influenced investors to move money out of country and to seek safe haven in securities markets elsewhere. Brazil, Indonesia, China as well as others are no longer experiencing upward momentum and are now even in decline or negative.
However year after year, analysts continue to see strong signs of growth and long term prosperity in Mexico as many of the emerging markets troubles are not being seen in Mexico, in fact quite the opposite.
Brazil with its lucrative energy industry capitalized by the largest South American exchange, has attracted many investors to seek opportunities in Latin America. Brazil has enjoyed the influx of foreign investments and has gone further to encourage more interest from the North by recently lowering some of its staggeringly high tax penalties on returns and additionally allowing the shares of foreign instruments to take more of a part in portfolios of its domestic shareholders. “Investors are more cautious with Brazil,” Gustavo Mendonca, an economist with Oren Investimentos in Sao Paulo said this week. “The country has slowed very sharply and the prospects for long-term growth have gone downhill.”
Policy adjustments invite and attract investments, but many of these actions are late and under pressure by issues developing in other countries such as Spain. On the other hand, the opportunities for a rudimental Northern investor looking South of the Border to Mexico remain solid.
A key factor with Mexico is that it has some of the most definitive metrics that provide the level of transparency needed in a volatile global market. Unlike Brazil, Russia, India or China, Mexico is directly tied to American monetary policy with a correlation that does not exist in other Emerging Market countries and not surprisingly is also growing alongside the American economy.
Is Mexico beyond ridicule and examination? Of course not, but to begin to understand the benefits of investing in Mexico for the short and the long term we should begin with how Mexico plays a key role as a member of NAFTA (North American Free Trade Agreement). The implementation of NAFTA along with close inter-country relationships, ties Mexico’s trade and currency valuation to that of the US and Canada.
For example, in 2010 many believed the US would remain flat for the next two years, but we now see this was not the case. As a result of American performance, Mexico’s markets have also increased working in parallel a framework portfolio managers find affirmative Mexico has also maintained a weak peso over the last ten years. The Mexican peso has been priced at a competitive advantage with China.
Currency rates have helped Mexico realize an economic boom that continues to rise since the 90’s. The move to NAFTA in 1994 could be the key contributing factor for Mexico’s 600 percent increase in sales to the US. With inflation no longer under control in countries like China and Brazil, analysts are discovering that Mexico’s policies have proven successful in weathering many global financial catastrophes.
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As opportunities within the developed markets diminish, the Mexican marketplace is standing strong. As a top emerging market for the global investing community, particularly in Latin America, Mexico represents a substantial alternative to Brazil, home of the leading Latin American stock market. Mexico, although not a BRIC country, certainly has more promising economic stability and growth potential than some of the most mature economies. With a clear goal in sight, the local markets in Mexico continue to take measures that enhance liquidity in equities and derivatives trading which provide surety to its financial institutions and reach more investors abroad.
Source: FINAMEX /Dan Watkins, 01.08.2012 dwatkins@cc-speed.com
Filed under: Asia, BMV - Mexico, Brazil, China, Exchanges, Latin America, Mexico, News, Trading Technology, Asia, BMV Bolsa Mexicana de Valores, Brazil, BRIC, China 中国, Dan Watkins, DMA Direct Market Access, Economic Crisis, Emerging Markets, Exchanges, Finamex, Financial Crisis, Inflation, Investment, Latin America, MexDer, Mexico, Order Routing, Risk Management, Trade Connectivity
