National Market Overview
Mexico’s 2000 presidential election that ended more than seven decades of one party rule, solidified the nation’s democracy and paved the way for unprecedented investor confidence. A preponderance of indicators suggests predictably long-term internal as well as external economic and political factors extremely conducive to profitable investment in Mexico, especially related to tourism and retirement real estate.
2000
Mexico repaid, ahead of time, its debt to the International Monetary Fund, “Ending a difficult chapter in the nation’s history,” reported an Associated
Press article published September 1, 2000.
2001
The Mexican Peso was the only major currency to gain against the U.S.
Dollar in 2001, inflation in Mexico fell to a 30-year low, the nation’s stock market was the world's seventh-best performer, and Mexican bond yields dropped to historic lows as foreigners snatched up the country's debt.
Substantially indicative of investor confidence in Mexico during extremely unsettling global circumstances, in October, 2001, the month after the
terrorist acts of September 11, the flow of foreign capital into the Mexican stock market rose 6.19%.
2002
2002 foreign direct investment into Mexico increased 10.9% over 2001,
and between January 2001 and June 2002, was higher than for any period
in history, totaling over U.S. $30 billion.
The North American Free Trade Agreement increased U.S.-Mexico trade from U.S. $81.5 billion in 1993, the year before NAFTA took effect, to U.S. $232.3 billion in 2002.
In February, 2002, Standard and Poor’s upgraded México’s sovereign debt rating to the investment grade rating, already awarded by Fitch and Moody’s Investor Services, and Moody’s subsequently moved its rating one level higher.
Representing the strength of Mexican consumer spending, Wal-Mart reported record sales in Mexico of 106 billion dollars in 2002, up 13.1% from 2001.
2003
JP Morgan added Mexico bonds to its Government Bond Index, one of the leading instruments used by fund managers for deciding portfolio allocations.
As of January 17, according to the February, 2003, Allen W. Lloyd &
Associates’ monthly economic report, Mexico’s foreign reserves stood at
an historic high of 48.328 billion dollars, particularly noteworthy considering
that it has not been one of the central bank’s priorities in recent years.
Mexico’s successful January, 2003, issuance of $2 billion of 10-year global bonds with a 6.375% coupon and yield-to-maturity of 6.639%, a spread of
only 2.46 basis points over the 4.17% of 10-year U.S. Treasury Bonds, indicates strong investor confidence and also that the government had
already covered its refinancing needs for the year.
A February, 2003, Wall Street Journal article titled, “Mexico Real Estate Is
a Haven For U.S. Institutional Investors,” stated:
“War anxieties abroad, sluggish returns at home and Mexico's recent
recognition as investment-grade by all three major U.S. credit-rating
agencies are behind the surge of U.S. institutional cash seeking a haven
in Mexican real estate. According to industry analysts in both countries,
more than $1 billion has washed into Mexico from U.S. institutional investors over the past eight months, and a lot more is on the way.”
In March, Bank of America Corp. bought 24.9 percent of Mexico's third-
largest financial group, Grupo Financiero Santander-Serfin for U.S. $1.6
billion. Spain's Santander Central Hispano SA owns the remaining 75.1 percent.
U.S. remittances to Mexico jumped 29 percent in the first half of 2003
to $6.3 billion, outstripping the $5.2 billion Mexico received in direct foreign investment. Transfers are now second only to income from crude oil exports.
On September 29, Eusebio Rivera, Hispanic Initiative executive for Bank of America, said the bank is studying possible bi-national mortgages that would help Mexicans living in the United States buy property in Mexico. Bank of America is increasing the competitive pressure in a U.S. market serving more than 35 million Hispanics. Rivera said the bi-national mortgage, to be denominated in U.S. dollars, could be launched during the first quarter of 2004 with features similar to any mortgage in the U.S.
Billions of U.S. dollars are already invested and around a million U.S. citizens
are living in Mexico. There are more Mexicans in the U.S. now than Canadians
in Canada, and U.S. politicians are actively courting the Hispanic vote that Mexican President Vicente Fox can influence more than could any previous Mexican President. Mexico’s economy along with its positioning in the global marketplace are growing dynamically, and U.S. as well as Mexican business
and political leaders are more bilaterally motivated than ever before to encourage lasting and mutually advantageous relationships, creating a more hospitable, secure and financially viable opportunity than has ever existed for foreign investors.
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