Mexico may not get a lot of attention, but the investment community sure seems to recognize its prospects. The Bolsa Index is up more than 90% since the March 2009 lows and is just shy of its all-time high set in January 2010.
One of the primary reasons for this success is commodities. Mexico is one of the most promising areas to invest due to a renewed wave in exploration investments and a mining sector that is well-placed to profit from both increased global demand for commodities and a relatively investor-friendly regulatory environment.
“Further, the broader Mexican index is made up of solid companies, which should outperform most developed-world stock markets,” National Bank Financial geopolitical analyst Pierre Fournier says in a new report.
In 2009, Mexico’s 7% decline in GDP was among the worst performances in the world, underscoring the country’s dependence on the U.S. consumer. The next couple of years is expected to bring modest growth, but the country’s long-term economic, social and political fundamentals are strong enough to justify a bullish long-term investment perspective for Mexico, according to Mr. Fournier.
“Despite its overdependence on the United States, and strong competition from China and other developing countries, Mexico’s manufacturing sector is becoming increasingly competitive and is beginning to diversify its export markets,” he says. “The overwhelming security and geopolitical interests of the U.S. will also ensure that Mexico’s powerful neighbour will provide a backstop in case of need.”