Mexico has all the makings to become the next rising star in the world economy, according to Alonso Madero Rivero, Fund Manager Director for the Actinver Financial Group.
Madero was guest speaker at the company’s conference “What to expect in global financial markets and how Mexico could be the place to invest,” held December 7 at the Hotel Real de Chapala with a full house in attendance.
He opened the presentation with an overview of the current status of world economy. Just hours after the United States released encouraging employment figures, the Mexican financial expert gave a gloomy forecast for that country’s immediate economic future.
“The U.S. economy is growing slowly, but it’s not enough. Retail sales are slowing down. The resilient U.S. consumer is showing signs of faltering. Investment prospects are dim,” he stated. “Corporations and banks have huge capital in their vaults, but they are keeping it there over uncertainty of what is happening in Washington.” Pointing to a single bright spot, he mentioned signs of modest recovery in the U.S. housing market.Madero went on to outline financial troubles that plague European countries, predicting that a mild recession lies on the horizon there. Looking at Asia, he said China appears to be losing its strength as a world leader in exports and Japan is posed for continuing problems of slow growth, inflation and debt.
In discussing investment issues, he reflected on shrinking yields on federal and ICB bonds over the last two decades. “In 1992 you needed to invest 650,000 USD to generate 50,000 per year in returns. Today you would have to put up 1.8 million – more than triple the amount – for the same result.”
Sunny side up
“It’s not all bad news. You just have to know where to invest,” Madero said, segueing into the upbeat angle for his audience. “You’re lucky, you’re in Mexico!”
He jumped into commentary on the rosy picture of Mexico’s future painted in the November 24 edition of the distinguished British weekly journal The Economist. The lengthy special report cited a slew of favorable trends such as Mexico’s free-trade agreements with 44 countries, a decade of inflation control and a growth rate that is out-performing Brazil, the long-time darling of Latin America. The country shows strong potential to turn in the top source for U.S. imports by 2018.
Madero threw in more statistics on the country’s macro-economics. Public debt that stood at 50 percent of GDP just a few years ago is down to 37 percent today. Money held in the central bank is at an all time high, with enough reserves to pay off external debt three times over and maintain a hedge against unforeseen events.
In addition, the manufacturing sector is showing solid growth. Favorable demographics – the country’s relatively young population – translate into greater consumer demand. Long-term investments in the booming Mexican stock market pull in over 18 percent in earnings.
Asked why Mexico is doing so well while the much of the world seems to be in financial disarray, Madero told the Reporter, “We finally understood the importance of fiscal discipline.” He credits former President Ernesto Zedillo with putting the country on track and successors Vicente Fox and Felipe Calderon for following in his steps.