Mexico gets a new president on Saturday, Enrique Pena Nieto of the long-standing Institutional Revolutionary Party (or PRI). He comes to power with an economy that's growing faster than its Latin American-rival Brazil for the first time in the past five years or so—and with markets that look highly appealing to investors.
The economy is expected to have a growth rate of 3.8% in 2012 vs. 1.5% for Brazil and 2.2% for the U.S, according to Bloomberg. And that recent track record has been drawing in investors like Bill Gross of PIMCO. (PIMCO's Emerging Local Bond Fund, PELBX, has about $14 billion in assets, of which 19% are Mexican and 14% are Brazilian based.)
"Following the results of the election, it seems more likely that some of the needed structural reforms (to smooth labour market rigidities, foster formal employment and private-sector deregulation) could be achieved in the coming six-year presidential term, leading to faster economic growth," wrote analysts at Canada's Scotiabank in a recent report.
During the final week of November, for instance, EPFR Global-tracked equity funds had inflows of nearly $14.9 billion, with Mexico-themed equity funds experiencing six-week highs, the research group reported Friday.
Global investors now own more than 50% of Mexico's $140-billion-plus fixed-rate peso bond market, Bloomberg said in a report on Friday. That's the highest proportion since February 2000. This has helped push returns on peso debt to close to 20% in dollars this year, which is about eight times the uptick in local-currency Brazilian bonds.
