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Zacks Calls Mexico a "Long-Term Winner"

27 May, 2013

Mexico’s booming economy has given rise to a variety of excellent investment options,due in part to the many reforms that have been underway since President Enrique Peña Nieto took office late last year. Most recently,Zacks covered the Mexico ETF,which research analysts have dubbed a “long-term winner” and an “excellent investment.”

“Economists think these critical reforms could push growth to about 6 percent,” writes Zacks. “As a result of open market policies,fiscal discipline,labor reforms and prudent macroeconomic measures adopted by the country,the economy has been on a sound footing – currently growing at about 4 percent.”

President Peña Nieto has already demonstrated his commitment to these reforms,taking strong action to improve Mexico’s telecom,energy and education sectors during the first few months of taking office,followed by progressive tax reforms and a new law that restricts the ability of various parties to block regulatory measures. In addition,he has demonstrated the ability to take on a number of powerful entities in order to reign in corruption.

As a result of his efforts,both S&P and Fitch have conveyed optimism and have announced that Mexico’s already investment grade credit rating could be upgraded again in the near future. According to the International Monetary Fund,the nation’s budget deficit is holding strong at around 2.5 percent of the GDP and gross debt is hovering at just over 40 percent of its GDP,compared to a budget deficit of 8.6 percent and gross debt of more than 107 percent in the U.S.

In addition,thanks to a major upswing in foreign investments throughout a variety of economic sectors,including Mexico real estate,foreign exchange reserves have reached an all time high of $167 billion in recent months,prompting the peso to appreciate more than 5 percent against the U.S. dollar so far in 2013. Inflation is also holding steady at around 4.7 percent and is expected to fall to around 3 percent before the end of this year.

All of this positive news has prompted Zacks to remain positive on the Mexico ETF,which remains one of their top choices among emerging markets with a #1 Strong Buy ranking. In fact,the iShares Mexico Capped Investable Market Index Fund,which was launched in 1996,now has more than $3 billion in assets under management. These assets are diversified among 46 holdings,including America Movil,Consumer Staples and Telecom,which allows it to take advantage of growing consumer demand in Mexico.