Mexico is quickly becoming a major force to be reckoned with on the world economic stage, with a booming economy, low unemployment, affordable luxury real estate and a large labor force, it's easy to see why the following companies are investing heavily in what has become Latin America's second largest economy.
BUSINESS, DOMESTIC & FOREIGN INVESTMENT CAPITAL
The lower house of Mexico’s congress voted this week to loosen longstanding restrictions on foreigners who buy Mexico real estate along the nation’s coast and borders. The measure will become law following approval from the senate and a majority of state legislatures.
"Thousands of Americans and Canadians already own beach homes in Mexico anyway and many more are interested in buying,” writes ABC News.
“Jatco has confirmed plans to invest US$220m to construct a second automatic transmission plant in Mexico,” writes Automotive World. “The new facility will have annual production capacity of 400,000 units and be the Nissan Group transmission specialist’s second plant in Mexico.”
“Chrysler de Mexico reported sales of 8,003 units, representing an increase in retail sales of 2.3 percent,” writes Automotive World. According to Bruno Cattori, president and CEO of Chrysler de Mexico, the company “keeps its retail sales growth trend as a result of new product launches.”
“Mexico’s auto production has almost doubled since 2009,” writes Bloomberg. “Now its steel industry is spending almost $3 billion on new and improved factories.”
In addition, the Mexican Automobile Industry Assoc. expects output to rise by as much as 40 percent by 2017, as Mexico has “become a magnet for automakers seeking low labor-cost output with access to North and South American markets and other regions through the nation’s trade agreements with more than 40 countries.”
Respected U.S. minerals advisory group Behre Dolbear has named Mexico as one of the top five best places in the world for mining investment in 2013.
Budapest Business Journal
A meeting between Hungary’s state secretary for foreign affairs Péter Szííjjártó and Mexico’s deputy foreign minister Juan Manual Gómez Robledo resulted in a new agreement to “boost trade and help more Mexican companies enter the Hungarian market.”
“Mexico has secured its place as the new favorite among investors looking to put cash into Latin America,” writes CNBC. “Investors have been encouraged by signs that the new Mexican president will continue to push for economic change.”
In addition, the iShares MSCI Mexico Capped exchange traded fund rose more than 17 percent over the last 12 months, compared to a lost of more than 15 percent by Brazil’s iShares MSCI Brazil Capped Index Fund.
Real estate in Mexico is once again making headlines, with the Financial Times calling it ‘red hot’ in a recent article. The news comes just weeks after President Enrique Peña Nieto vowed to push a variety of progressive economic reforms through Congress and on the heels of his success in already passing significant reforms in Mexico’s telecom and education sectors.
As Mexico continues to capitalize on its rising status as one of the world’s strongest economies, energy sources and manufacturing hubs,President Enrique Peña Nieto is actively working to increase trade with Japanese business leaders and has announced an agreement with Japan’s Mitsui Corporation to build a new $460 million gas pipeline.
“The deal will provide cheaper and more abundant energy for Latin America’s second-largest economy,” writes the Financial Times. “Mexico is thought to sit on one of the world’s largest shale gas reserves.”
The auto industry in Mexico is booming, with powerful growth from both car markers and associated industries, according to new figures released by the Mexican Auto Industry Association (AMIA). Since 2009 production has nearly doubled, spurring expectations that the nation will produce more than 4 million cars each year by 2017, compared to last year’s 2.9 million, and 2013 is already showing another substantial increase.
“In April alone,Mexican auto production surged to 238,766 units, a 15.6 percent increase from the 206,489 of the same month of last year,AMIA reported,” writes The Financial Times.
The growth is largely due to new investments from Audi, Honda, Mazda, Nissan and Volkswagen, along with related investments in Mexico’s steel industry. In recent weeks,Audi has begun construction on a $1.3 billion assembly plant located in Mexico real estate, while Honda has announced that it will invest in a new $470 million transmission plant and Volkswagen has opened a $550 million engine plant in Silao, Mexico. Similarly,Mazda is investing around $650 million in a new plant and Nissan will open a new $2 billion plant by late 2013, while Ford and GM continue to invest hundreds of millions into their existing plants.
Spanish Bank BBVA Bancomer will reportedly invest more than $3.5 billion dollars in Mexico over the next four years, highlighting the bank’s growing presence in Latin America. The money will be used to renovate its branches, upgrade information technology and to fund the construction of new operations centers,as well as a new corporate headquarters.
“We are convinced that, in the coming years,Mexico has been consolidated as one of the most important and dynamic economies in the world, and will lead global growth,” stated Francisco Gonzalez, executive chairman of BBVA, according to a report by NASDAQ. “The investment is the largest in the history of BBVA Bancomer.”
Global investing news service Money Morning has dubbed investing in Mexico a “100-year opportunity,” citing the evolution of the nation’s government and economy over the last century and the positive repercussions that are already in the pipeline that are stemming from last year’s election of President Enrique Pena Nieto.
“There is quite a bit of long-term upside ahead [in Mexico],” writes Money Morning. “The short term picture looks pretty good, too. The Economist team of forecasters already puts Mexican growth at 3.7 percent in 2013 and 3.9 percent in 2014. Further, the Banco de Mexico has just cut interest rates from 4 percent to 3.5 percent and that should help the economy.”
New York Daily News
Mexico Aims to Boost Trade with Brazil
“There’s a mutual interest to strengthen trade relations,” said Mexican Foreign Relations Secretary Jose Antonio Meade according to New York Daily News. “We believe it can be achieved by business meetings by sectors.”
In addition,Mexico and Brazil have eliminated the visa requirement for Mexican and Brazilian citizens to visit one another’s countries for up to 180 days in an effort to farther stimulate tourism and mutual business opportunities.
Eurocopter Invests $550 Million in Mexico
“Eurocopter plans to invest up to $550 million in Mexico over the next few years,” writes New York Daily News. According to Eurocopter’s president and CEO Lutz Berling, the company “is ready to continue investing.”
The investment will go toward a new unit in the state of Queretaro that will produce a variety of state of the art aircraft components. Eurocopter has been in Mexico for more than 30 years and will create at least 200 specialized jobs.
New York Daily News
Glassmaker Plans $146 Million Investment in Mexico
“Mexico’s Vitro, one of the world’s largest glassmakers, said it planned to invest $146 million in different products this year,” writes the New York Daily News. Vitro will focus on increasing production and modernizing plants in Mexico.
Nestle Invests $130 Million in Mexico
Nestle has invested $130 million to expand a factory in Mexico, boosting the plant’s capacity by 30 percent and making it the largest of its kind in the world. Nestle also boosted its workforce at the factory by 10 percent.
IBM has announced that it will move the manufacturing of Power Systems, PureSystems and PureFlex Systems servers to Guadalajara,Mexico by mid-2014.
In 2013 alone, investment in Mexico’s mining sector will near $8 billion, while the five-year projection is currently hovering around at least $25 billion, according to Mario Cantu Suarez, who is Mexico’s chief mining official.
“A healthy boost in foreign direct investment in the first quarter underscored confidence in Latin America’s No. 2 economy,” writes Reuters. “Foreign direct investment reached $4.99 billion in the first quarter. The lion share of the direct investment went into the manufacturing sector and came from the United States.”
Reuters reports that fibras – which are Mexico’s version of real estate investment trusts, or REITs – are experiencing unprecedented growth, with no signs of slowing down.
“Domestic and foreign investors are piling into Mexican real estate investment trusts, which are strongly outperforming the wider stock market,” writes Reuters.
Reuters reports that foreign investors are buying record amounts of Mexican stocks and bonds, totaling more than $80 billion in the fourth quarter alone. According to the central bank, this is nearly five times more than the amount of foreign investment dollars that went into Brazil during the same period.
“Foreign portfolio investment inflows doubled in 2012 from a year earlier on optimism about reforms promised by Mexico’s new government and solid growth of about double that of Brazil,Latin America’s biggest economy,” writes Reuters. “Investment in both private and public sector assets picked up in the fourth quarter to notch quarterly records for the period since 1995, when the current data series began.”
“Union Pacific’s connections to Mexico will be an important driver of business growth for the company in the coming years,” writes Travel Weekly. “Union Pacific is one of the leading railroad companies in the United States. Trade between the two countries is expected to rise as Mexico is forecasted to export more goods into U.S. than China by 2018.”
U.S. President Barack Obama met with Mexican President Enrique Peña Nieto last week, calling for broader economic relations between the two countries, while praising Mexico’s efforts to expand its economy and its democratic system.
“I have come to Mexico because it is time to put old mindsets aside,” stated Obama according to an article published by USA Today. “It’s time to recognize new realities, including the impressive progress in today’s Mexico.”
The leaders hope this growing relationship will improve communication and cooperation between the two nations, which will ultimately build a stronger economy for all of North America. Obama’s three-day trip to Mexico was his fourth visit as president and the first since Peña Nieto took office last December. Annual bilateral trade between the U.S. and Mexico is already close to half a trillion dollars.
Wall Street Journal
Western Union Expands in Mexico
As Mexico continues to forge ahead by leaps and bounds in the global economy, the Western Union Company has announced that it has entered into a five-year agreement with Bancoppel to offer its services at close to 1,000 new locations.
“Mexico is a strategic market for Western Union,” stated Odilon Almeida, president of Western Union in the Americas, according to The Wall Street Journal. “We see a great opportunity to expand in Mexico through existing and new Agent relationships such as Bancoppel – while combining the strengths of our global brand and network to offer innovative financial solutions to consumers and businesses.”
“Foreign direct investment is expected to surge this year and for years to come,” writes the Wall Street Journal. “Mexico’s Economy Ministry said that its tally for first-quarter FDI was just shy of $5 billion, up sharply from a year earlier.”
Global Offering Raises Nearly $800 Million for Mexican REIT
The Wall Street Journal reports that the Mexico real estate investment trust (REIT) known as Terra has raised more than $772 million in a global offering. According to the Mexican stock exchange, more than 47 percent of the sale went to Mexican investors, while more than 52 percent went to international investors.
“Mexican REITs, known by their Spanish acronym as Fibras, are relatively new instruments that have become sought after by Mexican pension funds and wealthy individuals due to their steady revenue streams and long-term horizons,” writes the WSJ. “Wealthy individual investors typically allocate between 15 and 20 percent of their portfolios to real estate.”
For the last 75 years, the government has controlled Mexico’s massive petroleum and shale gas resources in a state-run monopoly known as PEMEX. Today, moving the company into the modern era and opening it up to foreign investment is one of President Enrique Peña Nieto’s top priorities.
“The U.S. Energy Information Administration calculates that Mexico’s gas deposits are the fourth largest in the world, with the potential to ensure decades of low-cost energy and give manufacturers an additional incentive to invest in Mexico over places such as China,” writes The Washington Post. “Mexico remains the third-largest source of foreign oil for the United States after Canada and Saudi Arabia.”
The reforms are expected to take place by late summer and will likely give outsiders the opportunity to invest in Mexico’s wealth of energy resources. The changes will also reportedly introduce new technology and accelerate growth; thereby lowering electricity costs for families and businesses throughout the country.
Investment and financial services giant Wells Fargo called Mexico a “smart investment decision” in a recent article, citing the country’s robust economic growth, booming car export industry and consistently rising level of national productivity.
“Investors who 10 years ago looked beyond the headlines and found merit in the country’s economic fundamentals and enlightened fiscal policies have seen the Mexican Bolsa equity index average a 21.7 percent annual gain during the 2003-2012 decade,” writes Wells Fargo. “Further bolstering the Mexican economy has been an expansion of ‘near-shoring’ with many international manufacturers, particularly automotive companies, seeking shorter supply chains and proximity to the U.S. market.”
“Mexico’s constitution forces it to run a balanced budget in sharp contrast to Washington,” writes the Financial Times. “Meanwhile its debt-to-GDP ratio is less than 45 percent and falling, compared to more than 90 percent in the U.S., according to the International Monetary Fund (IMF).”
Reforms in Mexico Should Lead to "Healthy Growth"
Savvy members of the global investment community have taken notice of recent reforms taking place in Mexico real estate. In addition,Standard & Poor’s upgraded the outlook for Mexico’s sovereign credit rating in early March, moving it from stable to positive, which could indicate an additional upswing over the next year and a half or so.
“These moves should help set the foundation for healthy growth,” writes Morningstar. “Some of this appreciation has been driven by strong foreign investment inflows into Mexico.”
In fact, according to the Mexican central bank, foreign investors dumped more than $80 billion into stocks and bonds this February, marking it a record month for the nation’s market and surpassing nearly five times the inflows to Brazilian securities over the same period.
New York Times
Mexico’s economy and its stock market have been posting strong gains in recent weeks, causing the nation’s treasury department to increase estimates for economic growth in 2014 to at least 4 percent. This beats projected growth for 2013, which remains at around 3.5 percent. In addition,Mexico’s IPC index has risen for seven sessions in a row, causing analysts to predict further gains ahead.
“Mexico’s growth prospects are attracting investment banks and investors hunting for ways to gain greater exposure to international markets,” writes Elizabeth Malkin for the New York Times. “At the same time, foreign manufacturers are returning to Mexico as a production platform for the recovering American market.”
“Mexico will allow increased foreign investment in its telecom sector as part of a reform bill announced Monday,” writes Reuters. “The country will allow up to 100 percent foreign investment in telecoms and up to 49 percent foreign investment in broadcast media and communications.”
“Mexico’s auto production increased by 1.6 percent in February compared to the same month a year earlier,” writes Reuters.
Wall Street Journal
Mexico’s January Retail Sales Grow 1.8% On Year
“Mexican retail sales rose in January from the year-earlier month, and also posted a gain from December,” writes the Wall Street Journal. “Sales rose 1.8 percent on better sales of products such as automobile parts, fuels and lubricants, paper products, personal-care items, clothing and shoes, among others. Retail sales for all of 2012 grew 3.7 percent compared with the year earlier.”
Fitch Upgrades Economic Rating
Fitch Ratings upgraded Mexico’s credit rating from BBB to BBB+ this May, following news that proposed economic reforms would boost growth in Latin America’s second largest economy. This move is expected to help further reduce Mexico’s already low borrowing costs and has helped to boost the peso.
“Fitch noted Mexico’s economic resilience despite a sluggish economy in the U.S.,Mexico’s key trading partner, with three-year growth averaging 4.5 percent in 2012,” writes the Wall Street Journal. “The agency also praised Mexico’s prudent macro-economic policy, which underpins the country’s low inflation.”
“Mexico’s National Statistics Institute says the country’s economy grew 3.9 percent in 2012, thanks in part to a rise in agricultural activity,” writes Yahoo! News. “Agricultural activity grew by 7.2 percent in the last quarter of the year.”
In addition, Mexico’s new federal government, led by President Enrique Peña Nieto, is actively working to pass a series of reforms in the telecommunications and energy sectors that analysts expect will create even more growth and employment opportunities in Mexico.
Mexico Named "21st Century’s New Export Leader"
A major shift in where and how the world’s manufacturing dollars are being spent is the focus of reports published by Yahoo! Finance and StreetAuthority last week. In China, wages have been steadily climbing at a rate of at least 12 percent each year over the last decade. This, combined with the high cost of shipping goods from the other side of the globe, is prompting a growing number of manufacturers to consider Mexico as a more cost effective alternative.
“The evidence clearly shows which country is poised to own economic growth in the next decade,” writes Joseph Hogue of the StreetAuthority network. “[Mexico] has a quarter of the transportation costs as goods exported from China and a boom in natural resources that makes the energy to run plants extremely cheap.”
According to a survey conducted in 2011 by online manufacturing superstore MFG.com, at least 21 percent of North American manufacturers said they plan to bring production closer to the U.S. and 38 percent are actively working to do so as soon as possible. What all of this means in the bigger picture is that Mexico will continue to attract new foreign investment dollars in record amounts.
Wall Street Journal
The iShares MSCI Mexico Capped exchange-traded fund (ETF) has been getting quite a bit of attention in the news lately, attracting more than $1.4 billion in net inflows through the beginning of April. This is in stark contrast to the iShares MSCI Brazil ETF, which has seen outflows reaching upwards of $236 million since 2012.
“Fund investors keep pouring money into Mexico’s white-hot stock market, joining a rush to embrace sweeping economic reforms ushered in by a new government,” writes The Wall Street Journal. “The country’s stock market is trading at a forward price-earnings ratio of around 17, as compared to Brazil’s multiple of 11.”
According to the report,Ben Marks, chief investment officer at Marks Group Wealth Management said, “Mexico’s transition into a more competitive marketplace for foreign investors is looking better and better.”
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.”