Mexico, despite Donald Trump’s repeated attacks, represents the world’s 15th largest economy and is doing relatively well. Which could provide opportunities for those venturing into this emerging industrialized country. Several sectors of the Mexican economy are doing relatively well. This has prompted many investors to look for ways to invest in Mexico.
So, if you are looking for new ways to increase your income, here is a short list of how to invest in Mexico.
Consumption
The Mexican consumer has the wind in his sails and the companies in the sector are reaping the benefits. All the companies are showing sustainable growth, improving their profitability, and still have reasonable valuations. Consumption, which accounts for two-thirds of GDP, has been one of the main drivers of the Mexican economy over the past two years. Remittances from Mexicans working in the United States, the upward revision of wages in several sectors, and the government’s intention to create new social programs will encourage consumption.
Real estate
The real estate market is doing well in Mexico as house prices rose 4.73% in the first quarter of 2019 compared to the same period last year. The health of the sector’s companies and the continuation of free trade in North America also bode well for real estate.
“Exposure to commercial real estate is desirable, as most companies offer attractive dividend yields (5% to 8%) and should benefit from the new Canada-U.S.-Mexico Agreement.
The analysis also points out that interest rates in Mexico could also decline in the coming months. The consensus among analysts is that the Bank of Mexico is expected to cut its key rate in the next 12 months, according to a survey conducted by the Mexican central bank. If so, this could improve the valuations of real estate companies.
Real estate can also be seen as a defensive sector
Beware of exchange rate risk
In addition to the risk associated with the underlying securities, fluctuations in the peso can affect the performance of a Canadian investor. Fluctuations in the Mexican peso affect the value of Mexican securities traded in U.S. dollars in the United States (the “ADRs”) and, in turn, the value of those shares in Canadian dollars.
On the other hand, a moderate devaluation is not necessarily bad for the Mexican economy, as some Mexican companies could benefit from a weaker peso.
