VIEWPOINTTM

How Will Mexico Recover in 2010?
By Harriet Cochran Murrray • Cochran Real Estate - February 2010

John Naisbitt* writes about seeing the future as a picture puzzle. He believes you see the future finding connections between things that don’t seem to fit, things which are not obviously related, and things which sometimes seem to contradict a pattern.

Some pieces of a puzzle to examine:

• CURRENCY

Mexico’s peso is winning over the world’s largest foreign-exchange traders as the economic recovery in the neighboring U.S. boosts the value of one of the cheapest currencies in emerging markets.

“The Mexican peso offers the most potential upside in Latin America,” according to the manager of $4.6 billion at Aberdeen Asset Management Ltd. in London. “It’s massively undervalued. The U.S. economy recovery prospect clearly remains positive, which means Mexico’s exports to the U.S. will increase in value.”

 “The peso is probably the cheapest currency in the liquid emerging market,” said Kieran Curtis, who helps manage $1.2 billion in emerging-market debt in London at Aviva Investors, a unit of the U.K.’s largest insurer. “All the negative news is in the price and you’ve got the U.S. economy starting to turn upwards. You’ve also got oil stabilizing, which means a much better outlook for the budget in 12 months.

• RECESSION

Standard & Poor’s cut Mexico’s credit rating one level to BBB, the second-lowest investment-grade rating, on Dec. 14, 2009, and three weeks after Fitch Ratings did the same. The ratings companies cited concern that the budget deficit in Latin America’s second-largest economy would increase as oil production decreased.

“The bounce that the Mexican economy saw in the second half of 2009 is because of the expected rebound in the U.S. economy,” said Ramirez, the sole partner at Mexico City-based economic research firm Ecanal. “Once that wanes, Mexico lacks a domestic demand engine.”

• US ECONOMY

Martin Hutchinson “Money Morning” writes that those people bemoaning the increase in U.S. joblessness have a right to do so. They should also remember that unemployment is a direct result of what has been one of U.S. economy's greatest strengths: the ability to expand productivity in a recession.

The Conference Board publishes a Total Economy Database, which gives productivity growth figures - nearly 50 years' worth, in some cases - for most of the world's major economies. The results for 2009 were just released and the Conference Board's conclusions are important.  The U.S. economy is not as bad off as many pessimists believe.

• MEXICAN ECONOMY

Mexico, Latin America’s second-largest economy will expand 2.95 percent this year, after contracting 7 percent in 2009 Last year was the worst recession since the 1930s, according to the median forecast of 19 economists in a Bloomberg survey. This year’s predicted expansion will be the biggest rebound behind Russia’s developing countries.

“We expect recuperation this year in Mexico with the prospects of improvements in the U.S. economy,” said Gerardo Roman, the head of trading at Mexico City-based Actinver SA.

Newstin’s website reports: The Mexican government says the British-based bank HSBC will invest $700 million to increase the operating capital of its Mexico subsidiary by about 30 percent.

• WEATHER

Recent weather: Chicago is 7F and feels like minus 4F. New York is 18F, but feels like 1F.

• MEXICAN REAL ESTATE

Will the strength of the peso fuel investment in real estate from nationals? foreigners?

How important is weather in the choice of a place to live?

What do countries do to make sure their money is spent inside their borders?

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Harriet C. Murray
E-mail: harriet@casasandvillas.com.

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