Mexico’s Foreign Portfolio Inflow Doubled In 2012 To $80.2 Billion

February 25, 2013Mexicoby EW News Desk Team


Foreign portfolio investments in Mexico doubled from $40.6 billion in 2011 to $80.2 billion last year, showed data from the central bank on Monday, following a pick up in investor confidence on optimism about reforms promised by Mexico's new government.

According to Reuters, investment in both private and public sector assets peaked in the fourth quarter of last year – with foreign inflows to Mexican stocks and corporate debt seeing $5.61 billion in investments in the final quarter, up from $1.21 billion in the third quarter, and comprising nearly half of the $10.04 billion for the entire year.

Total portfolio investment inflows also accelerated slightly to $23.53 billion for the fourth quarter, with flows into peso-denominated bonds hitting more than $14 billion and helping portfolio inflows to reach $80.23 billion in the full year.

"What you see there is that we had more money coming into stocks in the fourth quarter, a big pick-up after the election," UBS economist Rafael de la Fuente said.

The total foreign portfolio inflow was also almost five times more than in Brazil, the central bank reported.

Nonetheless, Brazil still managed to attract much more foreign investment into direct assets such as factories and infrastructure, netting $65.27 billion in foreign direct investment in 2012 compared to Mexico's $12.66 billion.

For the first time in decades, Mexico’s central bank also said that FDI outflows actually surpassed inflows in 2012, with Mexican corporations investing about $25.6 billion last year overseas in buying up plants and companies, more than twice what foreigners invested directly in Mexican firms.

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“The nation’s receiving an extremely large quantity of external resources both due to global liquidity conditions and because of conditions in Mexico,” said Rafael Camarena, an economist at Grupo Financiero Santander Mexico SAB, to Bloomberg. “There’s a great confidence on the part of investors in the financial market to buy Mexican bonds and stocks.”

But, “Mexico is in no position to become a net exporter of capital,” admitted economist Ernesto Piedras, of the Mexico City-based Competitive Intelligence Unit, to AP. “Financing capital is a scarce resource in Mexico.”

Few, however, believe that the trend will be permanent. Analysts point to the fact that the foreign buying spree by Mexicans was mostly spurred by Carlos Slim, the world’s richest man, whose companies spent billion last year in European telecoms companies and foreign oil assets.

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“These big companies ... shouldn’t be satanized for taking capital abroad. This should be seen as a sign of the growth of Mexican companies,” noted Mexico City economist Ramiro Tovar.

“Mexico, like any other country, has a right to have multinationals,” Tovar added, arguing that the country could start getting more income from dividend, profit and royalty payments from abroad as a result of the investments.

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