O mi dios! El Peso!<G>
Maybe if BubbleBoy behaves himself, Fox will let him peg the ClownBuck to the almighty Peso!<G>
Note to self: cancel that "buying trip" to Jalisco for another year or two....<G>
quote.bloomberg.com
12/18 16:57
Mexican Peso Is World's Best Performer vs Dollar (Update4)
By Nick Benequista
Mexico City, Dec. 18 (Bloomberg) -- The Mexican peso outperformed other world currencies for the first time in at least 30 years, as investors say Latin America's largest economy has become more democratic and stable.
The peso's 5.8 percent gain against the dollar since January has been fueled in part by money fleeing Argentina, where three years of economic contraction and a currency crisis sparked fear of a devaluation. Mexico's stronger trade ties with the U.S. and Vicente Fox's victory in last year's elections, ending 70 years of one-party rule, have boosted investor confidence.
Mexico has ``all the ingredients to become a more stable, developed economy,'' said Simon Nocera, who helps manage $6 billion in emerging-market debt at Dresdner RCM Global Investors in San Francisco. Nocera increased his Mexican holdings by 50 percent this year.
The transformation of Mexico into a haven for emerging-market investors contrasts with the battering the economy took in 1994, when a currency crisis cut the peso's value in half. This year, the peso is one of just five currencies in the world to gain against the dollar, outperforming the Czech koruna, Polish zloty, Hungarian forint and Peruvian new sol.
Mexican inflation fell to a 30-year low in 2001, the stock market was the world's seventh best performer, and bond yields dropped to historic lows as foreigners snatched up the country's debt. Political developments have helped convince investors to move their money back into Mexico.
Fox's Victory
``Fox's win established that this is a democracy,'' said Oliver Kratz, who helps manage $5 billion in equities for Deutsche Asset Management. Kratz tripled his investments in Mexico this year to about $150 million.
Foreign investors held $51.37 billion in Mexican stocks at the end of October, or 44 percent of all publicly traded shares, according to the Mexican stock exchange. That's up from 41 percent in December of last year.
The influx of foreign capital to Mexico has helped the Mexican Bolsa Index rise 14.5 percent, making it the seventh-best- performing stock market in the world this year.
Interest rates have also fallen to record lows, reducing the borrowing costs for Mexican companies and encouraging consumer spending on credit. The yield on Mexico's 28-day Treasury bill, the benchmark for the country's interest rates, today fell 15 basis points to a record 6.3 percent.
Company Borrowing
The falling cost of capital in Mexico has prompted Grupo Bimbo SA, the world's third-largest bread maker, to return home for its financing needs this year with its first peso-denominated commercial paper program. The company has always sold debt and sought loans outside of Mexico.
Moody's Investors Service last year upgraded Mexico's sovereign debt rating to the lowest rung of the investment-grade category, Baa3, on its integration with the North American economy. Economists say Mexico's risk may decline further, pushing interest rates lower, following the example of Italy after it joined the European Union.
Bill Gross, managing director of Pacific Investment Management Co., recently recommended Mexico's 10-year bonds at 8.5 percent. His $48.2 billion Pimco Total Return Fund is the world's largest bond mutual fund.
Losing Steam
Still, some investors are already seeing Mexico's peso rally near its end as they begin shifting money to Brazil, where securities prices are cheaper.
``The Mexican market is expensive and the peso is overvalued,'' said Arjun Divecha, who helps manage $1.3 billion in emerging-market funds for Grantham Mayo Van Otterloo & Co. in Berkeley, California. ``We prefer Brazil.''
Another pillar of the peso, revenue from oil exports, may be eroded next year by falling crude prices. The average price of Mexican oil exports to the U.S. dropped to $13.43 a barrel on Tuesday, hovering near its lowest level in three years.
Foreign direct investment -- another factor boosting the peso -- may plunge 23 percent to $13.62 billion in 2002, from $17.68 billion this year, as companies scale back spending amid a global slowdown, according to a survey of 31 economists by Mexico's Central Bank.
Mexico's currency is expected to end the year at 9.4 pesos to the dollar and fall to 9.99 pesos by the end of 2002, according to the central-bank survey. The government is less optimistic. The proposed 2002 budget assumes the currency will average 10.1 pesos to the dollar next year.
Predicting the peso's movements has been difficult. Last December, 28 economists forecast on average that the peso would end this year at 10.42 to the dollar. That compares with Monday's closing price of 9.09.
`Good and Stable'
The Mexican peso was fixed at 12.5 pesos to the dollar until 1976, the year it depreciated 38 percent. The 1980's saw the peso slip further, with the currency dropping 73 percent in 1982 alone, to 10.36 U.S. cents. The government eventually chopped three zeroes off the peso in 1993, after the exchange rate reached more than 3,000 pesos per dollar.
Under Carlos Salinas de Gortari, president from 1988 to 1994, the peso traded within upper and lower limits maintained by government intervention. In 1994, the currency began to trade freely, precipitating a devaluation that caused the collapse of the country's banking sector. Consumer prices jumped 50 percent.
Those days are past, according to one investor.
``Other than the cloud of recession in the U.S., Mexico looks good and stable,'' said William Nemerever, who helps manage a $1 billion emerging-market bond fund at Grantham Mayo. ``As for devaluation and hyperinflation, that's not something we're worried about.'' |
