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Money pours into Mexico
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August 27, 1996: 8:55 p.m. ET
Falling interest rates, lower inflation are boosting investment prospects
From Correspondent Katharine Barrett
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NEW YORK (CNNfn) - Money poured into Mexico from across the borders Tuesday as investors bid of the nation's stock market up more than 2 percent to a new record high.
The move had some analysts asking: "Why now?"
The answer lies in ongoing improvement of Mexico's economy and stock market, which both hit rock bottom in early 1995.
Both the market and the overall economy fell after Mexico devalued the peso in late 1994 in the wake of broad financial problems.
But this month, it became clear that a post-devaluation recession has ended, while international investment has been returning to the nation's markets.
"We've turned much more positive about Mexico in the past few weeks," said Geoffrey Dennis, Latin American equity strategist at Bear Stearns.
"Interest rates have come down a long way and probably will go down further," Dennis said, adding that the Mexican government "is managing the peso very well ... and you're clearly getting a quite decent economic recovery now."
Mexican interest rates have fallen back to where they stood before the peso devaluation, while inflation is slowing and business and consumer confidence are growing.
All these improvements are helping to attract capital from a variety of nations, including Brazil and Argentina, where markets are slumping.
Yet while more money is coming in, Jorge Mariscal, Latin American equity strategist at Goldman Sachs, noted that the inflows are still less than 25 percent of records set three years ago.
"It's dedicated global portfolio managers who had no exposure to emerging markets last year -- who almost completely left Mexico and Latin America in 1994 and 1995 -- who are beginning to get their feet wet again," he said.
While risks remain, analysts forecast the Mexican stock market will jump 12 percent or more by year's end.
It's been a long time coming, but investors are once again favoring Mexico as one of Latin America's most-promising markets.
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