Find linked here a UBS report dated March 25th (today) that includes the company’s call on Mexico and the transcript of a very interesting conference call between four Mexico sector experts (namely UBS Mexico economist Gabriel Casillas, Latin America FX strategist Marcos Mollica, Latin America fixed income strategist Alvaro Vivanco and Mexico equity strategist Tomas Lajous). Here’s an excerpt from the report to whet your appetite. It’s well worth reading the rest, so use that link.
The main conclusions (of the conference call debate) are as follows: First, this will almost certainly continue to be a very weak year for Mexican growth, although we do look for stabilization by end-year and recovery in 2010. On the other hand, despite fears of widening current account deficit and external corporate debt, the Mexican foreign financing position actually looks well-supported – and this in turn means that although we don’t expect a sharp recovery in the level of the peso, we also don’t see sharp depreciation risks from here. With the surprise 75 basis-point cut by the central bank last Friday we are no longer taking strong positions in the domestic rates market, preferring to focus on external bonds and CDS. And finally, while the equity market has already fallen to very inexpensive levels, in light of ongoing earnings risks we prefer to wait for more visibility before jumping back in to buy stocks.
FWIW*, I think UBS has been calling Mexico really well recently and this paper just is more confirmation. There’s no need to fall for all the ‘failed state’ idiocy propagated by those who want to see that wall finished (Fox News et al) but on the other hand the big exposure the country has to the USA (traditionally the market for 80% of all exports) means that there are real economy woes still in the pipeline, so no need to exposure yet.