Introduction
In the current global climate of uncertainty driven by the United States’ trade dynamics, Mexico should offer a stable and predictable environment for long-term investors who wish to remain in the country, according to Jonathan Fortun, senior economist at the Institute of International Finance (IIF).
Investor Perspective
Fortun explained that investors understand the geopolitical context is short-term, while Mexico’s commercial potential with the U.S. and Canada offers long-term opportunities. He emphasized that Mexico can capitalize on this by addressing internal issues to generate confidence.
Internal Improvements
- Strengthening respect for the rule of law
- Improving the administration of justice and judicial resolutions
- Restoring the institutional strength of economic authorities
Beyond Mexico’s Control
Fortun clarified that certain factors are outside Mexico’s control, such as the weakness of the U.S. dollar, the fiscal outlook of the United States, or global opinions on the world’s leading economy.
Attracting Foreign Direct Investment
To maintain attractiveness for foreign direct investment (FDI), Mexican authorities should focus on implementing changes within their reach, alongside legislators and the private sector.
The Role of the Mexican Peso
Fortun, responsible for reviewing emerging market debt and equity operations, noted that the Mexican peso’s appreciation over the past year and a half should be viewed in context of the weakening U.S. dollar.
Peso’s Strength as a Double-Edged Sword
While the strong peso benefits Mexican exports, it also increases costs for technology and labor compared to other countries, potentially eroding Mexico’s competitive advantage.
Investor Interest in the Peso
Fortun observed that investors view the Mexican peso as a parallel to the U.S. market, seeking Norteamerican exposure without direct U.S. dollar risk.
Key Questions and Answers
- Q: What can Mexico do to attract FDI amid global uncertainty? A: Mexico should focus on internal improvements, such as strengthening the rule of law, improving justice administration, and restoring economic authority institutions.
- Q: How does the U.S. dollar’s weakness affect Mexico? A: The U.S. dollar’s weakness has contributed to the Mexican peso’s appreciation, which benefits Mexico’s emerging market status.
- Q: What are the implications of a strong Mexican peso for exports? A: While a strong peso benefits exports, it also increases costs for technology and labor, potentially diminishing Mexico’s competitive advantage.
