Stick with Mexican stocks

Mexico’s president Enrique Peña Nieto has won worldwide praise for reforms designed to boost the economy’s growth potential. But he’s unpopular at home, where the “interlinked problems of violent crime and corruption” are the main concerns, says The Economist.

You can see why. Drug traffickers killed 43 students in the southern state of Guerrero, after police kidnapped them and handed them over.

And it seems that one of the firms in a consortium hoping to build a high-speed rail line owns a mansion that is the Peña family’s private residence.

These events are a reminder that economic reform won’t be enough if criminality and corruption continue to undermine growth.

Peña needs to “pursue reform of Mexico’s… police forces with the vigour, commitment and ingenuity he has brought to opening its energy and telecommunications markets”, says It won’t be easy, but Mexico has come a long way recently and this should be merely a setback, says Dimitra DeFotis in Barron’s.

Remember that the government “shattered a 75-year government energy monopoly” this year, while financial reforms should bolster transparency and property rights. Growth is rising, inflation is falling and equity valuations remain reasonable. Stick with Mexican stocks.