Mexico: an economic basket case set to turn around
Mexico's economy shrank by 8.5% last year and has suffered one of the world’s worst Covid-19 death tolls. But things could be looking up.

Is Mexico a bargain or a basket case? Latin America’s second-biggest economy shrank by 8.5% last year and has suffered one of the world’s worst Covid-19 death tolls. Yet now it stands to gain from two key trends, Mathieu Savary of BCA Research told Barron’s.
Firstly, Joe Biden’s stimulus-fuelled boom is excellent news for the country’s manufacturing and tourism sectors: more than three-quarters of Mexican exports go to its northern neighbour. Secondly, a renewed focus on simplifying and “reshoring” global supply chains away from China could mean that corporate investment that once went to Asia is now directed towards Mexico. Local assets are now set to eclipse their emerging-market peers.
On a cyclically adjusted price/earnings ratio of 18.6 the local market trades on a reasonable valuation. The country’s benchmark IPC stock index has gained 7.5% so far this year but is still down by 3% since President Andrés Manuel López Obrador (known as “AMLO”) was elected in July 2018. Poor management saw the economy contract during his first year in office. Then Covid-19 arrived.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
AMLO has scared investors away by tearing up contracts and passing protectionist laws to prop up Pemex, the ailing state oil firm, says The Economist. The result? Investment in Mexico has fallen to the lowest level as a share of GDP for a quarter of a century. He has also overseen one of the world’s most inept pandemic responses: 47% of voters say AMLO is managing the economy badly, and most think he has failed to get a handle on organised crime. Yet so far he has managed to duck responsibility; his party leads in polls heading into mid-term elections in June.
Voters elected AMLO because they were fed up with decades of “corrupt dealings between Mexico’s narrow oligarchy of billionaires and the political class”, says Nathaniel Parish Flannery on Forbes.com. Sometimes described as a left-wing populist and noted for his “messiah” complex and intolerance of criticism, the real question is whether AMLO wants to become “Latin America’s next autocrat”.
The president’s belief system amounts to “ideological necrophilia”: he is attracted to ideologies that have been tried, and have failed, “an infinite number of times” , Moisés Naím of the Carnegie Endowment for International Peace told Jude Webber and Michael Stott in the Financial Times. AMLO is “deeply in love with bad ideas”. But for all of AMLO’s denunciations of critics as “lackeys of the rich” he also has an “unlikely obsession with fiscal prudence”. He refused to turn on the spending taps last year in response to the crisis. Mexico is unlikely to go completely “off the rails like Venezuela”, but expect a “bumpy ride”.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
8 of the best houses for sale with home cinemas
Houses for sale with home cinemas – from a modern oast-house style property in Kent to a house in Buckinghamshire with Dolby sound and bespoke seating
By Natasha Langan Published
-
Rachel Reeves faces £23 billion capital gains tax “black hole” – will she be forced to look elsewhere?
The fiscal watchdog has downgraded its forecast for capital gains tax revenues, leaving chancellor Rachel Reeves with £23 billion less than previously expected
By Katie Williams Published
-
Large cap stocks start to struggle – is it time for investors to reassess their focus?
Buying quality large caps worked very well last decade. A more volatile world will be a bigger challenge for these star stocks, says Cris Sholto Heaton
By Cris Sholto Heaton Published
-
How to generate income with fixed-interest investments
Public debt is overvalued, but other fixed-interest investments now look like a bargain, says Max King
By Max King Published
-
Three top-notch Taiwanese companies cashing in on the advent of AI
Opinion Eric Chan, investment director and co-manager of the Aberdeen Asian Income Fund, highlights three potential Taiwanese winners in the technology industry
By Eric Chan Published
-
Weight-loss drugs could revolutionise the economy – the investments to buy now
The new generation of weight-loss drugs are a boon for the overweight, but they also promise to change our relationship with food and revolutionise the economy
By Dr Matthew Partridge Published
-
Find tomorrow’s Asian giants while they are still smaller companies
Opinion Nitin Bajaj, portfolio manager of the Fidelity Asian Values trust, picks three Asian companies to invest in.
By Nitin Bajaj Published
-
AI will maintain Moody’s market lead, says Stephen Connolly
Opinion Veteran data provider Moody's has adapted well to the modern world, and is one of Warren Buffett’s longest-held investments
By Stephen Connolly Published
-
Is BlackRock World Mining gearing for a recovery?
Opinion After a frustrating year, BlackRock World Mining is positioned for growth and to capitalise on the sector's recovery
By Rupert Hargreaves Published
-
Should you limit exposure to US tech stocks?
An end to the AI boom would shake both US funds and global trackers. Here’s one way to trim exposure to US tech stocks
By Cris Sholto Heaton Published