Mexico ETF: Can It Rise Above Swine Flu and Violence Fears?

Mexico’s economy and ETF took a drubbing in the economic downturn. But now the Latin American country is looking to the future and figuring out its next step.

Mexico’s economy is showing early signs of recovering from its deepest recession since 1995. Economic activity rose 2.5% month-over-month in July, and industrial output and services are on the rebound. Less tourism could put a dent in economic growth, as receipts are predicted to decline 16% this year, reports the Latin Business Chronicle. Many visitors have stayed away because of drug violence and the H1N1 flu outbreak.

As the country pulls itself out of a recession, the government is examining fiscal policy and reform, states Ken Parks for The Wall Street Journal.

The government wants to raise income and excise taxes, as well as slap a special 2% sales tax on all goods and services as it tries to replace lost oil revenue and stave off a sovereign rating downgrade. The final answer should come by mid-November as Congress puts together its budget.

Mexico’s IPC index rose a remarkable 20% during the third quarter and 28% year-to-date, however, it has started to ease as U.S. economy continues to show signs of a wary recovery. The United States buys 80% of Mexico’s exports and employs millions of migrant laborers who sent home $25.1 billion in remittances last year.

• iShares MSCI Mexico Investable Mkt Idx (EWW): which is up 42.3% year-to-date.

Kevin Grewal contributed to this article.

Comments

[Analyste de...:]

"Many visitors have stayed away because of drug violence and the H1N1 flu outbreak." I question this hypothesis - that's more an excuse than a reason.

Look at the travel pattern of US visitors (83% of their market) - "it's the economy, stupid!" American residents aren't taking vacations like they used to because they're losing their jobs, hello!

If THAT wasn't the reason, we'd see Americans traveling abroad elsewhere - but US visits to Canada have cratered, too.
tinyurl.com/lh9wvn

As an investment opportunity, I'm sure there's a more complex story why the Mexican etf (EWW) has dramatically underperformed Brazil (EWZ) and Latin America (ILF). But I'm not seeing any compelling indicators to buy otherwise, here. Sorry!

Oct 14 01:54 PM

[Augustus:]

The oil is running out. Or at least production is down as they skim off the revenues and don't reinvest. Combine that with the effects of the drug wars and returning illegals from the US. Not a pretty future. I'm short EWW and it has sure left a mark. I still believe the country is going down the hole and will proceed at a faster rate as US unravels.

Oct 21 12:55 AM