Foreign investment leaves Mexico as coronavirus crisis bites

Foreign investors have withdrawn over MXN $150 billion because of the current economic crisis

Foreign investment leaves Mexico as coronavirus crisis bites
Investors seek to escape uncertainty - Photo: File photo/EL UNIVERSAL
English 01/04/2020 17:56 Tláloc Puga Mexico City Actualizada 18:07

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Amid the economic crisis caused by the coronavirus, foreigners have begun to withdraw their investments from Mexico.

Figures of Mexico’s central bank Banxico show that the government’s debt in hands of foreign investors rose to MXN $64 billion on March 19, the lowest amount since December 5, 2019.

The loss of trust of investors is reflected in the withdrawal of over MXN $150 billion compared to the MXN $2.2 trillion on February 21, its highest level in 2020.

In particular, foreigners withdraw their investments from Cetes, considered the easiest instruments to Exchange for money.

As of March 19, they had MXN $167 billion in those assets, 77 billion less than on January 15, 2019, when they were MXN $244 billion.

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In addition to the uncertainty due to the spread of the coronavirus and the collapse of oil prices, investors have withdrawn their capital because of the slow economic development and its implications for public finances, as exposed by Gerardo Copca, an analyst in MetAnálisis.

“Foreigners see Pemex’s situation as very risky for Mexico’s finances,” he mentioned.

Banxico’s most recent figures reach March 19, so they do not include the result of the public referendum on March 21 endorsed by the government and criticized by businessmen which rejected Constellation Brands from building a brewery in Mexicali.

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They do not include, either, the announcement on March 26 in which Standard & Poor’s (S&P) downgraded Mexico and Pemex’s ratings with a negative perspective.

The announcement was unexpected as it was not foreseen for Moody's and S&P to reduce the grade of the country and analysts also thought that, after an adjustment of ratings, the perspective would be “stable” and not “negative,” as explains Copca.

In 2014, Moody’s raised Mexico’s sovereign grade to “A” category for the first time ever, which it still keeps today, a characteristic that attracted investors.

In 2010, the country became the only one in Latin America to enter the CitigroupWorld Government Fond Index.

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The MXN $150 billion that left the country exceed the almost MXN $113 billion planned for the INSABI Health Institute in 2020.

The number is also twice the MXN $70 billion assigned for the Youths Building the Future program for 2020, and it is five times bigger than the MXN $28 billion for the Planting Life program.

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