Mexican businessmen take their capital abroad

BANXICO: direct outward investment rose to USD$5.11 billion between January and September

Mexican businessmen take their capital abroad
Out of the 5.11 billion dollars invested abroad, 2.3 billion were transferred between July and September, which accounted for 45.2% of the total - Photo: Beawiharta/Reuters
English 08/12/2018 13:03 Leonor Flores Mexico City Actualizada 13:05
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Mexican businessmen decided to bet their capital abroad during the first nine months of 2018 with more intensity than in the same period in the past three years, according to the Bank of Mexico (BANXICO).

When presenting the balance of payments for the third trimester, the institute informed that direct outward investment by Mexican businessmen had risen to 5.11 billion dollars between the months of January and September 2018.

The number turned out to be seven times higher than last year, when direct outward investment represented 729 million dollars.

Most of the capital invested was registered during the first quarter, when Mexico’s presidential election ended with the landslide victory of leftist Andrés Manuel López Obrador.

Out of the 5.11 billion dollars invested abroad, 2.3 billion were transferred between July and September, which accounted for 45.2% of the total.

The remaining 54.8% was split as follows: 1.58 billion dollars during the first quarter and 1.21 billion during the second quarter.

According to experts, this sort of financial movements are perfectly normal, since investors see more opportunities of investing abroad and they take advantage of this, though financial uncertainty in Mexico is also a factor.

Although Mexico’s federal elections took place this year, the results in terms of outward investment were not the highest for a period in which a presidential election took place. During the first nine months of 2012, direct investment rose to 16.39 billion dollars.

Investments return

After the presidential election, Mexican businessmen returned 1.43 billion dollars worth of outward investment.

Between July and September 2018, some national residents decided to return the amounts they had put in deposits and financial investments abroad, according to information provided by BANXICO.

During the period leading up to the July 1 elections, during the second quarter, Mexicans had reduced their outward financial assets by 1.85 billion dollars, meaning that during the first two quarters of the year, investors decided to return their deposits.

However, private capital inflows registered during the third quarter of the present year are less than during the same period last year, when they accounted for 2.8 billion dollars.

The risks

Notwithstanding, the Bank of Mexico warned that certain financial risks prevail. And although a moderate expansion of the global economy is expected to occur between 2018 and 2019, prospects of economic growth on the short and middle term were revised downwards.

Said trend was the result of the evolution observed in some of the world’s most important economies, as well as the materialization of certain risks at the global scale, such as the increase of trade tensions and the tightening of global financial conditions, the institution explained.

The central bank pointed out that there were other risks for growth, such as volatility in oil prices and both political and geopolitical factors.

The institution claimed that said factors had contributed to certain episodes of volatility in financial markets and an overall negative performance in share prices for emerging economies.

BANXICO revealed that the current account deficit was of 5.82 billion dollars, which amounts to 1.6% of the Gross Domestic Product (GDP), similar to what was observed last year, though higher than the 1% of the second quarter of 2018.
 

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