Banks forecast brighter Mexico outlook
With presidential elections and the threat to Nafta hanging over Mexico, international investors pared risk to the country and deal flow slowed. Finally, clarity is returning and the prospects for capital markets activity are looking better. But could Amlo’s presidency change prospects?
The victory of Andrés Manuel López Obrador (Amlo) in Mexico’s presidential elections may not have been the markets’ preferred outcome, but at least the arrival of clarity has led to a positive investment narrative.
Amlo’s resounding victory should give him legislative flexibility, while his conciliatory messages to the markets immediately after the election – in contrast to the bellicose messages during the campaign – have also settled nerves. Throw in the much-reduced risk around the collapse of the North American Free Trade Agreement (Nafta) and many of the ingredients for a recovery in deal activity are in place.
Only the general and global jitters around emerging markets – sparked by Turkey but that also highlight other countries’ structural and political weaknesses – could limit the capacity of the recovery, Mexican-based bankers say.
‘Recovery’ may be too strong a word: debt capital markets activity from Mexican issuers has been resilient so far in 2018. Nearly $30 billion has been raised year to date (compared with $46.8 billion in 2018 and $49.4 billion in 2016), according to Dealogic, but this has been skewed to the sovereign, which issued $5 billion in the first week in January alone, and large quasi-sovereign issuers.