It would also be a worrying sign that the malaise that has hit the southern cone can affect the Pacific Alliance – that group of countries whose economic and financial management orthodoxy was supposed to ensure that membership of this club remained exclusive to those with strong and stable credit ratings.
Sadly, it seems that the fund managers’ prediction could be correct. For only the second time since the Mexican peso was floated, the Mexican current account turned into surplus in the second quarter of 2019.
And the swing was sharp – from a deficit of 1.3% in the first quarter to a 1.0% surplus. The drivers were sharp contractions in imports for consumption (the country is in a technical recession) and capital goods (which signals lower future growth).
And Mexicans are moving capital offshore at a rate that suggests they also worry that the cyclical downturn could turn into something more structural, with a decline in the investment climate pushing the economy into stagflation.