At the height of the Mexican Peso Crisis it was the Rubin bailout in the Clinton Administration that made the Treasury loan to Mexico at 10% interest. This saved the Mexican bond market and the peso. The result was their ability to repay the load in less time than expected.
At the time a loan of $52 billion was supported by the US Treasury's ability to borrow at 5%. The difference of 5% amounted to a huge profit for the United States. This was brought out in the e-mail streams that I provided at the time with the profit margin widely quoted in the press.
With this legacy, the Mexican economy should continue to prosper under more conservative internal management and the US Treasury more liable to come to rescue than if under the previous type of Administration policy.
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When it really comes down to it - the Mexican economy is very dependent on the US economy. With the upturn in US markets and increasing confidence - Mexico should soon follow.
ReplyDeleteThe biggest issue besides the drug "problem" (which is a US problem not a Mexcan problem as far as the source of the trouble) is trade. The NAFTA provisions are now targeted to be put aside.
We don't have a Bob Rubin to come to the rescue if the peso should tank but the days of Salinas corruption have ended long ago and Mexico's Central Bank is on a much better footing.
The rebound at first will leave Mexico behide but this will leave us with more time to carefully pick our investment targets.
My only target today was IBA. Meat consumption in a growing economy is rapidly growing. The major inputs are somewhat dependent on US imports of corn. With the blizzard ongoing now in the mid-west, soil moisture would point to a record corn crop and sharply lower prices making the profit margins for this company to expand.