The peso is an important part of the Mexico investment thesis because exports account for over a third of GDP in Latin America’s second-largest economy. So are oil prices because Mexico is one of the largest non-OPEC producers in Latin America.
“Several inflation-targeting central banks have begun to ease monetary policy (most notably Brazil) as the pass-through from weaker currencies is waning and the impact of the El Nino weather pattern is diminishing. Conversely, Mexico has been tightening monetary policy to control inflation and inflation expectations in the face of a weak and volatile peso. Fiscal consolidation continues to face challenges from weak growth and continued spending pressures, while debt dynamics remain adverse in numerous countries,” according to Fitch.
Some investors are reevaluating Brazilian stocks, something that has benchmark indexes there trading at the highest multiples in a decade. However, Brazilian assets can be more appealing with the help of a weaker dollar and stronger commodities prices. The Brazilian real has been one of the better-performing emerging markets currencies this year.
For more information on the Mexican markets, visit our Mexico category.