The Donald Trump Show’s surprise winner just might be Mexico

All things being equal, Mexico seems poised to capitalize on the twin benefits of a surging U.S. economy and a weak currency.
All things being equal, Mexico seems poised to capitalize on the twin benefits of a surging U.S. economy and a weak currency.

By Joe Chidley / Financial Post

A surface reading of the Donald Trump’s impact on the global economy suggests that there is one clear and present loser: Mexico. The new president has hurled so many threats down Mexico way, it’s actually hard to remember all of them.

Let’s see, there’s the wall (which he’ll get Mexico to pay for, somehow), and the “big border tax” on Mexican imports, and also the broader border adjustment tax on all imports. There’s NAFTA renegotiation (which, we Canadians like to think, will hurt Mexico more than us) and the crackdown on undocumented immigrants, and the snubs to Mexico’s leadership.

I’m probably missing something, but even that short list adds up to bad news for NAFTA’s third amigo, right? You would think investors must be running for the hills.

And for a time, they did: In the 10 days following Trump’s Nov. 8 victory, the Mexican Bolsa index, or Mexbol, fell off a cliff, plummeting 8.5 per cent and sealing Mexico’s fate as one of the 10 worst-performing markets in the world in 2016.

The story since then, however, provides an interesting counter-story to all the bad news for Mexico. In fact, despite all the doom-and-gloom and the threats from the White House, investors in the Mexican market have been doing rather well, thank you.

Last Friday, the iShares MSCI Mexico ETF – a popular entry point to the Mexican market for outside investors – rose 1.5 per cent, putting the fund’s three-month return near 13 per cent.

More remarkable, perhaps, was that the Mexbol hit (and then surpassed) 48,470 — where it sat at end of day on Nov. 8, 2016, when Hillary Clinton was still widely expected to become the next president of the United States.

So, you might ask yourself, what happened to the Trump effect? Well, this might be in part a case where the disease is part of the cure — namely, the impact on the Mexican peso and the boost it has given to Mexico’s export competitiveness.

http://business.financialpost.com/investing/investing-pro/the-donald-trump-shows-surprise-winner-just-might-be-mexico

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