Mexico: The next emerging-market trouble spot?
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Mexican revolutions: 1810, 1910 . . . and 2010?
Catching up on some reading over the weekend, I came across a provocative opinion piece on Mexico by economist Walter Molano of investment bank BCP Securities in Greenwich, Conn. It won’t give any comfort to U.S. investors who are having second thoughts about emerging markets in the wake of the deep declines in share prices in China, India and other developing nations this year, or because of newly rich Russia’s increasingly combative approach toward the West.
Writing on the economics website RGE Monitor last week, Molano noted that the Mexican economy this year has been ‘a sea of relative tranquillity in a convulsed world.’ He didn’t say, but I’ll add, that the country’s stock market has fared better than most, and the peso has been strong against the dollar.
But Molano sees parallels with the country’s economic and social situations today and the backdrops of 1810 and 1910 -- the years that the last two Mexican revolutions began:
Today, cracks are visible on the Mexican veneer. Violence is raging, as frustration from the lack of economic opportunities forces people to resort to narcotrafficking and kidnapping as a way to survive. So-called revolutionary groups are reappearing, blowing up pipelines and extorting businesses. In less than two years, Pemex will squeeze the last remaining oil out of Cantarell. This will be a body blow to the government’s fiscal accounts. The monopoly rents generated in telecommunications, media and cement may have produced some of the wealthiest men on the planet, but it saddled the economy with enormous costs and bottlenecks. The unwillingness of the victors of the Mexican Revolution to give quarter means that they will probably have to be dislodged by force. Unfortunately, the clock is running out. With less than two years to go until the 10th year of the new millennium, history suggests that another bloody revolution may be somewhere on the horizon.
Molano’s view is dire, but maybe no less so than that of many Mexicans. ‘We live in paranoia, chaos and anarchy,’ Cecilia Turriago, an economist at an undisclosed company, told a Bloomberg News reporter in Mexico City last weekend, where tens of thousands marched to protest soaring crime rates. ‘This is the only way to let these irresponsible authorities know that we’re tired of this and we’re not going to stand to live in a city that has been kidnapped.’
Read Molano’s commentary here.