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Mexican Real Estate and Economy Mid Year-2010
By Harriet Murray • September 2010

According to Ricardo Ortiz Lamadrid, attorney with Diaz Reus International Law firm:

Professional investors agree that the current time is great for investing in Latin America*. Europe has problems, as does the United States. Latin America includes Mexico, which also has the advantage of being the only Latin country also in North America.

Lamadrid goes on to write that as of the end of April of 2010, Latin American’s stock markets made some of the biggest gains, even when the world’s most developed markets were struggling. Taken as a whole, Latin American stock markets confirmed bigger gains than Asia except for China. Investment returns from Latin America tripled any other portfolio, including continental Europe.

If China is forecast to grow 9% this year and its currency (yuan) strengthens, it will continue to thirst for imports. Mexico is finding part of its growth tied to exporting goods to China, which has become its second most important export customer. Four per cent annual growth for Mexico would be nearly three times as much growth as the Euro Zone. Lamadrid believes Mexico and Brazil are the best investment markets in Latin America. 

Oil: Latin America’s oil supply is 10% of the world’s known stock, ahead of Iran, the world’s second-biggest producer. There has been no slow-down in demand for oil, so prices will not be flat.

Tourism aside, the Mexican economy has been stable for the past 8 years, and the peso has been firm.  Mexico has 12 free trade agreements with 43 countries, causing Mexican exports to surge.

Currently Mexico enjoys high foreign currency reserves and investment-grade debt rating.  Mexican companies are listed on the NYSE and NASDAQ, such as Wal-Mart de Mexico, Desarrolladora Homex and cement maker CEMEX. The interest in stocks of these two last companies is fueled by the belief that residential construction business will continue to grow as more Mexicans qualify for loans to build or buy their own homes.

“Business Monitor Online” notes in July, strong potential exists for growth in Mexico's low and middle income housing sector, which in turn provides a large and sustainable market upon which homebuilders may capitalize.

Mexico possesses very favorable housing fundamentals, based on strong and sustainable long-term demand, according to Sociedad Hipotecaria Federal, the agency responsible for overseeing Mexico's mortgage market. The country had a deficit of 8.9mn housing units at the end of 2009. With 54% of the population under the age of 30, according to the World Bank, the platform for growth is realistic.

Demand for affordable housing is strong and BMI is positive about the long-term growth prospects. In particular, BMI notes that recent activity within the sector points to a growing shift in focus towards those working within Mexico's informal economy which, according to the National Statistics Institute, constitutes over a quarter, or 12.5mn, of the total workforce. This segment of the population do not qualify for mortgages from state-run housing funds Infonavit or Fovissste, making it a largely untapped market, with a huge demand for low-cost housing provision.

“Weekly Forex Fundamentals” by Wachovia Corporation, August 2010 Reports:

The Mexican economy posted a surprisingly strong performance during the second quarter, growing by 7.6 percent compared to the year-earlier period.

The Mexican engine of growth during the recovery from last year's recession has been the auto manufacturing sector. Automobile production surged by almost 80 percent during the first half of the year.  The export customer is the USA.

Even the Mexican tourism sector, which suffered one of its worst crises in decades during 2009, posted a strong recovery during the second quarter of the year. Temporary accommodations surged by 11.6 percent during the second quarter of this year compared to the year-earlier period. The number of tourists coming into Mexico posted a surge of 36.1 percent in June. (This was measured as a three-month-moving average)

*Latin America has an area of approximately 21,069,500 km² (7,880,000 sq mi), almost 3.9% of the Earth's surface or 14.1% of its land surface area.

As of 2009, its population was estimated at more than 568 million and it’s combined GDP at 4.26 trillion United States dollars. Latin American is expected to have an economic growth rate of 4% average in 2010. Wikipedia. Email to a friend

Harriet C. Murray
E-mail: harriet@casasandvillas.com.

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