According to data from Banxicountil October 20 there is a significant outflow of capital from the country, he noted Felipe Mendozafinancial broker analyst AFTX.
This after until October 20, the last date available in figures from the Bank of Mexico, our country registers an outflow of 76 thousand 416.60 million pesos, 4.14% of the total that foreigners had invested in Mexico.
“Since April 2020, there has not been an exit from capitals of that size”he explained.
In an interview with this newspaper, he reviewed that investors are betting a lot on the United States now more developed economies where the returns on their variable income are higher, they will even move depending on what happens electorally.
“Apart from the fact that capital seeks to have better returns, we know that Mexico is experiencing a panorama uncertain due to its political climate and investment does not like that,” he stated.
“They don’t usually like it because of the uncertainty that can reflect and they prefer to make decisions to flow their money to other, slightly safer markets.”
In this regard, Janneth Quiroz, director of financial analysis at Monex, explained that for the moment this capital flight must be taken with caution, considering that many government securities operations are not accounted for by Banxico, because there are transactions that are made outside the country.
He recognized that there is a trend of a fall in 88 billion pesosat least until the last data provided.
“We still don’t know the full story of October… but this latest data implies a drop of 4.8%.”
This indicator, he added, can be affected by exchange rate variations… although it should still be followed with caution, but from January to October there have been some 14.4 billion dollars.
Quiroz said that there are several factors that can lead to the outflow of investments, such as the decision of the Fed and other banks on rates. Furthermore, nervousness about the change of power in Mexico in June moved capital towards other more attractive places with returns such as South Africa.
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Time.news Editor: Good morning, Felipe! Thank you for joining us today to discuss the significant capital outflow from Mexico, as highlighted by recent data from Banxico. Could you start by giving our readers an overview of what the current figures look like?
Felipe Mendoza: Good morning! Absolutely, it’s a pleasure to be here. As of October 20, Mexico has recorded a capital outflow amounting to 76,416.60 million pesos, which roughly represents 4.14% of the total foreign investments in the country. This figure is quite alarming since it’s the largest exit we’ve seen since April 2020.
Time.news Editor: That is indeed concerning. What do you believe is driving this outflow, especially considering the timing?
Felipe Mendoza: There are a couple of key factors at play here. Firstly, many investors are currently favoring the United States and other more developed economies where they can achieve better returns on their investments. It’s important to note that the global economic landscape is changing and evolving, pushing investors to look for more lucrative opportunities elsewhere.
Time.news Editor: You mentioned better returns—how do the returns in Mexico compare to those in the U.S.?
Felipe Mendoza: The gap has widened significantly in recent times. While Mexico traditionally provided competitive returns, various elements such as economic stability, political climate, and regulatory environments in the U.S. are making it more attractive. For instance, there’s the potential for heightened returns in U.S. equity markets, which draw investor attention away from Mexico.
Time.news Editor: This brings us to the political environment. You hinted earlier that investor sentiment can shift due to electoral dynamics. Could you elaborate on that?
Felipe Mendoza: Certainly. Political events, such as elections, can create uncertainty. Investors often reassess their risk profiles based on the outcomes or even the pre-election sentiment. If they perceive that a particular election may lead to unfavorable policies or instability, it can trigger capital flight, as seen in our current scenario.
Time.news Editor: That makes sense. In your opinion, what can Mexico do to address this outflow and regain investor confidence?
Felipe Mendoza: Mexico needs to focus on strengthening its economic fundamentals. This includes ensuring political stability, improving regulatory frameworks, and promoting economic growth through innovation and infrastructure. Additionally, transparent communication from government officials regarding policies and reforms can reassure investors.
Time.news Editor: It sounds like a multi-faceted approach is essential. As we look ahead, what are your predictions for future capital flows in and out of Mexico?
Felipe Mendoza: If current trends continue, and if investors see no qualitative changes in Mexico’s economic management and political landscape, we may witness sustained capital outflows. However, if the government can effectively address these issues, we could see a recovery of confidence leading to renewed inflow.
Time.news Editor: Thank you, Felipe. Your insights are invaluable as we navigate this complex economic landscape. Is there anything else you’d like to share with our readers?
Felipe Mendoza: Just to emphasize that informed investment decisions rely greatly on understanding the broader economic and political context. Staying informed and adaptable is key. Thank you for having me!
Time.news Editor: Thank you for your time, Felipe! We appreciate your expertise on this pressing issue.