The Mexican economy is on the move. With a Gross Domestic Product of $1.144 trillion and around $373 billion in exports shipped around the world, the Central American nation is piquing the interest of global investors. Looking to get in on the action? Where should you invest your money in the economy and exports of Mexico?
In this article, we’ll take a look at some of the top exports of Mexico to give you a better sense of the nation’s main economic drivers. We’ll also go over some of the main political considerations and stock suggestions for investing in today’s Mexico. By the time you’ve finished this article, you should know what is the main export of Mexico. You’ll also have a good idea whether or not adding a position in Mexico is right for your portfolio.
Automobile Industry – the Main Products Made in Mexico
As of today, the top exports of Mexico are related to automobiles. Vehicles and vehicular products made in Mexico accounted for 23.6 percent of the country’s total exports in 2016. That translates to around $88.1 billion. Amazingly, within just a seven-year time frame Mexico’s automotive export industry went up 160 percent. Automakers from around the world have been investing Mexican plants mainly due to the country’s proximity to the USA market. Some of the companies that have set up manufacturing plants in Mexico include Nissan, General Motors, and Volkswagen. In addition to cars, Mexico is a huge producer of auto accessories and parts.
Other Mexico Top Exports
Following the automobile industry, Mexico’s second highest export is electrical machinery. Accounting for 20.4 percent of the country’s export ratio, electrical machinery brought the country $76.4 billion in 2016.
The third largest exports of Mexico, computer machinery products, are somewhat related to electrical machinery. This segment of the Mexican export market is around 16.5 percent (which translates to $61.7 billion).
A few other popular exports include mineral fuels, medical equipment, furniture, plastics, gems, vegetables and fruit. The top foods Mexico currently exports include tomatoes, watermelons, lemons, and avocados. Most of these exports go to either U.S. or Canada.
What Multinational Stocks Look Interesting Considering Mexico’s Economy?
Due to the relative weakness of the Mexican peso in comparison to the USD, many companies have decided to set up plants and even headquarters in Mexico. Investors have been eager to invest in some of the hottest exports of Mexico in recent years. A few companies to keep on your radar include Ford Motor Company and United Technologies Corporation. Both of these companies have expanded their operations in various Mexican cities to take advantage of Mexico’s cheaper peso and prime location. Not only are these two solid companies, they also sport great dividends.
Is It Safe to Invest In Mexico Right Now?
Many people pulled out of Mexican stocks due to President Trump’s strong rhetoric against the North American Free Trade Agreement (NAFTA). Some contrarian investors, however, started buying up Mexican stocks at low prices once Donald Trump took office. Why? Well, a few analysts suggest Trump’s tough words won’t necessarily turn into radical policy.
As of today, around 80 percent of Mexico’s exports go straight to the USA. The two countries are so strongly tied together that it will be almost impossible for Trump to impose huge tariffs on Mexican goods. Of course, investing in Mexico does carry risks, but it all depends on your political worldview.
If you believe Trump will be able to tear up NAFTA, then you’ll want to stay away from investing in Mexico. As of today, Mexico’s economic growth relies heavily on its ability to export goods to the United States. If the U.S. takes that away from Mexico, the nation could spiral downhill quickly.
What Mexican Stocks Should You Buy?
The most popular plays in the Mexican market today are consumer stocks. As of today, only around 15 percent of Mexicans have a credit card, so there’s plenty of room for loan growth in the future. One obvious stock in the Mexican market is América Móvil. Although América Móvil doesn’t have a monopoly on the Mexican cellphone industry anymore, over half of cellphone users in Mexico use this company. This company is traded publically on the NYSE under the ticker AMX.
A few other popular consumer stocks include Walmex (listed as WALMEX on Mexican stock exchange), Banco Santander (NYSE: SAN), and Coca-Cola Femsa (NYSE: KOF). Illustrious analysts from banks such as Goldman Sachs and Credit Suisse have “buy” ratings on many of these companies. If you think that the relative weakness of the Mexican peso will attract more tourists to Mexico, you could also consider investing in Mexican airports like Grupo Aeroportuario del Sureste (NYSE: ASR).
Should We Bet on the Mexican Peso?
Another way to invest in Mexico is to go into the currency markets. After the Mexican peso fell after Donald Trump’s election, many emerging market investors started to bet that the peso would end 2017 on an up note. Their positivity on the peso has to do both with technicals and fundamentals.
Put simply, most analysts believe there’s too much bad news priced into the peso. They don’t believe the currency can go any lower. Plus, the peso has been hitting many technical breakout levels in recent months. The peso has been climbing for a while now, and it’s considered one of the strongest performing emerging market currencies.
As you can see, there are many opportunities for investment considering the exports of Mexico and the overall Mexican economy. Mexico’s great location on America’s border and relatively low prices have led numerous big-name companies to set up shop in major Mexican cities. The power of Mexico’s export market has helped to strengthen consumers’ purchasing power.
As mentioned above, consumer stocks are perhaps the best to pick at this moment if you want to get involved in Mexico. You could also purchase iShares MSCI Mexico exchange (ticker EWW) if you want to bet on the country’s overall economy and the strength of the exports of Mexico.
While there are risks to investing in Mexico, there are also some wonderful opportunities for growth. Be sure to take a closer look at the exciting things going on south of the U.S. border. Who knows? You could find a great deal.