Literature is often a better guide to navigate the emerging markets than the cold algorithms of modern finance. This is definitely true with the magic realism genre of Latin American writers like Argentina’s Borges, Colombia’s García Márquez and Mexico’s Carlos Fuentes, the three men for whom I have struggled to achieve fluency (without success) in Spanish/Castellano. So when I think of emerging market equities in 2023, all I can think of is Count Leo Tolstoy’s observation in his classic Anna Karenina. “All happy families are alike. All unhappy families are different in their own way”. I made no secret about my table thumping bullishness on Mexican equities in multiple posts in 2023, as it has been vindicated since the Bolsa tracker EWW, is up a stellar 27% in US dollar terms year to date while Morgan Stanley’s Emerging Market index has been dragged down by China to a dismal 4%.
Porfirio Díaz, a dead Mexican dictator, once lamented “pobre México. Poor Mexico, so far from God, so close to the United States”. Sénior Dictator was 100% right for much of Mexican history since Uncle Sam stole California, Nevada, Arizona (once my home state before New York replaced it in my driver’s license and in my heart forever), New Mexico and above all, Texas. Yet Dictator Saheb would have been proven dead wrong in 2023, since closeness to the US is precisely why entire factory supply chains are moving from China to Mexico’s industrial hubs. Reshoring/near-shoring/friend-shoring trend is the main reason why the Mexican stock market tracker EWW and the peso was a license to print money in 2023. Caramba! Muchas gracias amigos y amigas! Will the fiesta continúe? I will bet anyone my last Burrito and strawberry margaritas at my fave Mexican joint in Dubai Marine Beach Resort, Jumeirah (Loca) that it will.
Mexico is Tolstoy’s happy family in 2023 as long as you do not live in one of those desert states owned by the narco-trafficante cartels who like to wage pitiless gunfights and mass public executions (remember Sicario?). Forgive me to bore you with carry to volatility ratios in FX but the Mexican peso is the best performing EM currency in the world, though Pakistan held that honour for a day in IMF Eid. Politics can be dicey in Mexico as Amlo’s seizure of a private railway attests. Electricity and access to water are iffy but Musk still chose to locate a Tesla plant in Monterrey, home of countless gringo fabs. A dream industrial property play? The Vestas ADR in Nueva York. I once lost my heart to a bonita señorita from Guadalajara I met in Cancun… Buena suerte México!
Also published on Medium.
