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Mexico Stock Market Strengthens as Fears Dissipate

The economical stability of Mexico can often be a concern for potential investors in real estate and other industries. While the tourism industry has gone from strength to strength, uncertainty surrounding US-Mexico trade relations has caused concern for long-term growth. However, lingering fears that were ignited during last years US presidential election are finally beginning to dissipate as Mexico proves it’s resilience. The run-up to, and indeed the outcome, of the 2016 US presidential election ignited fear in the international markets, casting a dark cloud over the future of Mexico. This was mainly due to President Trump’s rhetoric surrounding US-Mexico relations. However, well into 2017, Mexico’s solid performance has quietened many concerns. The Mexico stock market has regained it’s composure, not least because Mexico’s main stock index, Mexbol, is reaching record highs. 

U.S. & Mexico – A Reliant Relationship

Many of the issues that surrounded the Mexico stock market in 2016 stemmed from the uncertainty of US/Mexico trade relations. The significant size of both countries’ economies and their shared bored of more than 3,000 km results in an important trade relationship. NAFTA, a trade agreement between Mexico,  the US and Canada cements this trade relationship. In total, 80% of Mexican exports are headed for the States. That’s a very reliant relationship.

With Trump’s past threats concerning NAFTA negotiations, including imposing harsh tariffs on Mexican exports and building the infamous border wall, a strong sense of unease developed. International markets held their breath for a steep downturn in Mexico’s growth, and then they fled. The Mexico stock market suffered as stocks were dropped and the Mexican peso was sold off. As a result, the peso plummeted and so did the economy. By the end of 2016, the peso was the worst performing currency against the dollar, albeit unsurprisingly.

Mexico Stock Market Fights Back With Unexpected Growth

However, along with much of President Trump’s plans pre-office, the threats surrounding US-Mexico trade have failed to come to fruition. Subsequently, fear of the Mexico economy under performing has subsided. A lack of progress in the NAFTA negotiations has resulted in a rebound of sorts with the weak Mexican peso. The Mexican economy grew 2.6% in the first quarter of 2017. In July of this year, the Mexico stock market gained a victory as Mexbol hit a record high of $51,772.37 share prices due to increased investor confidence. Moreover, the peso has gone from strength to strength to become the best performing currency against the US dollar with a 15% growth. While this growth isn’t phenomenal, it is much more than predicted and is expected to continue into 2018.

What This Means for Investors and the Real Estate Market

While the peso was recently at it’s weakest, it did offer a fantastic exchange rate for real estate investors to snap up a bargain. More square meters for your money is never a bad thing. However an unstable economy doesn’t incite confidence in investors. This holds true for the Mexico real estate markets as much as the Mexico stock market. A strong local currency is never a bad thing when directly investing into a foreign country.

While the current exchange rate may not be as enticing as it was a few months ago, it is still favourable. Mexico real estate is still a much more attractive investment option than the States or Canada. This is mainly due to the fact that prices are a fraction of what similar properties in the States or Canada would cost. Moreover, property taxes are also minuscule in comparison to Mexico’s neighbours to the north.

A property in Mexico still costs you less, but it can also gain you more. Annual appreciation in the Riviera Maya specifically is between 9 and 12%. Furthermore, the tourism industry is currently growing as a rate of 3 times the global industry average. This has developed a keen vacation rental market that can add another 10% ROI annually.

The political storm that has hung over Mexico in recent months has failed to muster a deluge. And, happily, the palm trees still stand tall and the Mexican sun shines. Mexico’s resilience and incredible regrowth in this time of uncertainty should only inspire excitement for the possibilities of the future.