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Michael Kadish
12/3/95
.4
President Clinton has been under close scrutiny for a few months now because of his recent fifty billion dollar bailout to Mexico. While many fingers have been pointed and names thrown at Bill, Mexico itself has been the butt of most of the scoffing. They must adhere to Hispanic stereotypes and there peso drop blamed on Mexican irresponsibility. Not only is this not fair it is being blamed on the opposite set of people.
In 1992 and '93 the dollar cost approximately 3.1 pesos. Suddenly then, in 1994, why did Mexico's economy go haywire? In and up to the 1990's, the Mexican stock market was a good investors' market. Albeit, it was undervalued, but it was fairly dependable. However, just a few weeks ago, it suddenly hit the lowest ever. Not with counting in with inflation figured in- the lowest, but the lowest- period ever. So, for the second question, why did the Mexican stock market hit rock bottom less than a week after Wall Street hit four thousand points?
All in all and overall, both the peso, and the Mexican stock can be blamed for two things. Two events, two rather very significant events took place less than a month apart. Firstly is the revolt in Chiapas. Secondly, the strange assassinations of Zelliano, practically the president elect, and the secretary general of the ruling Revolutionary Party.
These incidents scared away the foreign investors, so essential to the economy. Most of these foreign investors looked northward to invest, to explain the closeness of Wall Streets boom so close to Mexico's bust. The current rate of pesos is 7.1 to the greenback. Last year it was a much lower 3.1. Two years ago the Mexican government floated the peso over one thousand times the value of it, to be approximately one third of a dollar. This was the first time the Mexican peso had been floated in its near 150 year history. Suddenly, though, had it not been for Clinton, they would have to float it again much sooner than they ever thought.
Had only one of the three tragedies occurred it would probably be a boost to their economy. People would think that Mexico was going to go under a major change, which is, for some reason, considered a good investment. Had two occurred, it would have only been a minor recession. Since there were three it appears to an investor that Mexico is going to Hell in a hand bag. It will take quite a while for this to wear off.
I, personally am not a stockbroker, but this would be a good time to invest in Mexico. Their stocks have nowhere to go but up, and if a serious revolution was planned the president would be frothing at the mouth to bomb the rebels. On the other hand, if you are in Mexico presently, and are anything but a poor Catholic Mexican, get a passport and move out. Go north or south, it doesn't matter. It's just that it's very dangerous to be a minority when radical changes are occurring.