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A Good Start for Mexico

March 25, 2013 – 5:01 pm

Global_Stock_Market_3-300x191Since we wrote about India in a recent market commentary I thought we would give a little attention to Mexico. Not long ago the attention to our neighbors south of the border was all about the drug wars and their spill over affect in the U.S. Now with the election of a new Mexican president everyone is excited about reforms taking place.

This is reforms by the party, PRI, returning to power. It lost their majority several years ago after holding it for about 70 years. The excitement is centered around a cross-party reform package already agreed to. Many of these reforms may propel Mexico to another level of economic growth. It already enjoys growth running at 4% and the hope is for it to increase in the years ahead.

However, to really spur that kind of accelerated growth they are going to have to tackle more difficult issues. A major issue is their closed-minded and constitutional restrictive energy policy. Mexico has as much known oil reserves as Kuwait but they don’t have the technical know-how or the financial backing to exploit it. They will not let any foreign companies participate with the only player allowed being their government controlled national oil company, Pemex. To change this will require a constitutional change, a task the new government plans on tackling.

Let’s hope it works though there are plenty of doubts. How many times have we seen a good start in reforms fall short in Mexico where 50% of the country is in poverty? We cheer their efforts, a robust and stable neighbor will help solve the illegal immigration problem and maybe someday we can look at immigration on both our borders as the same. More oil flowing north will mean cheaper prices for everyone and anything that helps us will help them as one of our major trading parties. I also like the possible investment opportunities that could result if they succeed.

Good Trading
Steve Peasley

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