US dollar and economic inactivity could make Mexico a breeding ground of investment activity in the third quarter of 2019. Despite the slowdown of economic output in the fourth quarter of 2018 due to a decline in industrial output, the position remains positive. In the start of the new year, economic activity moved from 0.4% contraction rate to 0.2% seasonally adjusted growth in January. Among this and the yearly growth of more than 2% in 2018, investors have something to contemplate about in the existing climate.

In a recent meeting, Paul McNamara, Director at GAM Investments, discussed the issue of emerging markets (EM), suggesting that the time could be ideal to invest. Even though not as positive as some, McNamara stated that the current situation of the US dollar has made EM more attractive. 

“I think it’s a good time to buy, but I’m not sure I’d be banging the table,” McNamara told IG.

During the IG EM outlook for 2019 analysis, McNamara expanded further his point, mentioning that stocks and bonds were doing well in emerging markets. Linking with the fact they are a relatively ‘’cheap’’ commodity in an ‘’expensive’’ world, the analysts confirmed investments in EM could prove positive in 2019. Although relations with the US are still on shaky ground, the optimism for Mexico will come as reinforcement, as its economy is moving in the right direction. 

In late March, Mexico Economy Minister Graciela Marquez said she was collaborating with U.S. Commerce Secretary Wilbur Ross to settle the tomato suspension agreement. Moreover, the prospects for Mexico are strong. In fact, students at Cornell University noted that tech and fintech are becoming an integral part of Mexico’s economy. The city of Guadalajara, located in the outskirts of Tijuana, has become a centre for companies such as IBM, while Gartner’s recent survey has shown that 73% of Mexican companies plan to invest in complex data-processing application software.

While new industries are starting to emerge, Mexico remains a trade-driven economy. As a matter of fact, imports and exports make up 78% of the country’s GDP. The US-China trade war took centre stage during IG’s EM analysis. Despite reduced trade affecting economic activity, McNamara was swift to mention that these issues aren’t the main concern for EM investors and encouraged traders to look beyond any trade issues and towards investment. 

“Investment matters, not trade, so watch the credit numbers,” said McNamara.

In parallel to this, any trade issues between Mexico and the US may not be a major setback for investors. As long as big firms such as IBM continue to operate in the market, Mexico will continue to be a solid choice for EM traders. Increased trading activity in Mexico will contribute to a long-term benefit of becoming a more attractive proposition for big businesses. Fundamentally, as EM investment grows business investment grows and vice-versa. If this dynamic persists, Mexico’s economy could continue to grow as we move towards the second half of the year.