Mexico lindo y querido is the second largest economy in LATAM, only behind Brazil. It is not difficult to understand why: it is a bioceanic country, it has a direct border with the USA, it is one of the most populous countries in the world. There are several projections that place it as the new factory of the world replacing China in the face of the advance of its middle class, average income, life expectancy, and in general, the increase in the prosperity of its population.
Still, its currency is more unstable than the U.S. dollar as it is throughout the Latin American region. During 2016 it was one of the most devalued currencies in the world and, like all Latinos, Mexicans have the concept that the dollar is always on the rise but that is only true for countries like Argentina and Venezuela. Although in the last decade the strength of the US currency has been undeniable, when comparing returns it has not been the best option.
Another deeply rooted belief in the region is that investing in dollars is only buying the currency in an exchange house and that’s it. The reality, as always, is much more complex than this. Within all the possibilities offered by the market only in the years 2008, 2014, 2015 and 2016 were the best. But in the years 2004, 2005, 2009, 2010, 2012, 2017 and 2019 the profitability has been negative. Otherwise, the real gains have been too modest.
In conclusion, it is not just buying dollars, the joke is putting them to work. One of the great disadvantages of only saving in the currency is that it is exposed to political changes, price fluctuations in commodities, the monetary policy of the Federal Reserve of the United States, etc., without any real hedging mechanism.
The world has become rapidly globalized. The technological development experienced thirty years ago has been impressive and focuses, above all, on connectivity and better access to basic goods and services. The financial and real estate market has not been the exception.
Currently, many investment instruments have been developed which are very easy to access without having to live in the USA, hire a broker in the Big Apple or do six semesters of finance in San Marino. Listed below are the best products.
- Cetes: better known as the Certificates of the Treasury of the Federation is a debt instrument of Mexico. Although the investment is made in pesos, if it is bought with the profitability given by the savings in dollars it has been greater in ten years of recent years. Although the investment mechanism is similar to that of the purchase of dollars, the payment is guaranteed by the State.
For this option it is convenient to consult well with experts to know the market and learn to identify trends in currency prices.
- US treasury bonds: they are quite popular in the Aztec country, although it is not so easy to make this type of investment. Its fame lies in the strength of the world’s largest economy. The risk is that the profitability may be lower than inflation, but it is being invested in dollars not in Mexican pesos. Depending on the length of stay, there are three types:
- T-Bills: range from four weeks to a year. They are sold at a discount to face value. When they are due, the government pays the full face value.
- T-Notes: They have a duration from two years to 10 years and you earn a fixed interest every six months and then the face value at maturity. Price and interest are determined at auction.
- T-Bonds: have a term of twenty to thirty years. They are also paid at maturity and the price and interest rate are determined in an auction.
- TIPS: profitability is adjusted for inflation, ranging from five years to thirty.
They can be purchased, either in TreasuryDirect (for institutions or individuals) having credit life in the United States or through an intermediary for those who do not have credit life in the USA.
- Mexican Stock Exchange: the Mexican Stock Exchange trades shares of all kinds of companies around the world. American companies are no exception. It can be done directly, through a broker, a bank or financial institution or through the new investment platforms such as eToro, Folionet, etc.
There are programs and funds that fit each type of investor or the investment objective being pursued. It is important before making each investment, to know your risk profile, the amount you are willing to invest and, above all, how much you are willing to lose. Remember that there is a product that fits each case, the important thing is that you take the time to make each decision.
- UDIS: recently created, 1996 after the tequila crisis, they were designed with the aim of solving any commercial act through the increase in inflation. It was once a way to access mortgage loans, but now its main attraction lies in the protection it offers from inflation, the value is universal for the entire Mexican Republic and variation of the value, as well as its publication, depends exclusively on the Bank of Mexico.
- ETFS: one of the most popular financial instruments within the Latin stock market. Its objective is to replicate a financial index, either the S&P500 or Nasdaq, combining the most liquid companies and forming an investment package.
The biggest attraction lies in the diversification it offers, in addition to the relative security for investors.
You can invest in them through Fintech investment platforms such as AlphaCredit, Bitso, Clip, Coru, Credijusto, Kavak, Konfío, Kubo Financiero, Kueski, Mibo, Stori and UnDosTres. The important thing is to take the time to get to know each one and which one best suits your needs.
- Investment funds: basically it is the meeting of the savings of several people and with that look for better alternatives in the market. The final product combines stocks, equity assets, fixed income, real estate investments, foreign exchange market, etc. depending on the risk profile of the investor.
The most famous are in BBVA, Sura, Citibanamex and HSBC. It is important that you diversify and do not invest all your savings in a single product. Take your time to understand which is the best option according to your goals and/or needs
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- Real Estate in Miami: the most important non-financial asset for Latinos is the house. Mexicans are no exception to this rule. Despite the crisis derived from the pandemic, the Aztec real estate sector was not greatly affected. According to 2021 figures, the intention to buy housing increased by 20%, housing rents increased by 35% and migration to intermediary cities has pushed the dynamics of the sector.
But the reality is that the Mexican peso is a weaker currency than the dollar. And in times of uncertainty, diversifying investments is key. That’s why there’s the real estate market in Miami, Orlando and South Florida. Mexico is arguably the country that benefits most from the cultural and geographical proximity to the United States. In addition to the possibility of renting real estate in dollars at a time when the dollar is so revalued against the Mexican peso.
Mexican investors over the years have been acquiring a representative notoriety in the business world of Miami and South Florida. In the last decade and, in particular, in the last six years it has been noticed that the volume of its investments in the city and in the state has had a significant increase that grows year after year. Mexicans have come with their capital to make investments in all sectors of the economy: tourism, commerce, entertainment, media, transport, logistics, gastronomy, real estate, etc.
In the real estate market has not been the exception, Miami has awakened an appetite for Mexicans: some want to buy real estate to spend a season a year and live the city in all its splendor, others seek in the real estate market rental opportunities in dollars, there is also a group of high-profile professional Mexicans who have emigrated to the city with their families for work reasons and as a result buy real estate to live
At PFS Realty Group Given our real estate activity we are focused on advising those individuals and families who are interested in making investments of this type in Miami, Orlando and South Florida, we have been working for more than twenty (20) years and for this, twenty (20) years that give us a specialty in what we do, if you want to explore real estate investment opportunities, We can schedule a meeting, face-to-face or virtual, to expand this information. Write to us at info@pfsrealty.kinsta.cloud and also visit our www.pfsblog.kinsta.cloud website to learn more about us.