The Mexican debt securities that are being liquidated by foreign investors have been picked up by buyers in the domestic market. Afores such as banks, insurance companies and investment companies are demanding the papers and have thus avoided a financial catastrophe, observed Carlos Ramírez, an analyst at the Integralia consultancy and former president of the National Commission of the Retirement Savings System (Consar).
Information from Banco de México confirms that last year there was a divestment of 257,238 million pesos.
The sale of these securities implies an outflow of dollars, which puts pressure on the exchange rate, but the increase to 2.1 trillion dollars in the holding of debt securities by the siefores would have reduced the pressure.
So far this year, foreigners have sold 295.408 million pesos in government securities, an amount that is 15% higher than that settled in all of 2020. By November 30, the siefores had already increased to 2.3 billion pesos the purchases of Mexican debt bonds.
Despite this significant participation of buyers in the domestic market, it is difficult to anticipate that it will be enough to offset further disinvestment.
In 2021, the closing of positions in government securities will be completed for two consecutive years and the Mexican authorities would already have to make a decision to grant certainty, he said.
By changing the conditions that made Mexico an attractive market, foreign investors rearm their portfolios considering the world at their fingertips. Then they go to Korea or Taiwan. But “domestic investors are tied up” and have to invest at least 50% of their portfolio in national fixed income.
“The advantages are that we already have a market with firm hands that invests in Mexico and allows the development of domestic markets (…) but pension funds are growing at an accelerated rate.”
When the capital outflow began, in 2020, the real rate offered by Mexico was one of the highest in the world, he recalled. If Mexico raises rates it has to be based on inflation and not to make it a more attractive market. It is the loss of competitiveness that is behind it.
Beyond the world cycle
The governor of Banco de México, Alejandro Díaz de León, explained last week that the debt holdings of non-residents represents 18% of the total outstanding.
Likewise, he recognized that “they are elements that we constantly and continuously monitor, which are considered from different angles and nuances.”
When the unprecedented shock of the pandemic arrived and without knowing what could happen with the unprecedented closure of the economies, there was a generalized exit in all emerging markets.
There has been a recovery of flows where China has been particularly benefited, he said. The foregoing due to its entry into the World Government Bond Index, where Mexico has been since 2010.
Reference-www.eleconomista.com.mx