A $25 Billion ‘Leak’… What Else Is Missing

Capital inflows into the Mexican economy record continuous outflows into the government debt market, marking a historic second year in a row in 2021.

is the main reason loss of appetite investors Mexican property for foreigners Fixed income in a risk-averse environment, added to other factors.

Some are associated with the economic effects of the pandemic and the expectation of a tightening of global financial conditions, particularly in the United States.

in the last two years Not only did the holdings of government securities held by non-residents in Mexico contract, but even there was a net outflow of resources,

According to data published yesterday by the Bank of Mexico, at the end of last December, the holding of these instruments in the hands of foreign investors was one trillion 633 thousand 447 million pesos, the lowest level since the end of February 2013.

That is, the sale of 257 thousand 601 million pesos in the debt of the Mexican government last year.

The exit in 2021 was slightly higher than in 2020, when they added an unprecedented amount up to that year of 257 thousand 239 million pesos.

This means that in two years reduction in the holding of government bonds by investors foreigners were 514 thousand 840 million pesos,

In terms of US currency, The accumulated withdrawal is equal to Some 24 thousand 672 million dollars, represents the biggest ‘leak’ since the 1994 crisis.

This size has been the adjustment of positions in the government securities market denominated in pesos since the start of the pandemic in February 2020.

Even then, Less Appetite for Mexican Property fixed income already comes health emergency for COVID-19Foreigners’ holding in government securities reached a record high in February 2019.

Since then there has been an accumulated outflow of capital inflows from non-residents into the country of 640 thousand 481 million pesos.

In 2021, the government debt market saw low participation of foreign investors.

Notably, the outflow into M bonds was of the order of 237 thousand 865 million pesos.

investor Continue to prioritize the assets of other emerging economies, especially the debt of Asian countries.

China, which has already returned to its pre-pandemic growth trend, has been the preferred destination for capital flows in recent months.

The inclusion of the world’s second largest economy in various global fixed income indices has made it an alternative destination for capital flows.

Although there is little willingness to hold positions on paper issued by the Mexican government, There is also an environment of high uncertainty in the markets financial International,

The uncertainty is primarily linked to global inflation, which continues to rise.

Earlier today in the United States it will be reported that December would have had the highest annual record for consumer inflation in practically four decades.

The data would confirm that, in addition to accelerating the withdrawal of monetary stimulus, Federal Reserve prepares to raise its rate of federal funds.

Three rate hikes are now projected for 2022, which could begin as early as next March, when the Fed will also end its bond purchases.

Tightening of financial conditions will be a risk factor for capital flows into emerging economies, where Mexico is one of the most exposed markets,

In fact, the Mexican peso is highly affected by external shocks, such as the imminent withdrawal of monetary stimulus in the US.

turn can mean more capital outflow, exchange rate pressure and episodes of volatility in national financial markets.

It is better that we be prepared for the times to come and believe that the increase in external interest rates will not be chaotic.

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