Mexico billionaire Carlos Slim has never held public office, but the second richest man in the world may as well be king of Mexico as far as Wall Street and international investors are concerned.
Much like the old E.F. Hutton commercial used to say about that firm, when Carlos Slim talks, people listen.
And this week he’s had people wondering what he knows that others don’t when he raised eyebrows by telling CNBC that the place to be investing now is in Mexico – that drug war-torn Mexico scaring away tourists and some investors actually has big potential.
“We have very (good) potential because we have a healthy economy, healthy financial system, healthy public finance, a lot of projects to do,” the 73-year-old tycoon said in an interview.
This came at a time when the ADR (American Depository Receipt) of America Movil – Slim’s empire which accounts for more than 15 percent of the Mexican stock market – is down almost 27 percent since the election of Mexico’s new president Enrique Pena Nieto last year.
So what does this mean for the U.S. and American investors who in recent years have put roughly 30 percent of their allocations for Latin America into Mexican stocks and bonds, according to Thomson Reuters’ Lipper data?
It apparently means good news, according to analysts like Darren Capeloto, a portfolio strategist who specializes on Latin America at Payden & Rygel in Los Angeles.
“You saw a lot of optimism around elections and the potential reforms,” says Capeloto of Mexico’s reforms of its energy and telecommunications industrys, including legislation that directly impacts Slim’s American Movil.
Slim himself downplayed any negative fallout from the reform in the CNBC interview.
“Profitability is coming from productivity, efficiency, management, austerity, and the way to manage the business,” he said of how the legislation would affect he company he founded and which is the dominant wireless provider in Latin America, particularly in Mexico.
Carlos Slim on Mexico’s economy
Carlos Slim also may be more intimately familiar and on top of the inner workings of the Mexican economy and its financial establishment than most other investors, according to an American analyst with connections in Mexico who was not authorized to speak on the record.
A cut in benchmark interest rates to a record-low four percent has given U.S. investors optimism in Mexico, he said, as has Standard and Poor raising the outlook for the country’s credit rating to positive from stable.
The Lipper data shows the allocations of U.S.-based emerging market fund portfolios in Mexico have grown over the last four years. At the end of 2012, Mexico represented 5.22 percent of these portfolios of stocks and bonds, up from 4.26 percent at the end of 2009.
Some experts are also saying that Mexico may now be a hotter investment for Americans than Brazil. They predict Mexico’s economy will expand about 4.5 percent this year while Brazil’s grew only one percent last year, according to figures from the Mexico-based American Development Company.
Slim is currently the world’s second richest man after Microsoft founder Bill Gates, with a net worth of just under $70 billion, according to the latest estimates from Forbes.
He fell from being the richest man in the world last month when a sell-off in shares of his giant phone company dropped his wealth behind Gates.
Originally published on VOXXI as What Carlos Slim knows about investing in Mexico most others don't