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
Mexico creates jobs
Our southern neighbor buys more of our products than any country other than Canada. Some 6 million U.S. jobs depend on trade with Mexico, <a href="http://www.wilsoncenter.org/publication/working-together-economic-ties-between-the-united-states-and-mexico" target="_blank">according to the Wilson Center's Mexico Institute</a>.
Mexico's economy is growing
Despite the common conception in the United States that Mexico is a poor country, <a href="http://blogs.independent.co.uk/2012/12/03/as-the-mexican-economy-takes-off-new-president-enrique-pena-nieto-has-a-shot-at-redemption/" target="_blank">Mexico's economy is growing faster than its northern neighbor's</a> -- 3.9 percent compared to 1.7 percent in 2011, according to the UK Independent.
Mexico has more professional elections than the United States
According to Robert A. Pastor, a professor and co-director of the Center for Democracy and Election Management at American University who has observed Mexican elections since 1986, the Mexican system is more professional, non-partisan and independent than the American one.
Mexico gave us chocolate
Along with corn, avocados, chili peppers, tequila and many other awesome foods.
Mexico has amazing cultural diversity
While Mexico may be the largest Spanish-speaking country in the world, that's not the only language spoken in the country. More than <a href="http://www.history.com/topics/mexico/page4" target="_blank">60 indigenous languages are spoken in Mexico</a>.
It's the largest Spanish-speaking country in the world
With a population of 112 million, Mexico is the country with the most Spanish speakers in the world.
Mexico City is massive
If size impresses you, you’ll probably admire Mexico City. <a href="http://www.time.com/time/specials/packages/article/0,28804,2097720_2097772_2097769,00.html" target="_blank">With around 20.5 million inhabitants</a>, it sits among the world’s largest cities. And it’s massiveness has a long history -- when the Spanish arrived in the sixteenth century in Tenochtitlán, the heart of the Aztec empire where Mexico City currently stands, it may <a href="http://books.google.com/books?id=BIQLMYyfHncC&pg=PA23&lpg=PA23&dq=tenochtitlan+larger+than+london&source=bl&ots=tdYDzvdqFE&sig=yNHV_7jhHxdEFlvfb4zzDRFBIzo&hl=en&sa=X&ei=AZinUeD6CeLL0AHSjICADw&ved=0CEgQ6AEwBDgK#v=onepage&q=tenochtitlan%20larger%20than%20london&f=false" target="_blank">have been the largest urban area in the world</a>.
Mexico has awesome tourism
Beaches? Ancient ruins? Mountains? Cultural diversity? Awesome food? Mexico's got it all.
It's not as violent as you may think
As we’ve pointed out before, <a href="http://www.huffingtonpost.com/2012/11/28/13-places-more-violence-mexico_n_2201941.html" target="_blank">Mexico's murder rate isn't particularly high by Latin American standards</a>. Mexico had a murder rate of 23.7 per 100,000 residents in 2011, according to the U.N. Office on Drugs and Crime. That's about equal to Brazil's and roughly half as high as Detroit. Plenty of places in the region have higher murder rates -- including Puerto Rico, the Bahamas, and Jamaica.
Mexico has a thriving film industry
Many Americans are already familiar with crossover successes like Gael García Bernal, Salma Hayek and director Guillermo del Toro. But those stars account for just a <a href="http://www.bbc.co.uk/news/world-radio-and-tv-17112066" target="_blank">small fraction of a booming industry</a>.
Home to some of the oldest civilizations of the Americas
Mexico's first major civilization, the Olmecs, <a href="http://www.history.com/topics/mexico" target="_blank">established themselves by around 1200 BC</a>.