Beware a Mexican Hangover
This column was originally published on RealMoney on May 3 at 1:13 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.
I went to college in San Diego, and every spring break we went to Mexico, and we always had fun there. However, every year something bad would happen -- be it a broken leg or a new Ford Bronco getting stuck during low tide, and staying stuck when the tide came in. (I'm sure the fact that we were rowdy college students had nothing to do with either episode.)
Investors in Mexico have had similar ups and downs.
In 1992, the benchmark IPC went from 1900 to below 1300 in just four months, and the IPC was cut in half in 1994 in the face of the now-distant peso crisis.But there have been some spectacular growth periods, too. The IPC is up 250% over the last five years, while the S&P 500 is, are you ready, a whopping net unchanged. But during this five-year IPC rally, there have been some big corrections, including a 26% decline in 2002 and a couple of other 10% to 15% declines. So what's driving Mexico? There are a couple of themes to this emerging market, starting with its abundance of natural resources. The U.S. gets roughly 16% of its oil from Mexico, and the country also has copper, silver and zinc.
|The IPC vs. the S&P 500
|Source: Your Source Financial|
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