Mexico's other big boom - Macleans.ca
 

Mexico’s other big boom

Mexico remains a developing country with an economy that still counts tourism as an important industry—an industry at constant risk as the death toll mounts


 
Mexico's other big boom

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Tourists may be thinking twice about Mexico amid escalating violence linked to drug cartels, but the bloody war that’s claimed some 28,000 lives over the last four years hasn’t stopped investors from piling into the nation’s economy. The Latin American country recently sold US$1 billion worth of 100-year government bonds—the largest century-bond offer on record and the first to come out of the region.

For the Mexican government, it’s a no-brainer: a rare opportunity to take advantage of reduced borrowing costs at a time when developed countries are holding the line on record-low interest rates. But some observers are concerned investors are getting carried away, arguing the sale is evidence of a credit bubble in the making. For one thing, a lot can happen in 100 years, and economists say rising interest rates in developed countries will ultimately make the lower-quality Mexican debt less attractive. And while there’s ample evidence of continued investment in Mexico, which has benefited from the North American Free Trade Agreement and boasts a growing middle class, it remains a developing country with an economy that still counts tourism as an important industry—an industry at constant risk as the death toll mounts.


 

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