Saturday, December 21, 2013

Change in Mexico Law will be a Huge Benefit for the Mexican Economy

Mexico Bolsa (stock exchange)
The Mexican government has voted to make a major change in its natural resource laws to allow foreign investments in the production of oil and gas, through production-sharing contracts with Petroleos Mexicanos, also known as Pemex. This change is expected to make the continents of North America a leading producer of petroleum and natural gas.

So who will benefit from this? First, the economy of Mexico will benefit greatly. With an influx of investment capital into the country, an increase in oil and gas production, and an increase in jobs, both the citizens and the Mexican government will be the beneficiaries of this windfall.

Second, the major U.S. integrated oil companies, such as Exxon Mobil (XOM), will reap the gains of having the opportunity to do joint ventures with Pemex.

Third, the publicly traded Mexican companies will also reap the benefit of of an improving economy. American investors have over 30 Mexican stocks available for trading in the United States, either on the New York Stock Exchange, the NASDAQ, or OTC, according to the list of Mexico stocks at

Fomento Economico Mexicano (FMX), which trades on the NYSE, is a bottler and marketer of Coca-Cola along with other beverages. It also owns the OXXO chain of convenience stores, and is involved in transportation logistics. The stock trades at 26 times forward earnings. Revenues for the latest quarter were u 7.2%, however, earnings dropped 5.2%. The stock pays a yield of 1.6%.

Grupo Televisa (TV), the stock with the great stock symbol,  is a television programmer and broadcaster, headquartered in Mexico City. The stock has a forward price to earnings ratio of 28, and pays a small yield of 0.5%. Latest quarterly revenues were up 8.1%, with earnings down 16.5%.

Maybe the easiest way to invest in Mexico is through an ETF, such as the iShares MSCI Mexico Capped ETF (EWW), which trades on the Big Board and has a PE of 16. The fund has had an average annual return of 19.8 over the last five years.

 For a list of around three dozen Mexico stocks, which includes the PE ratio, yield, and business sector, go to

Disclosure: Author didn;t own any of the above at the time the article was written.


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