Mexican President Andres Manuel Lopez Obrador was pilloried for his stinginess at the outbreak of the pandemic. His unwillingness to dole out anything but the bare minimum of emergency aid left millions of Mexicans to sink deeper into poverty.
But now, at least some pay-off for those sacrifices is emerging. Mexico has maintained access to international bond markets at a time when many other developing nations find themselves cut off.
With US interest rates surging, investors have become very selective. They often flat-out refuse to buy bonds offered by countries with deteriorating finances. Thanks in part to AMLO’s austerity, Mexico is for the most part in sound shape. Its budget deficit and debt levels are below the median for its peers.
So when Mexican finance officials have tested demand abroad for the country’s bonds, they’ve found plenty of willing buyers. Just last week, Mexico sold 75.6 billion yen ($553 million), bringing the government’s haul from overseas markets this year to $9.47 billion.
Much of those sales, to be clear, were just to roll over maturing debt. But at a moment like this — when hard currency is suddenly becoming a scarce resource across much of the world — even a simple refinancing of debt is an important step toward maintaining a steady flow of money into a country, shoring up the local currency and helping curb inflation. The peso is one of just a handful of currencies in the world to avoid sinking against the dollar this year as the Federal Reserve ratchets up interest rates.
AMLO’s “fiscal prudence then allowed the country to navigate this better,” said Carlos Legaspy, the chief executive officer of Insight Securities. “For debt investors, he has been good: Creditworthiness has been maintained at an attractive rate of return.”
Source: El Financiero