Foreigners pour record amount into Mexican debt

Mexico attracted record investment in government bonds in the first nine months of the year as foreigners, unnerved by debt woes in Europe and the United States, sought alternatives. Investors put $24.1 billion to work in the government fixed income market in the first three quarters, according to central bank data released on Friday.
The figure surpassed the previous record of $23.1 billion, set last year. "The country has been able to attract an abundance of foreign financial resources," the central bank said in a report announcing the current account balance for the third quarter.
Portfolio investment, typically money pumped in by professional investors, recorded a net inflow of $13.9 billion. But while foreign investment in Mexico's money and bond markets recorded a surplus of $7.4 billion in the quarter, investors pulled out of Mexican shares. The benchmark IPC stock index fell 8.4 percent in the third quarter.
Mexico has been able to draw foreign capital through the first nine months of the year, but it is unclear if that trend will hold up through the last three months of the year. "We can't know yet what things like the peso volatility will mean through December," said Sergio Martin, chief economist at HSBC Mexico, of the currency that has lost about 13 percent so far this year.
The entire balance of payment data pointed to a current account deficit widening to $3.757 billion, or 0.7 percent of gross domestic product, from $2.975 billion in the second quarter, with low exports of manufactured goods partly offset by the inflow of foreign investment.
Weakening US consumer demand played a role, the central bank said. The overall quarterly deficit was the largest since a $6.835 billion deficit in the last three months of 2008. Foreign direct investment (FDI), a gauge of long-term bets on Mexican industry, totalled $2.55 billion from July to September - roughly half the $5.21 billion from the previous quarter. The total FDI for the year through September was $13.43 billion or about 14 percent less than was invested by the third quarter last year.
Mexico will likely fall short this year of the nearly $20 billion in FDI seen last year "due to international uncertainty and the close links with the US economy," according to Banamex analyst Lourdes Rocha. Mexico had two more boosts of foreign cash in the quarter as the central bank's international reserves climbed $7.194 billion to $141 billion and worker remittances rose about 10 percent in the period over last year, touching $6.117 billion.