Frédéric Leroux, global macro fund manager at the group, said China is actively promoting wage increases to direct its economy towards domestic demand. This is leaving the way open for Mexico to become the production backyard of the US.
Mexico has been positioning itself to benefit from US growth, with labour costs competitive and long-term growth prospects looking strong. It has also implemented several major reforms that should, in Leroux’s view, create fresh impetus for the country to improve productivity.
At a time when Carmignac Gestion has reduced its emerging markets exposure to just below 30%, the lowest it has ever been, the firm still sees selective opportunities in EM and particularly in Latin America.
“Mexico has been very orthodox in terms of its macroeconomic policy,” said Leroux. “It’s the Germany of Latin America, with its economic reforms and decartelisation of the telecoms sector. It’s not just benefiting from the economic cycle but its own self-help agenda.”
More attractive than Brazil
Simon Pickard, head of emerging market equities at Carmignac Gestion, said it is interesting to compare Mexico with one of the perceived powerhouses of Latin America, Brazil.
“We prefer emerging market countries which have already announced reforms,” he said. “Mexico looks attractive from an export perspective, but also on domestic lending, as it has lower credit penetration than Brazil.”
Pickard also likes the consumer goods sector in Mexico, which in his view is well diversified.
Edouard Carmignac, who founded Carmignac Gestion in 1989, recently announced plans to step back from day-to-day running of the firm, in the next three-to-five years.
