Portfolio investment: more than ever

Portfolio investment poured into Mexico in 2012. The US$56.68 billion in portfolio investment last year more than doubled 2011’s record high. Foreign investment in Mexican stocks came to US$10.04 billion in 2012, a contrast to the US$6.57 billion outflow in 2011.  The US$46.64 billion of foreign investment in fixed income instruments was 47.4% more than in 2011.

Portfolio investment was the driver of Mexico's US$46.88 billion 2012 capital account surplus. Over the last three years, the surplus has averaged US$46.93 billion. The closest the country has ever come to surpluses of this magnitude was in 1993, when, thanks to portfolio investment, the capital account registered a US$32.34 billion surplus. In 2010 and 2011, portfolio investment comprised, respectively, 52.8% and 43.5% of the capital account surplus. In 2012, portfolio investment was 120.9% of the capital account surplus. In 1993, the proportion was 56.0%.

Forget about portfolio investment fleeing the country, as it did in 1995, the last quarter of 2009 and the first quarter of 2012. If portfolio investment diminishes substantially or ceases, the capital account surplus will plummet.