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Published: June 23, 2010
In the late 1960's, the
central bank of Mexico was looking for ways to bring more
American tourists -- and their U.S. dollars -- into the country.
Acapulco, on the Pacific side of the country, had already become
a tourist mecca decades earlier. In the 1950's it was a prime
spot for Hollywood celebrities and millionaires. John Kennedy
and Jackie even had their honeymoon there.
The central bank saw the opportunity and ordered a commission to
study the feasibility of creating another tourism destination on
the Caribbean side of Mexico. Eventually, the commission picked
an isolated spot near the eastern tip of the Yucatan peninsula.
The spot was home to only a handful of residents and was covered
in jungle. But it also boasted warm turquoise waters, white sand
beaches, and a spit of land that jutted into the water, making
it perfect for strip of hotels.
So in 1970, Mexico put its master plan in place to turn this
unknown spot into a tourist haven. Of course, today we know this
town as Cancun -- which in 40 short years has become home to
more than half a million residents and one of the most visited
tourist destinations in the world.
I tell you this story because I'm trying to break some
perceptions about Mexico. Right now, even though Mexico is
practically in our backyard, most people sneer when the country
is mentioned.
People see the headlines of the drug trade, corruption and
illegal border crossings and shun any investment opportunities.
But the rise of Cancun is a great example of the opportunities
of investing in Mexico.
Don't get me wrong, any investor needs to weigh the problems I
mentioned, but at this point they appear to be outweighed by the
opportunity.
As bad as the recession was for the United States, we had it
easy compared to Mexico. Dependent on oil prices and exports to
major U.S. industries, Mexico's economy contracted -6.5% in
2009. But 2010 is turning out to be a strong year -- even
stronger than financial experts had predicted. In the first
quarter, Mexico's economy grew +4.3% versus a year ago.
In the first four months of 2010, Mexico's
exports rose +43.2% over last year's performance. In the same
time period, Mexico added 380,000 jobs -- the country's largest
job creation in 20 years. April saw the amount of money sent
home by Mexicans living abroad rise year-over-year for the first
time in 17 months. Remittances are Mexico's second-largest
source of foreign income after oil exports.
Even Mexico's beleaguered tourism sector is starting to show
signs of a rebound. Last year tourism was crippled by the swine
flu scare. And although it is still facing some hurdles due to
the uptick in drug-related violence, tourism revenues were +6.6%
higher in March 2010 than March 2009 (although that is a easy
comparison given the March 2009 downturn in the U.S.).
Given the good news but poor headlines from Mexico, I think
there is an opportunity. But what about income?
Action To Take --> For us
income investors, high yields can be found with closed-end
funds. There are a few funds with heavy interests in Mexico that
also trade on the NYSE. (See below for a few details about one
pick I found for my
Daily Paycheck readers.)
The best news is that because of the dour headlines, many
closed-end funds are trading at large discounts to their assets.
And with share prices still being held down, yields on these
funds have been inflated, making a great entry point for income
investors.
And just think -- you could reward yourself with a trip to
Cancun with the dividends you earn.
-- Amy Calistri
Editor
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