Investing down Mexico way


PUERTO VALLARTA, Mexico -- Informal discussions with taxi drivers in this bustling port city of 250,000 quickly confirms the point: Mexican President Carlos Salinas de Gortari is doing a remarkable job of turning around the economy.

"He is a good man, good for the country and good for all of this," said a bespectacled, middle-aged cabbie as he motioned out the window toward the string of handsome new beachfront resorts just north of the old commercial district.

A younger cab driver with a thick black mustache echoed those sentiments when asked about the reform-minded president, a 43-year-old Harvard MBA who has made privatization of industries his main thrust since election in 1988.

"He is a very fine man, and he took the money from all those banditos," the cabbie exclaimed, a reference to the president's crackdown on corruption.

While I find taxi drivers generally have the best feel for the relative popularity of government leaders, across-the-board rave reviews are unusual.

But consider the president's results. Inflation in Mexico, raging at more than 100 percent in the 1980s, declined to 30 percent in 1990 and 18.8 percent in 1991. It's expected to range between 10 and 12 percent this year.

The nation's growth rate was 3.9 percent in 1990 and 4 percent in 1991, and there are expectations for 4.5 percent this year. Corporate earnings are expected to rise 15 percent.

The Mexican stock market skyrocketed 101 percent in U.S. dollar terms, fourth best among the world's markets.

"President Salinas is the key to the entire reform program, bringing quality management to a country which had been ruled for years by generals, lawyers and politicians with no concept of economic management," said Frank Fernandez, senior Latin American economist for Merrill Lynch.

Since its successful privatization in 1990, Telefonos de Mexico has begun a modernization program that introduced cellular telephones and fax machines. About 800 of the nation's 1,100 state-owned entities have been turned private, and private companies are now even in charge of building highways.

"The trade deficit is about the only bad thing I could mention, for it has a way to go down, but everything else is positive," said Jorge Herrera, vice president of the Mexico Equity & Income Fund, a closed-end fund with a 1991 total return of 55 percent with dividends reinvested.

"The Mexican stock market still represents a developing situation, which is positive overall for investors," said Oscar Castro, co-portfolio manager of the G.T. Latin America Growth Fund, up 20 percent since its inception last August.

Telecommunications and construction are hot. Stocks favored by Fernandez of Merrill Lynch include Telefonos de Mexico (available on the New York Stock Exchange as an American depositary receipt), Cemex in the booming cement industry and Cifra in retailing.

Biggest Mexican holdings in G.T. Latin America Growth Fund are Telefonos de Mexico and Tolmex, a cement company associated with Cemex.

Others are telecommunication equipment suppliers Ericsson of Mexico and Indetel. Cifra is another significant holding.

The most prosperous holdings of Mexico Equity & Income Fund are the Vitro glass company (also an American depositary receipt) and the Bimbo baking and confectionary firm.

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