Frédéric Leroux, global macro fund manager at the group, said China is actively promoting wage increases to direct its economy more towards domestic demand. This is leaving the way open for Mexico to become the production backyard of the US.
US and LatAm growth
Mexico has been positioning itself to benefit from US growth, with labour costs currently competitive and long-term growth prospects looking strong. It has also implemented a number of 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 (EM) 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.”
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.
Succession plans
“We prefer emerging market countries which have already announced reforms. Mexico looks attractive from an export perspective, but also on domestic lending as it has lower credit penetration than Brazil.”
He also likes the consumer goods sector in Mexico, which in his view is well diversified.
Carmignac Gestion is celebrating 25 years since it was founded by Edouard Carmignac in 1989. The firm is looking to gain further traction in the UK market, while Carmignac himself said he is looking at succession planning and taking a step back from day-to-day running of the firm in the next three to five years.
