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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?
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.
Always searching for your next paycheck,
Amy Calistri
Chief Investment Strategist --
The Daily Paycheck
P.S. -- I pinpointed one particular Mexican-focused
fund for my
Daily Paycheck "Mid-Month Update" a few days
ago. This pick trades in the U.S. and yields over 10%. But
today, investors can buy the fund at a sharp double-digit
discount to its assets.
For now, I have to reserve this pick only for my
Daily Paycheck subscribers, but you can join me risk-free.
Follow this link to learn more.
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