Mexico’s President Andres Manuel Lopez Obrador aka AMLO is scaring the rich into shipping their money abroad.
The very 1st signs of this capital flight date back to the run-up to Lopez Obrador’s landslide electoral victory in Y 2018, and they mounted after he implemented new laws against tax evasion late last year, according to interviews with several wealth managers, tax advisers and bankers.
Now, the populist President’s response to the C-19 coronavirus chaos in which he has refused to provide fiscal stimulus to shore up the economy and sharpened his rhetorical attacks on wealthy Mexicans linked to past administrations is adding to The Money and Rich People Exodus.
There are several data points that highlight the scope of the trend, they are the following: Mexicans poured almost 4X as much money into overseas portfolio investments last year than they had in Y 2018; real estate prices in the capital’s affluent neighborhoods have fallen this year; and domestic investment has fallen in 17 of the past 18 months, all alarming trends for an economy that will need capital to recover from the virus.
Mexico is one of the more corrupt and unequal countries in the world, and it has the lowest tax collection rate of all 37 nations in the OECD (Organization for Economic Cooperation and Development).
Lopez Obrador’s press office did not respond to requests for comment, nor did the Finance Ministry.
Lopez Obrador built his career decrying inequality and corruption among the nation’s elite, has little patience for criticism of his crackdowns. He has railed against conservative critics who he said want to label him a danger for Mexico who will replace budding democracy with autocratic rule. He has told everyone to calm down and insists he is not going do anything more radical than what he laid out in his Presidential campaign.
Capital flight is not a Mexico-exclusive phenom now. The medical emergency chaos, and the economic collapse it has sparked, have led investors to pull money out of countries across all emerging markets. The Mexican peso, down 16% YTD, it is 1 of the many currencies to have declined in value against USD.
Some wealthy Mexicans worry their assets could be seized or they could be thrown in jail.
Rich Mexicans are increasingly moving their family office operations to US cities like Miami, Boston and New York.
AMLO runs “an anti-business, very antagonistic government that is trying to use this perceived clash between the wealthy and the poor as a way to sustain his popularity.”
Now the money is flowing out with portfolio investments outside of the country rising nearly 4X last yr to $5.6-B, according to central bank data.
My sources say that wealthy people are very nervous about what Lopez Obrador could do. They want to move their money where he cannot touch it.
Have a healthy weekend, Keep the Faith!