Mexico capital outflows point to investor uncertainty

Significance

The administration’s continuous attacks against certain private-sector interests, domestic and foreign, have also rattled investors, seemingly contributing to increased capital flight.

Impacts

• AMLO places importance on peso-dollar parity, but is not expected to alter the floating exchange rate regime.
• The reduced appeal of domestic debt for foreign investors will not hit demand for dollar-denominated bonds issued internationally by Mexico.
• Even if capital outflows pushed the peso to depreciate significantly, Banxico would not use international reserves to defend it.