Portfolio investment is the investment made between countries in financial instruments, such as stocks in stock exchanges or debt bonds.
In the second quarter of 2024, a total of $8.233 billion in “hot money” left Mexico, marking the 16th outflow in the last 21 quarters, according to the Bank of Mexico (Banxico).
This is according to data from the Balance of Payments published by Banxico, which records all transactions between Mexico and the rest of the world during a given period.
The investment outflow recorded during the second quarter of this year is the largest for a quarter since the October-December period of 2021, when $14.476 billion left the country.
“Aggregated during the first half of 2024, there is a net portfolio investment outflow equivalent to $414 million. This is the first time a capital outflow has been recorded during the first half of the year since 2019, when $5.625 billion left,” highlighted Grupo Financiero Base in a report on the Balance of Payments.
Portfolio investment is the investment made between countries in financial instruments, such as stocks in stock exchanges or debt bonds. Unlike direct investment, portfolio investment does not imply control over the company or entity in which it is invested.
“These investments are usually highly volatile and short-term, and it is capital that can quickly enter and exit the country in response to changes in the macroeconomic environment, financial conditions, and geopolitical events,” explains Grupo Financiero Base, hence the term “hot money.”
In the case of the direct investment account, a deficit of $2.911 billion was recorded, meaning that Mexico received more direct investment from abroad than it invested abroad, resulting in a net capital inflow, explains Banco Base.
“Accumulated in the first half of 2024, Mexico had a net capital inflow from direct investment equivalent to $28.251 billion, slightly lower than the amount received in the second half of 2023,” said Banco Base.
Direct and portfolio investments are part of the financial account, one of the three divisions that make up the Balance of Payments. The other two accounts are the current account and the capital account.
Considering the balances of direct and portfolio investments, the financial account had a positive balance of $5.679 billion, which means a net outflow of money from the country or a net loan from Mexico to the rest of the world, highlighted Grupo Financiero Base.
Current Account Surplus
The current account records all economic transactions between Mexico and the rest of the world related to goods, services, primary income (from labor and capital), and secondary income (transfers that do not involve an economic exchange, such as remittances).
During the second quarter of 2024, the current account had a surplus of $3.639 billion, equivalent to 0.74% of the national Gross Domestic Product (GDP), the largest surplus for a second quarter since 2021.
Remittances, an important component of the current account, amounted to $17.244 billion in the second quarter, representing a 22.45% growth compared to the first quarter and a 6.01% increase compared to the same period last year.
However, the trade balance (also part of the current account) resulted in a deficit of $4.345 billion, equivalent to 0.57% of the Gross Domestic Product. This deficit was the result of $171.127 billion in exports and $175.472 billion in imports.
Source: El Economista
