REFILE-UPDATE 2-Foreigners invest $80 billion in Mexico stocks, bonds

Mon Feb 25, 2013 1:01pm EST

* Five times more portfolio investment in Mexico than Brazil

* Stocks and government debt notch records in fourth quarter

* Current account deficit widens to $6.49 billion

By Krista Hughes

MEXICO CITY, Feb 25 (Reuters) - Foreign investors poured a record $80 billion into Mexican stocks and bonds last year, almost five times more than in Brazil, central bank data showed on Monday.

Foreign portfolio investment inflows doubled in 2012 from a year earlier on optimism about reforms promised by Mexico's new government and solid growth of about double that of Brazil, Latin America's biggest economy.

Investment in both private and public sector assets picked up in the fourth quarter to notch quarterly records for the period since 1995, when the current data series began.

"What you see there is that we had more money coming into stocks in the fourth quarter, a big pick-up after the election," UBS economist Rafael de la Fuente said.

Foreign inflows to Mexican stocks and corporate debt totaled $5.61 billion in the fourth quarter, up from $1.21 billion in the third quarter, and $10.04 billion for the year.

Total portfolio investment inflows accelerated slightly to $23.53 billion in the quarter, with flows into peso-denominated bonds hitting more than $14 billion and helping portfolio inflows to reach $80.23 billion in the full year.

Net foreign portfolio inflows into Brazil were $16.53 billion in 2012, down from $67.8 billion two years earlier after the country slapped strict limits on hot money inflows to stem a rise in the real currency.

But Brazil attracts much more foreign investment into direct assets such as factories and infrastructure, netting $65.27 billion in foreign direct investment in 2012 compared to Mexico's $12.66 billion, which was around half the level of 2011.

Foreign direct investment in Mexico fell $909 million in the fourth quarter, the first fall since at least 1995. But the central bank said the outflow was largely due to the $4 billion public offer of shares in Spanish-owned Banco Santander and thus a reclassification of funds from direct to portfolio investment.

"(This) does not imply the removal of resources from the economy," the central bank said in a statement, adding that without the share transaction, foreign direct investment for the year would have been $3.2 billion in the quarter and $16.77 billion in the year.

DEFICIT WIDENS

The data showed Mexico's current account deficit widened to $6.49 billion in the fourth quarter of 2012, largely due to interest and dividend payments to overseas investors.

The accumulated current account deficit for all of last year was $9.249 billion, the equivalent of 0.8 percent of gross domestic product, the central bank said.

The quarterly balance of payment data, which provides a snapshot of Mexico's dealings with the outside world, showed that imports during the quarter again outweighed exports.

The surge in the overall deficit from a downwardly revised $941 million in the previous quarter was driven by a $6.03 billion deficit in the section of the accounts covering interest on Mexico's foreign debt, salaries paid to foreign workers and dividend payments.

De la Fuente said the number probably reflected interest payments on foreign currency debt, since dividend payments were mostly reinvested and foreign direct investment was negative in the quarter.

Mexico's foreign reserves rose to a new record of $167.05 billion by the end of December.

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