DAVOS, Switzerland (Reuters) - Volatility in currency markets will have some effect on Mexico, but the country is well placed to “weather the storm,” Finance Minister Luis Videgaray said on Friday.
A full-scale flight from emerging market assets accelerated on Friday, setting global shares on course for their worst week this year and driving investors to safe-haven assets including U.S. Treasuries, the yen and gold.
In an interview with Reuters television on the sidelines of a gathering of business and political elites in the Swiss mountain resort of Davos, Videgaray said Mexico would feel the effects of the volatility but would not suffer greatly.
“It’s going to have some impact in Mexico,” he said.
“We’re obviously watching very closely, but we think that Mexico is fundamentally well prepared to weather the storm. It’s going to have an effect, we’re already seeing it in our currency, but it’s not something we expect to be disruptive.”
Mexico’s peso currency slid to a 1 1/2 year low of 13.6044 on Friday as foreign investors became more averse to risk, scared by a looming foreign exchange crisis in Argentina and concerned about less monetary stimulus globally.
Still, the government hopes the Mexican economy will grow nearly four percent this year and is looking forward to attracting significant investment due to a string of economic reforms passed by President Enrique Pena Nieto.
During the meetings in Davos, multinational companies PepsiCo Inc (PEP.N), Nestle SA NESN.VX and Cisco Systems Inc (CSCO.O) announced major investments in Mexico that together totaled more than $7 billion.
Nevertheless, emerging markets are likely to face a volatile 2014 as the U.S. Federal Reserve scales back its stimulus program to support the U.S. economy.
Videgaray said the volatility might have “some impact” on investment but, he said, Mexico was ready for a Fed change of tack.
“We expected this year to be a volatile year for emerging markets as the Federal Reserve starts to taper the unconventional stimulus measures,” he said.
The minister said Mexico’s currency, the peso, was quite liquid but that the country might intervene if that changed.
“I don’t see any problems of liquidity in the market for the Mexican peso. We would intervene to provide liquidity in the market. But this is not the case now,” he said.
Reporting by Axel Threlfall; Editing by Alessandra Galloni, Hugh Lawson, Toni Reinhold