Sunlight streams through the glass dome, casting window-pane shadows across the polished marble trading floor at the Bolsa Mexicana de Valores, Mexico's stock exchange.
Computer screens circle the traders, who call out the names of stocks they want to buy or sell and scrawl their signatures on slips of paper to cement their deals. As a group, they are better dressed and considerably less frantic than their counterparts at the New York Stock Exchange.
When there is no business to be done, the traders chat casually or watch the day's numbers flow silently past on a red electronic ticker: the bolsa's own IPC Share Index, the Dow Jones industrial average, the price of gold in Hong Kong and silver in London, how many dollars to the barrel of West Texas crude.
Life is pretty calm at the bolsa these days, but the Mexican market was overdue for a breather. The country has had one of the world's hottest stock markets. After crashing in 1987, the Mexican market soared more than 1,500 percent over the next five years. Even after adjusting for inflation, the market gained more than 80 percent in three of the past five years.
So far this year, Mexican stocks are down about 10 percent. However, many people are betting that the market still has glory days ahead. William F. "Ted" Truscott is one of them.
"We think that over a five- to seven-year run, Mexico is going to be a real exciting story," said Truscott, manager of the New York-based Scudder Latin America Fund, which has attracted more than $60-million since it opened to investors in December. About 40 percent of the fund's holdings are Mexican stocks.
"What you have going on in Mexico right now is some companies (formerly government-owned) that are newly private that are flourishing in their new environment and others that have been around for awhile, have come through the painful '80s and are now competing on a worldwide basis and doing the job very well," Truscott said.
What you also have is an economy that's growing, albeit slowly, expanding consumer purchasing power and inflation being brought under control.
"You have 89-million people, about 50 percent of whom are under the age of 20," Truscott said. "This incredibly young population will be forming households and spending money on things related to household formation."
Workers' real incomes, which fell drastically during the 1980s, are growing. Public works projects are extending water and electricity to millions, building hospitals and roads and tackling severe pollution problems. At the same time, the Mexican government under President Carlos Salinas de Gortari has eliminated the federal budget deficit and brought down inflation from an astonishing 159 percent in 1987 to a projected 8 percent this year.
"This will be the first year in a quarter of a century that Mexicans will know what it is to live with price stability," Salinas told a group of visiting Floridians earlier this month.
U.S. investors have taken notice. Last year they made net purchases (after subtracting sales) of $2.8-billion in Mexican stocks, up from $2.1-billion the previous year.
One reason for the surge of interest is that investing in the Mexican market is easier than ever.
Scudder's fund is one of a dozen U.S. mutual funds that specializes in Latin American securities (see chart, left). Most of them invest heavily in Mexico.
For small investors _ those who want to bet just a few thousand dollars on Mexico _ mutual funds are the way to go. However, it's also possible to invest in many individual Mexican companies without ever venturing outside U.S. markets.
Thirty-four Mexican stocks now trade in the United States in the form of American depositary receipts, or ADRs, which are bank-issued certificates representing shares of foreign stock held on deposit in the bank vault. ADRs come in many varieties and may represent one share, a partial share or several shares of the underlying stock. For some companies, more than one type of ADR is available.
Most ADRs trade in the over-the-counter market, often on the NASDAQ electronic bulletin board or the "Pink Sheets." Stocks in these markets are less liquid and information about them is less readily available.
However, the biggest Mexican companies have ADRs listed on the New York Stock Exchange. It's as easy for a small investor to buy ADRs in the Mexican telephone company, Telefonos de Mexico, as it is to buy shares in AT&T.
Large U.S. investors also can buy shares directly, but their trades must be executed by one of the 26 Mexican brokerage firms, since U.S. firms are not yet permitted to have seats on the bolsa.
Currently there are 195 companies listed on the bolsa, with a total market capitalization of $126-billion. Trading volume is concentrated in the largest stocks, such as Vitro Sociedad Anomia, the glassmaker that owns Tampa-based Anchor Glass Container Corp.
Telefonos de Mexico, or Telmex, by itself accounts for 30 percent of the bolsa's trading. Its shares also represent 30 percent of the value of the 38-company IPC Share Index and account for much of this year's decline in the Mexican market.
Telmex took a tumble in April after reporting a dip in first-quarter profits. Last year the company had profits of $2.6-billion on sales of $6.6-billion. However, for the first quarter of this year, profits came in at $652.6-million, down 4 percent.
The New York ADR, which sold for as much as $60 a share in 1992, closed Friday at $46 per share.
"A lot of the hot money out there was assuming it (Telmex profitability) was going to grow 15 to 20 percent a year, and they were wrong," Truscott said.
However, he and many analysts who follow the stock still think the future looks bright. Telmex has a monopoly for both local and long-distance telephone service and much room to grow since many Mexicans don't have telephones.
In addition to the slower growth at Telmex, the Mexican market also is feeling a pinch from concerns about the economic impact of continuing high interest rates and from uncertainty over the future of the North American Free Trade Agreement, or NAFTA.
On its own, Mexico has been removing barriers to trade with the United States. NAFTA would phase out or eliminate most of those remaining and by many estimates, it would create thousands of jobs in both countries. However, approval by the U.S. Congress is in doubt because of fears that low Mexican wages would prompt U.S. manufacturers to move jobs to Mexico and would allow Mexican growers to undercut Florida growers on prices of fruits and vegetables. On the other hand, NAFTA also would create jobs through increased U.S. exports to Mexico.
Last month Smith Barney downgraded the Mexican market from "overweighting" to "neutral" based on the murky outlook for NAFTA as well as relatively slow economic growth and concerns that negative sentiment toward U.S. stocks might spill over into the Mexican market.
"In the short term, we do not expect any good news on NAFTA, while there is plenty of negative rhetoric," analyst Scott Kalb said in his report. "We are confident that there will be attractive opportunities to re-enter Mexican stocks going forward."
Truscott says he thinks the importance of NAFTA to the Mexican market is overblown.
"If NAFTA doesn't pass, the market probably will drop, but then it will come back when people realize NAFTA isn't the end-all and be-all," he said. "We already do have trade, and let's not forget that Mexico can open its doors to other countries."
The bolsa dates back to 1894, but its history as a legitimate player in the world of global finance is considerably shorter. Three years ago the exchange moved into a striking glass skyscraper with a domed annex and computers to keep track of trading, although trading is not yet fully automated. Before then, stock prices were posted in chalk on a blackboard.
The legal framework of the current market dates to 1975, and the real development began in 1982, when Mexico's banks were nationalized, said Alejandro Ritch, the bolsa's assistant director of international affairs.
"A lot of people who were in the banking industry went into the securities industry," he said. "At that time, brokerage firms also began trading money-market instruments to compete with banks."
The 1987 stock market crash, which began in New York and spread to markets around the world, hit Mexico hard.
"In two days, the market lost 40 percent of its value, and then it continued to go down," Ritch said. "Mexican investors lost a lot of confidence in the stock market."
Improvements in the economy, surging foreign investment and the modernization of the bolsa itself have combined to bring them back. As in the United States, the mutual fund business is booming. At the end of last year there were 470 Mexican mutual funds (known as sociedades de inversion), up from 206 the year before.
The bolsa also has begun trading warrants and is looking at options, futures and the possibility of trading stocks listed on exchanges in other Latin American countries.
However, investing in foreign stocks, particularly in emerging economies such as Mexico's, is not for the faint-hearted.
"Price moves of 10 percent in one day can occur," Truscott said. "This (Latin America Fund) is not for somebody age 70 to put 100 percent of his IRA money in. People tend to put small amounts of money in, but they are coming into the fund because they realize there's a growth opportunity here that carries risks commensurate with the return."
Some investment choices
Investing in Mexico and the emerging economies of Latin America is easier than ever for U.S. investors _ although it still entails plenty of risk. Here are some of the options:
Open End Mutual Funds
(Funds purchased through brokers or directly from fund company)
Alliance North American Government Income Trust (800) 221-5672
G.T. Latin America Growth Fund (800) 824-1580
Scudder Latin America Fund (800) 225-2470
Merrill Lynch Latin America Fund (800) 262-4636
TCW/DW North American Government Income Trust (800) 869-3863
Closed End Mutual Funds
(Funds traded like stock on New York Stock Exchange)
Emerging Mexico Fund (NYSE/MEF)
Mexico Equity & Income Fund (NYSE/MXE)
Mexico Fund (NYSE/MXF)
Latin America Dollar Income Fund (NYSE/LBF)
Latin America Equity Fund (NYSE/LAQ)
Latin America Investment Fund (NYSE/LAM)
Latin American Discovery Fund (NYSE/LDF)
(Traded as American Depositary Receipts or ADRs)
Telefonos de Mexico (telephone company) (NYSE/TMX)
Empresas ICA Sociedad (construction) (NYSE/ICA)
Transportacion Maritima Mexicana (shipping) (NYSE/TMM)
Tubos de Acero (steel) (ASE/TAM)
Sociedad Anonima Vitro (glass containers) (NYSE/VTO)