Is Mexico barreling toward violent, drug-cartel-induced anarchy? It's a question that many with south-of-the-border investments (like me) have to consider.
Horrific stories like this one, about a gangland murder victim wrapped in Christmas paper, may not represent everyday reality for the vast majority of Mexicans, but that might not matter to certain industries, especially tourism.
People everywhere suffer from an inability to separate reason from emotion. Inevitably, reports like these, and the visceral revulsion they create, trick readers into misjudging their odds of suffering similar fates. (For example, many Americans believe they'll be victims of terrorism, though they're far more likely to be squashed by their neighbors' SUV.)
Despite new President Felipe Caldaron's crackdown on drug cartels -- or quite likely, because of it -- these drug-fueled terrorists (let's call them what they are) have become more brazen in their attacks, killing some of the very government officials charged with eradicating them. For now, the Mexican public seems to favor this long-overdue reckoning. In the meantime, the stories hitting American news wires make for scary reading.
While perceived lawlessness likely won't have a direct effect on large commodity, service, or consumer-goods companies like Cemex (NYSE:CX), America Movil (NYSE:AMX), Gruma (NYSE:GMK), or Industrias Bachoco (NYSE:IBA), a pinch on tourism could muck things up for travel industry stars, such as airport group ASUR (NYSE:ASR). In the long run, however, establishing the rule of law across a broader swath of Mexico should improve economic conditions throughout the whole country.
ASUR is up 55% (versus 18% for the S&P 500) since Seth recommended it to Fool readers just over a year ago. He's a member of the Motley Fool Global Gains team, which scours the world for opportunities like this one and delivers a pair per month. A free trial will show you the latest ideas.
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At the time of publication, Seth Jayson had shares of ASUR but no positions in any other company mentioned. See his latest blog commentary here. View his stock holdings and Fool profile here. Cemex is a Motley Fool Stock Advisor recommendation. Fool rules are here.
