According to analysis by JPMorgan Asset Management, Mexico has overthrown Brazil to become a member of five emerging markets known as ‘fragile five’.
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The group of emerging markets are seen as the top five economies overly dependent on foreign investments and the unpredictable flow of world economics and skittish investors.
The list was named in 2013 with the original members being hit hard when investors pulled out of emerging markets. South Africa, Turkey, India and Indonesia were hit hard, but Brazil managed to weather the storm and is Latin Americas largest economy.
“Mexico is seen as vulnerable because its reserve coverage ratio, its foreign exchange reserves divided by its funding gap — the capital needed to balance its current account deficit, repay short-term funding and compensate for any drying up of foreign direct investment — is just 1.6 years, far less than the seven years of Russia, another struggling oil exporter,” according to Financial Times News.
Mexico has long been seen as a good investment, but over the last year more investors consider the country as a high-risk emerging market.
With interest rates near 0% in Mexico and the peso losing nearly 40% of its value in the last 12-months, there are little options left for the nation’s bank if the economy weakens more.
Columbia’s dependency on oil exports also landed it on the list, replacing India.