Analyst Tom Konrad has an excellent piece on Mexico’s peak oil crisis at AltEnergyStocks.com, wherein he explains why shorting Mexico Country ETFs would be a good call.
[T]he Mexican Federal revenues dropped 12% in the first half of 2009 because of falling oil production. This is not a one-time hit to the budget, but part of an ongoing decline. That means that Mexican government revenues are permanently 12% lower, and likely to decline further as oil production declines further.
With declining revenues, default and/or devaluation seems almost inevitable. No option would be good for Mexican companies.
If the Mexican Governments’ fiscal situation is so dire, it makes sense to short Mexican companies, especially if the short is part of a hedge against exposure to world financial markets. With a hedge, the investor only needs to be confident that things are liable to get worse in Mexico more rapidly than elsewhere, or not get better as quickly.
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