Mexico Says It Has Reversed Capital Flight : $1 Billion Invested in Other Nations Returning

Treasury Secretary Gustavo Petricioli said Mexicans this year have brought back to Mexico about $1 billion that was invested outside the country, halting a trend that has sapped the country of badly needed money.

“We have had the entrance of capital more than flight” this year, he told local reporters last Thursday. His remarks were reprinted in Friday editions of Mexico City newspapers.

Petricioli attributed the reversal of capital flight to greater investor confidence in the economy, the government’s current exchange policy and businessmen’s need for investment money.

Most private analysts have attributed the inflow of money to the tight credit policy of the nation’s central bank, Bank of Mexico. The policy has sharply reduced the amount of money available for loans to the private sector, forcing business executives to “repatriate,” or bring money back for their operations.

Billions of Dollars Abroad

Since the economy tumbled into a crisis in 1982, Mexicans have socked away billions of dollars outside of the country, mostly in the United States.

Morgan Guaranty Trust Co. of New York estimates that Mexico lost $53 billion in such capital flight from 1976 through 1985, the worst outflow in Latin America.

From 1983 through 1985, Mexico lost $17 billion, the bank said.

Mexico disputes Morgan Guaranty’s figures on capital flight. The Bank of Mexico estimated earlier this year that $6.8 billion left in 1983-85 and said that figure may even be high.

Earlier this year, private analysts and some government officials had said Mexicans were moving their money back to their country, bolstering the nation’s international reserves.

The sharpest inflow appears to have occurred early in the year, according to Jonathan Heath, senior economist at the private Mexican forecasting project of CIEMEX-Wharton in Philadelphia. In late spring and early summer, he said, the inflow appeared to slow.

Falling Oil Prices

The nation’s international reserves also began tumbling at that time, he said, due to the sharp fall in prices on the world oil market and payments that Mexico owed on its foreign debt of nearly $100 billion.

President Miguel de la Madrid said last week that reserves were $4.5 billion, down $1.3 billion from the end of 1985. At the end of 1984, the reserves were $8.1 billion.

“The drop in reserves during this fiscal year was largely the result of a net payment of $900 million on the foreign debt; the rest was due to payments for trade transactions,” the president said during his annual state of the union speech.

Petricioli said the government has no plans to change the current exchange policy that has seen the value of the peso fall sharply against the U.S. dollar.

“The exchange policy is going to continue being a realistic policy so that we can boost basically exports, but at the same time a type of exchange rate will be sought that will not incite additional inflationary pressures,” he said.

“Changes in the exchange policy are not forecast,” he said.

A low rate for the peso, compared to other major currencies, makes Mexican products cheaper and more attractive to foreign buyers, helping increase exports and bring in more money. But the low value of the currency makes imports more costly and adds to the inflation rate for consumers.

Commercial banks and private exchange houses in Mexico City on Friday offered 722-723 pesos on the free market for customers wanting to exchange a dollar and demanded 725-728 pesos for those wanting to buy a dollar. The free-market rate is used in tourism and most transactions along the U.S-Mexico border.