Monday, June 28, 2010

Failed state and capital controls

As I have discussed, the situation is disintegrating as the rule of law breaks down. It would have been prudent o remove exposure months ago.

Mexico’s peso fell after the leading candidate for governor in the border state of Tamaulipas was gunned down in the highest profile killing of a politician since 1994, fueling concern companies may cut back on investment in the country.

The currency dropped 0.4 percent to 12.6990 per dollar at 2:37 p.m. New York time, from 12.6490 on June 25. Government peso-denominated bonds erased gains.

Rodolfo Torre, a 46-year-old member of the Institutional Revolutionary Party, was killed in Tamaulipas state, said Interior Minister Fernando Gomez Mont in a press conference broadcast on television today.

“The market flipped suddenly a few minutes after the news of the candidate’s murder,” said Ramon Cordova, a currency strategist at Base Internacional Casa de Bolsa SA in Monterrey, Mexico. “This isn’t going to be a long-term risk, because we have been seeing this kind of violence in the country for two or three years now.”


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