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While this topic might not be sexy, for those who live in Mexico, and even more so, for those who are considering investing here, the concept of debt vulnerability is an important factor to consider in the puzzle of a country’s economic health.

Sure, Mexico is a massive player in the world economy, an economy only slightly smaller than that of Canada. A simple way to visualize the economies of the world is from a scale-size graphic from the Visual Capitalist group, showing Mexico right up there with the major league players. Even more so, when the United States, Canada and Mexico are looked at as a single bloc, they could be a force to be reckoned with.

So why does Mexico not have a real seat at the world table when it comes to power, especially financial power?

Aside from the almost verbatim responses: high levels of ungovernability, with as much as a third to a half (depending on which reports have the best data) of the country controlled by organized crime; the lack of rule of law; an erratic rhetoric from the federal government, from President Andrés Manuel López Obrador (AMLO)  himself, not honoring agreed-to specifics of international treaties to the inability to fulfil simple regulatory requirements (airports, for example) and the rampant corruption at all levels of government.

However, what is an even higher indicator for both internal and external private-sector investment concerns is Mexico’s high level of debt vulnerability.

The Bloomberg Sovereign Debt Vulnerability Ranking answers a simple question: Which countries have the highest default risk on their sovereign debt?

The ranking is a composite measure of a country’s default risk based on four underlying factors: government bond yields (the weighted-average yield of the country’s dollar bonds); five-year credit default swap (CDS) spread; interest expense as a percentage of the GDP; and government debt as a percentage of the GDP.

As stated earlier, because Mexico has a large chunk of the total world economy, most people would have guessed that Mexico might have fallen in the middle of this index, maybe among the highest of the developing countries.

But, sadly, Mexico is in the top 25 (actually in the 25th place), right up there with the usual suspects: Ethiopia, Nigeria and the Dominican Republic. Remember, there are 195 countries in the world, so that puts Mexico in the 170th place.

Of the four categories mentioned, Mexico is extremely high in its interest rates per GDP. An alarming 4.5 percent of its entire economy is destined to interest payments.

Why is this significant? The temptation to simply default, when the percentage becomes so great, is very real, especially when populist presidents begin to float that kind of rhetoric and a financially uneducated populace has no clue of the implications on their own life as well as the lives of future generations of the country. “We love you Mr. President for not giving ‘our’ money away to foreign banks!”

So while Mexico has officially been saying its relationships with trading partners are honky-dory, the numbers paint a very different picture.

My conclusion: Mexico may be a country you may to date for the short term, but this index would suggest a long-term marriage with Mexico might not be in an investors’ best interest. The current and future governments’ task will be to aggressively attack this horrible ranking by building true confidence for investors.

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