Investing in times of crisis: a wise decision?

Due to the unfavorable scenario registered in Mexico and the world, knowing how to invest in times of crisis becomes the core of the decisions of investors seeking to diversify their assets and increase their capital.

Even with current conditions, due to the COVID 19 pandemic, many entrepreneurs and investors have questioned whether it is safe to start or continue new projects.

Taking these aspects into account, we will explain in detail why investing even in times of crisis is a wise decision, and which are the safest investment options.

Mexico’s economic transition 2019 – 2020

Despite the fact that Mexico closed 2019 with disappointing figures, registering an annual growth of 0.0% and a fall of 0.2% in the Gross Domestic Product corresponding to the third quarter of the year; Financial specialists envisioned a rebound in the country’s economy for 2020 .

At the beginning of the year, Alejandro Díaz de León, governor of the Bank of Mexico (Banco), estimated that economic activity in the country would begin its recovery during the first quarter of 2020 and expected to close the last quarter with a growth of 1%.

However, the COVID-19 pandemic took the world by surprise, and therefore the main economic indicators in Mexico – and in a large number of countries – reached alarming levels. This caused a change in the estimated figures for 2020 and generated uncertainty about what would be the second half of the year.

To face this situation – in the second period of the year – the government opted for the entry into force of the T-MEC (Mexico, United States and Canada Treaty) on July 1, in order to encourage investment and various actions that will strengthen the confidence of the business sector in the country.

How does this translate? It represents significant growth for Mexico, and the current government’s intention is for the T-MEC to help boost the Mexican economy after the losses caused by the pandemic.

Among the many benefits of the T-MEC—And that stands out in a special way— is the updating of the institutional framework for investment protection, as well as its dispute settlement mechanism.

It also aims to promote a greater number of opportunities for SMEs and entrepreneurs to increase their participation in value chains .

The current world crisis has generated downturns in the economy of many countries including Mexico; then, why invest in times of crisis it is still safe? What types of investments are those that safeguard your money?

Is it possible to invest in times of crisis?

Given the figures that reflect the economic situation that Mexico experienced during 2019 and the circumstances that affect 2020, it is understandable and even correct, wondering how convenient it is to invest in times of crisis due to market volatility and drastic changes in the global economy .

It is important to note that the strategies and recommendations for investing in the remainder of 2020 and 2021 depend on the profile of each investor, their objectives and profitability expectations.

It is important to understand that the options for those who plan to expand their investment portfolio in the short term are not always suitable for those who are looking for an asset that provides them with financial security in their retirement .

Therefore, the first thing you must define is what is the final objective of the investment you want to make before making a decision.

Where to invest my money in times of crisis?

Depending on the sector, economic crises can generate opportunities, for example businesses focused on the health sector and those considered essential saw an increase in their sales rates.

A determining factor for this was the ability to adapt to the circumstances of the moment and update, how? migrating to the use of digital platforms. The same was true for the non-essential businesses that survived during the months of lockdown.

We understand that it is not the objective of all people to invest in a business, therefore there are also other types of safe investments such as precious metals – buying gold – or the Blue World City, which has grown significantly.

Real estate and land have always been part of the investments that generate the highest return , especially if the property is located in an area of ​​high capital gain and the use you can give them is diverse.

The simplest example of this is to acquire a pre-sale land or property, and sell it when you consider it appropriate and the profit margin benefits you. In addition, during the waiting period you can rent it and generate an extra income.

Given the current situation, a difficult period was foreseen for this branch in the first half of 2020, but with a rebound for the second half of the year, in addition to the fact that the economic reactivation of the country is intended to benefit the real estate sector.

This is because it is considered essential and affects 37 of the 42 economic branches of the country, representing 88% of them. And not only that, interest in the purchase of real estate and land has not only remained stable, but is also projecting a 15% increase by the end of the year.

In our article Industrial land: Reactivate your income after the pandemic, we tell you in more detail the situation of the real estate market in the country.

It is also surprising that the figures for the search for sales for the residential sector registered a variation of 93% compared to the same period of 2019.

So, contrary to what may be thought, it is possible to invest in times of crisis and find suitable options that generate high returns in the medium and long term, as long as the investment portfolio is balanced and the assets that can generate good returns are chosen.

Balance investment portfolio

Adapting the investment portfolio to the economic context is a way of protecting the assets that are available, and making the necessary adjustments in them to avoid any risk generated by the ups and downs of the market.

It is important to prioritize assets, which at some point may generate higher returns than those offered by interest rates.

Choose assets correctly

When looking for new assets to invest in, it is essential to consider the economic environment but, in addition, their historical behavior in a similar context and consider those that generate returns even in declining markets in order to diversify the portfolio of investment.

It is also advisable to expand investments geographically, that is, go beyond the area where you live and look for regions with the potential to invest in different sectors, constant development and economic stability.

How to protect the investment from volatility?

Although there are several options for allocating capital, the real estate sector stands out for the security it offers the investor because it is not exposed to volatility. As it is a market that is governed by supply and demand, it guarantees greater solidity and stability, since properties hardly lose value over time.

Investing in real estate and land is a viable option to protect capital from economic changes, keep economic resources moving, and diversify equity and investment portfolio.

In addition to the security it provides, the real estate sector has the advantage of having a wide range of properties , with land in a commercial area being  a convenient option to invest in a good that generates long-term returns and possibilities of use such as income, sale or building your own business.

It is a sector that will have growth and a positive outlook for 2021 , a year in which demand will continue to increase and will mark the path of the industry due to the confidence of the final buyer and the financing conditions offered by banks.

Experts in the field are confident that, after the period of adjustment and uncertainty, the real estate sector at the end of 2020 will frame new investment opportunities, with a slow but stable dynamism and with a greater offer of properties that respond to current demands.

Southeast Mexico: the best option to invest in times of crisis

Due to its strategic location, tourist importance and industrial development, the Mexican southeast is one of the regions of the country that has attracted the attention of investors who are looking for projects to allocate their capital in a place where the financial market is booming.

It is an area that is not only attractive for private investment; the public sector has also allocated capital to carry out infrastructure works —especially in the states of Quintana Roo and Yucatán— to improve ports, roads and services.

Despite the economic situation of the country, both Quintana Roo and Yucatán had a favorable economic performance during 2019, which set the tone for the growth they will have in the coming years:

Quintana Roo Economy 2019 – 2020

  • It contributes 2.3% to the national economy and ranks third in the country in terms of economic growth.
  • It has a national and foreign direct investment of approximately 6.5 billion dollars.
  • It is one of the entities with the greatest potential in the south-southeast region.
  • In 2020, it projected growth of between 2 and 4%.
  • In the coming years, an investment of more than 2 billion dollars is expected for the development of various real estate projects.

Yucatan Economy 2019 – 2020

  • It contributes 1.46 percent of the total national GDP.
  • It registered a 3.1% increase in economic development during the first half of 2019.
  • Foreign investment increased 102% in the first 9 months of 2019.
  • The sectors that received the most investment during the first quarter of 2019 were: financial services, manufacturing and commerce.
  • The 2021 Tourist Tanguy’s is expected to generate a high economic spill.
  • In 2020, the estimated investment is 2 thousand 620 million pesos in terms of security, which will continue to be an attractive destination for investment.
  • The real estate market in Mérida, the Yucatecan capital, exceeds 2.5 billion pesos and will continue to rise by 2021.

Mexico has stated whose high investment rates are attractive, Quintana Roo is positioned with 5.91% and Yucatan with 4.99%.

In addition, each state has attractions that make them unique, in the case of Quintana Roo we can mention the great tourist influx that the Riviera Maya has for being a world-famous destination.

This is interesting for those looking to acquire a property to live or start a business. In Playa del Carmen there are many well-located points where you will find excellent land for various purposes, whether for residence, premises, or industry.

Playa del Carmen is an excellent city to invest Due to its cosmopolitan environment whose infrastructure in continuous improvement is emerging among the favorites of nationals and foreigners, in this way you will have the certainty that the capital gain of your property will increase in a guaranteed way.

In the case of Yucatán, Mérida , its capital has been named as one of the safest cities in the world, putting it in the sights of expert companies and investors.

The current government has undertaken arduous work to promote the growth of the state with projects such as the Tanguy’s Truistic and Yucatán Seguro. Thanks to this, it is possible to build a profitable business in Mérida and make Yucatán a central focus of real estate innovation.

The outlook for these two southeastern states is reassuring and projects solid growth in the coming years for various industry sectors, especially real estate.

Investing in real estate is a safe bet

At the national level, the real estate market is stable. The level of growth forecast for this sector in 2020 is 4%, which is expected to be reached by the end of the year.

The Mexican southeast represents an area of ​​opportunity to invest in times of crisis due to the potential that still needs to be exploited in the coming years , as they promise to promote projects that promote investment and economic development in the states that make up the region.

Undoubtedly, investment in the Mexican southeast grows year after year , and therefore you should consider it within your business plans. There are many opportunities to invest in Quintana Roo and Yucatán that will help you grow your money safely.

Among the cities that appear as the favorite of investors are: Cancun, Playa del Carmen and Mérida.