Download now: How To Invest in the Coming Bitcoin Boom

My Mexican Standoff

Written by Briton Ryle
Posted January 10, 2018

After a slight weather delay in my departure from Mexico, my plane landed at Baltimore-Washington airport last Thursday around 8 p.m. I had no coat and was wearing only flip-flops, so it was a pretty chilly run to the parking garage. Going from snorkeling with sea turtles along a magnificent reef to 10-degree weather is a bit of a shock. 

We stayed on Isla Mujeres for five days and then spent a couple nights in Akumal, Mexico (I don't do the all-inclusive thing). It's been nearly 20 years since I've seen either place.

Isla Mujeres was very different from when I honeymooned there in 1999. It's no longer a sleepy island town. If you start at the Mayan site at the south end — Punta Sur — the island bifurcates about halfway, creating a natural harbor. The main road and the town sit to the east of the harbor. To the west is a peninsula called Sac Bajo that, 20 years ago, was a dirt road and almost completely undeveloped. 

We took that dirt road on scooters 20 years ago and found just one place, Playa Tiburon. We thought it was abandoned as we walked up the tile entrance. But there were several Mexican families and a couple guys grilling a big fish over an open fire in the sand. So yeah, we sat down and ordered fish for two. It was delicious and a great find. 

Now, Sac Bajo is almost completely developed with hotels, condos, and a few houses. That's where we stayed: a cluster of condos called Casa Hi Na Ha. Here's the view from the patio:

hi na ha

Playa Tiburon is still there and hasn't changed. It is the locals' spot. Apparently the local fishermen and snorkel guides dock there after work, sell their fish, and have dinner. We ate there one night on our recent visit, and the place was completely packed. We got the last table, ordered fish for six (it was grouper, served with tortillas, rice, slaw, and a couple sauces) and a couple rounds of drink and beers. The bill was around $80. Fantastic.

tiburon

Travel tip: The best snorkeling is reached by boat. But don't fall for the $70-a-head offers. Go to a pier at the public beach just east of town, and you can easily find a boat that will take you out for 250 pesos per person. You head just across the harbor to the north end of the Sac Bajo peninsula. It's shallow, the reef is pretty, and there is a ton of fish. For a little more they might take you to Playa Tiburon for an early dinner. And if you go in the spring, you can swim with whale sharks as their migration routes take them by the island. 

I was surprised to see that there were a lot of Mexicans vacationing on Isla Mujeres. Americans were definitely a minority of the tourists. 

But Akumal (about 50 miles south of Cancun) really hasn't changed all that much. We rented little two-bed bungalows at Akumal Beach Club Caribe for $180 a night. It's a great property, and you can snorkel right off the beach and get to the reef in less than five minutes. I highly recommend it.

akumal

Travel tip: Despite what the vendors on the Akumal beach will tell you, a life jacket is not required. They are just trying to make money by renting you one. And the water is salty enough that you're not going to sink. 

The Mexico Fund

There are just two viable ETF options for investing in Mexico. There's the iShares MSCI Mexico Capped ETF (NYSE: EWW) and the Mexico Fund (NYSE: MXF).

Each fund holds basically the same stocks. The difference is that the Mexico Fund pays a better dividend (3%). But the Mexico Fund also has a higher management fee (1.7%) than the iShares Mexico ETF (0.49%). However, the Mexico Fund also trades at a 12% discount to net asset value (NAV). It might seem like the fund will rally to eliminate that 12% discount if sentiment gets bullish. And it might. But I've learned that closed-end funds tend to always trade at a discount to NAV.  

A few years ago I recommended the Mexico Fund (NYSE: MXF) to my Wealth Advisory readers as a play on a growing Mexican middle class, and it paid a great dividend. The basic thesis was correct. What I didn't anticipate was the currency conversion. We ended up selling for a loss as the Mexican peso tanked.

But the exchange rate in Mexico is now very attractive for travelers. Twenty years ago, it was about 10 pesos to the dollar. This time I was getting 16 to 17 to the dollar. That puts a cold Victoria lager at about 2 bucks each.

Of course, one big reason the peso has been so weak has to do with American politics. The president has talked about ditching the NAFTA trade agreement for quite a while now, and that would definitely be bad for Mexico's economy. 

So I think the best investment you can make in Mexico right now is a visit to the Riviera Maya. You'll have a great time, and I have hard time imagining it getting much cheaper. After that, I'd have to say I like an individual stock like Wal-Mart de México (OTCBB: WMMVY) as a pure play on the Mexican consumer. 

But even then there's no rush. Wal-Mart de México is trading near the top of its range, just backing off resistance at $25. Some patience can get you in between $20 and $22.

I Fought the Law...

There was one bad note to the trip: I got a shakedown from the Mexican police. You see, we rented a big Chrysler minivan to drive from Cancun to Akumal. That thing just screamed "tourist."

Heading back to the airport, the Policia saw their opportunity as we passed through one of the checkpoints on 307. They pulled me over, said the kids were not wearing seatbelts (they were), and started to write up a ticket. All the while they were asking when our flight was...

shakedown

They said the procedure was to give me a citation, which I would pay at the station in Cancun. And they would keep my driver's license as a guarantee that I would pay the ticket. I would get my license back at the Cancun station when I paid the fine.

Clearly, they assumed I would be in a panic that I would miss my flight and be desperate to find a solution. Only I wasn't. Because my flight was the next day (kids and ex-wife were flying out that day). So I kept telling them I'd be happy to pay the fine the next day in Cancun. Things weren't going according to their rotten little plan...

When they finally figured out I wasn't caving, they finally made their offer: 700 pesos to get me back on the road. I countered with 590, about $30. 

OK, so I didn't actually fight the law. These two were armed with a MAC-10 and an M-16 — I would not have won. But I did haggle with them. And I'll call a $30 shakedown a win any day. 

That brings me to my final travel tip: Just take a cab or a shuttle van. It's only about 50 miles from Cancun to Akumal, another 15 maybe to Tulum, so it might run you 60 bucks. That's still cheaper than a rental, and you won't have to deal with la Policia.

Until next time,

brit''s sig

Briton Ryle

follow basic@BritonRyle on Twitter

An 18-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.

Comments

Buffett's Envy: 50% Annual Returns, Guaranteed