The Spread of People's Capitalism

INVESTING in the Mexican stock market is limited to a small, wealthy elite, especially since December's fiscal crisis. Banks and brokerage houses generally require high minimum balances in their accounts for clients with stock-playing dreams, and most Mexicans are discouraged anyway by previous market losses. Prices are down about 15 percent in 1995 and about 12 percent from a year ago. A recent Financial Times index of the world's 26 most important stock markets rated Mexico next to last in yields.

In the mid-1980s, during what economists call a financial "bubble," average Mexicans invested in the stock market. But the October '87 crash scalded many investors, and few have returned to the pot.

Carlos Lopez is a case in point. On his accountant's advice, he invested virtually all his savings - about $5,000 - in the stock market in 1986. Eighteen months later, the crash left him with less than $1,000. "I blame the big boys of the market and their wild speculation for that loss," he says, adding that he has no interest in reentering the market.

"I've gone back to the traditional means of saving and investment," Mr. Lopez says. He puts some money in a savings-and-loan institution, but most goes toward upgrading equipment for his print shop.

Mutual funds are available in Mexico but remain undeveloped, and they generally have minimum investments that are prohibitive for average Mexicans.

"Things have changed in Mexico since 1987," says Daniel Goldstein, a Mexico City banking and investment specialist. "Where before you could get in the market with something like $2,000, many banks and brokers now require [about $8,000].... You realize that means access is quite restricted."

At a time when President Ernesto Zedillo Ponce de Leon emphasizes the need for a higher savings rate, many observers say Mexico needs programs to encourage long-term investment not consumption. "There are things the government could do to encourage a much greater participation on the part of the public," says Roberto Salinas-Leon, director of the Center for Free Enterprise Studies in Mexico City.

In 1993, the government began talking about an employee stock-ownership plan that would take advantage of a privatization drive to encourage public participation in company capitalization. "The idea was based on similar programs already undertaken in Chile, England, and Czechoslovakia," he says. "For some reason, it never materialized, but it's a good idea that deserves renewed attention."

Other analysts say uncertainty will keep most analysts out of the market this year.