The aftermath: Although local and foreign markets will suffer, longer-term investments could still bear fruit. (Market Moves).

It will take a long time before w all recover from the dreadful loss of human life caused by the terrorist attacks in the United States. Even so, financial markets are back on the move, and in recent days we have been able to appreciate the first economic and financial effects resulting from the attack. Evidently, North American airline companies are the first to have been affected, as they are likely to face a heavy reduction in overall air travel and higher security costs in the near future.

But perhaps the worst repercussions so far have been on U.S. consumer confidence. We can realistically expect internal demand to fall for two main reasons, the first of which is the uncertainty surrounding the international environment in coming months. Consumers can be expected to spend less when they are unsure about what tomorrow will bring. Secondly, stock markets are continuing with a downward trend that is diminishing the so-called "wealth effect"--a sizable portion of North Americans have stock investments, and therefore feel better-off when stock markets are on the rise and vice versa. In conclusion, we can expect the United States' primary driving force to be turned off for some time, and high stock-market volatility--at least in the short-term.

A longer-than-expected recession in the United States will generate an even lower demand for Mexican exports such as auto parts and steel. However, this could be offset somewhat with rising oil prices that could result from U.S. military reprisals against its adversaries.

With this outlook, I would suggest investors take advantage of interest rates. This may be done through an investment society, since these can offer competitive yields. The premium being paid on fixed-income instruments is still quite attractive. Meanwhile, the U.S. dollar is not a clear option, given the adjustment it has already suffered.

Once the markets begin to stabilize, it is very likely that we will find shares belonging to solid companies offered at ridiculous prices. I think that some of the best local options at the moment are Walmex and AMX, given these companies' leading market positions and solid financial structures. However, these opportunities are only recommendable to long-term investors. Following is a brief outline of some of the most attractive long-term stocks on the Bolsa at the moment.

Martin Lara is director of Research at the Valores Finamex brokerage.

RELATED ARTICLE

America Movil

The adjustment in the Bolsa and a negative perception for cellular operators, particularly in Brazil, has impacted AMX's stock price. However, the company offers a significant EBITDA growth potential of more than 100% in real terms in 2001 AMX's operations depend mainly on Telcel, which has al limited competition in its home market. In addition, AMX has a rock-solid financial structure: its cash reserves are as high as its interest-bearing liabilities.

Cemex

The weakness in the global economy and depressed international valuations make it easier for Cemex to continue growing through acquisitions. In addition the company counts on a very high internal cash-flow generation: it expects to generate an EBITDA of around US$2.4 billion in 2001 with an impressive free-cash flow of approximately US$1.2 billion.

CIE 

CIE benefits from various positives; 1) high growth potential both in terms of sales and EBITDA; 2) vertical integration that assures a higher-than-average return; 3) leadership in several markets where it participates; 4) management with a proven track record; 5) healthy financial structure. Nevertheless, this company is riskier than the other ones due to its participation in Argentina; which accounts for around 10% of sales and EBITDA.

Housing sector

There is an enormous housing deficit in Mexico, estimated by some sources at around 6 million homes. This offers significant growth opportunities for the main developers in the country such as Ara and Geo However, the former has a healthier financial structure than the latter, which makes it a more defensive stock in volatile periods.