For some encouragement that a recovery may soon occur in Asia, one only needs to look at how Mexico has bounced back from the peso crisis of 1994-95. In recent months, asset managers have been re-evaluating Mexico.

According to Standard & Poor's Micropal, foreign managers with the highest exposure to Mexico include Foreign & Colonial (19.6% weighting), Kredietbank (17.7%), ING Barings (17.6%) and Trust Company of the West (16.2%). Groups with the lowest Mexican weighting include Genesis, SBC, Stewart Ivory and Commercial Union. F&C's Arnab Banerji comments: In 1994, Mexico had a trade deficit of $20bn. By 1997 the trade account was balanced and Mexico's finances are now healthier than at any time in the past decade. The crisis of 1994 has allowed Mexico to act as a shining example to other Latin American countries of how, with prudent financial housekeeping and decisive government, recovery is possible."

Enrique Garduno Curiel of Casa de Bolsa Bancomer, the second largest bank in Mexico, is Aetna's Latin American portfolio adviser. He suggests the region will continue to produce good performance, irrespective of what is going on in the other emerging regions: "With the reforms introduced in the national pension system, domestic saving will continue to grow. Low domestic saving has been a problem in the past. Now the savings rate is up at around 20%."

Essentially, Latin savings bounced back quickly from the depths of the pesocrisis. Michael Howell of Cross Border Capital adds that: "It is no longer necessary only to foster high domestic savings ratios; foreign capital can be attracted. A high FDI content and the cushion of deep domestic financial markets are vital factors of the developing process."

The performance effect of the peso crisis is that most fund managers have not matched the indices over longer time periods. Allocation to Brazil was the major factor in the outperformance of Latin fund managers in 1997, although Mexico was also significant.

In terms of domestic competition, some foreign groups have come in via the previously bombed out banking sector. However, banking remains a competitive, low margin business. Mexico's largest bank, Banco Nacional de Mexico, with $30bn in assets, formed a private pension fund management company rather than link up with an experienced foreign insurance or private pension fund manager. Chairman Roberto Hernandez explains that the group had handled mutual funds for years and has already gained a 17% market share of people signing up for private pension funds, largely by targeting existing savers."