Category: Mexico

In 2009, Mexico’s GDP growth is likely to stay below 1.0% as US industrial production, especially in the auto industry, drops. Credit Suisse expects GDP to expand just 0.6%, Merrill Lynch expects a 0.4% increase and JPMorgan sees no growth at all. Merrill says that US industrial production will decline 6% in 2009, hurting Mexico. Since 80% of Mexican auto industry exports go to the US, Merrill expects the slowdown in the US to hurt consumer spending, dent employment levels, cause a drop in real wages and a decrease in worker remittances to Mexico next year. Credit Suisse expects Mexico’s industrial output to contract by 2.2% in 2009, compared to a fall of 0.3% in 2008. Analysts expect Mexico to expand by as little as 1.3% this year, down from 3.2% in 2007.

S&P has lowered the national scale ratings of GMAC Mexicana to CCC from B minus, and of Ford Credit de Mexico to B+ from BB, it says. Both actions follow cuts in the ratings of each of their respective parents, and both ratings continue with a negative outlook. The Ford action centers on the parent’s “difficulties maintaining necessary liquidity in 2009.” S&P has lowered GMAC in response to a launch last week of an exchange offer for $38bn in bonds, which S&P views as a distressed debt exchange.

Pepsico plans to invest up to $3bn in Mexico over the next several years to expand its Sabritas and Gamesa business units. Most of that investment will go to research and development, manufacturing and distribution, marketing and advertising over the next 5 years, says Pepsico Americas Foods CEO John Compton. Pepsico employs more than 40,000 in Mexico.

A Banamex survey of economists reveals a consensus that Mexico’s monetary policy rate will be kept unchanged this year, but fall by 125bp in 2009 to 7.00% from a current 8.25%. The survey also shows that inflation is expected to drop to 3.90% in 2009 from 5.81% this year. Banxico’s inflation objective is 3.00%.

Lorenzo Belden, CFO of Autlan, has resigned, the Mexican miner says, effective at the end of the month, citing personal reasons. Gustavo Cardenas, director of IR and financial planning, will take over in the interim. Company directors will vote later on making the appointment permanent. Autlan recently decided to stop seeking a buyer and focus on acquisitions instead.

Fitch has downgraded to C from CCC minus the $100m 11.25% perpetual subordinated step-up notes issued by Mexican mortgage company Metrofinanciera. The action follows the deferral of a $2.8m coupon payment due Tuesday. The coupons of the perpetual bonds are deferrable when Metrofinanciera’s risk-weighted capital ratio stands below 8%. Such an action is not considered a default at the company level, Fitch says, leaving it to affirm Metrofinanciera’s B+ global and BBB national scale ratings. The recovery rating on the perpetual bonds remains at 6, the agency’s lowest. “Recovery expectations are limited in view of the subordinated nature of this issue and the uncertainty over the foreseeable future on Metrofinanciera’s ability to improve its financial condition while reducing its reliance on external support,” Fitch says.

In the past few days, Mexican billionaire Ricardo Salinas has been buying up shares in bankrupt electronics retailer Circuit City, accumulating a stake of around 28%. Filings with the Securities and Exchange Commission show that on November 12, Salinas purchased 5.3m shares at $0.22 each. The next day, the owner of Grupo Elektra and Grupo Salinas as well as television stations and cell phone companies, bought 18.8m shares at $0.24 each and on November 14, he purchased another 5.2m shares at $0.26 each. Circuit City closed at 20 cents Tuesday, down 2 cents on the day. The Richmond-based company has a market cap of $34m.

Norberto Roque, Mexico’s mining coordinator, left his post this week to pursue a new job at the National Institute of Statistics and Geography (Inegi). An Inegi press release confirms Roque’s new post as general director of federative relations based in Aguascalientes. Mining executives familiar with the move do not know if a replacement for Roque has been selected or if one will be chosen in the near future. This is worrisome, as the mining industry faces falling commodity prices globally, say an executive. The office of Mexico’s mining coordinator did not return calls for comment. In a September interview with LatinFinance, Roque said Mexico is in a race against time because pricing for mines is right at the moment. He also discussed plans to raise capital through novel securitization structures for the industry in 2009. “We have a great commitment to maintain Mexico as the number one place to do mining,” noted Roque.

JPMorgan will offer selected US-registered ETFs on the Mexican bolsa’s international segment. The bank says this will enable all eligible Mexican bolsa participants to achieve exposure internationally while benefiting from a MXP-denominated security. The cross-listed ETFs will be traded on the Mexican bolsa in pesos through a local broker, the bank says. JPMorgan will service the ETFs and handle all corporate actions. It will also disseminate relevant shareholder and corporate actions information in the Mexican market on the Bolsa.

Fitch has cut its rating for Mexican homebuilder Sare to BBB+ from A minus, noting that operating and financial indicators have weakened in recent quarters. “The rating is limited by the company’s dependence on the availability of financing to sell its homes, as well as the high working capital requirements associated with the company’s normal operations,” the agency states. Sare has postponed new apartment-building projects to focus on low-income homes that have a shorter working capital cycle and are also eligible for government-sponsored mortgages. Fitch also put the rating on watch negative.