Category: Mexico

Mexico is expected to leave the overnight rate unchanged at 7.5% at Friday’s monetary policy announcement. Credit Suisse predicts that the central bank will use the same language when closing its policy statement, including a commitment to a 3.0% inflation target. “The central bank will address in its communiqué the worsening of the growth outlook for the US and the aggressive rate cuts by the US Federal Reserve,” says the shop.

S&P has affirmed its BBB- (stable) long-term corporate credit rating on Mexico’s Controladora Mabe, citing the favorable credit effects of a joint venture with General Electric. The agency also laud’s Mabe’s leading position in Mexico, supported by “adequate operational performance,” as well as revenue and geographic diversification, increasing participation in the US and an important position in Canada. On the downside, S&P notes Mabe’s intense competition in its main markets, relatively high leverage, and somewhat aggressive expansion plans that could lead to higher debt levels. The agency says it might consider an upgrade if Mabe maintains total debt-to-Ebitda and funds from operations-to-total debt ratios of 1.7x and 30%, respectively, as well as positive free operating cash flow generation. A downgrade would follow if the company’s operational performance and strategies to enter new markets lead to a total debt-to-Ebitda ratio of 3.0x, S&P adds.

ING Group has agreed to sell to sell part of its Mexican Seguros ING unit to AXA for $1.5bn. ING will divest its health and life insurance lines, HMO and bonding business, in order to focus on its existing Mexican pension and annuities operations. ING, which will realize gains of EUR150m-EUR200m on the sale, is funding the purchase with its balance sheet. It is unclear whether it will seek outside funding. Debevoise & Plimpton and UBS advised AXA on the sale, while Cleary Gottlieb Steen & Hamilton and JPMorgan reportedly advised ING.

Bank loans to Mexican corporates ticked up noticeably in the last three months of 2007, according to a Banxico survey released Friday. The portion of respondents that said they took on a bank loan in Q4 rose to 26% from around 23% in the previous quarter, nearing a four year historical high. Over 63% of the respondents said the funds were used for working capital. Many companies also cited expensive interest rates on bank loans as the main reason they did not take out a loan. Of the 74% that did not access the bank market, 32% said it was because of the cost of funds. Over the second half of 2007, the sharpest pickup in bank borrowing came from investment grade companies.

Mexico will this year embark on an antitrust reform, Eduardo Sojo, the country’s secretary of economy, said Friday. “This is the year to reform and strengthen our antitrust environment and eliminate any artificial barriers to entry in our economy,” said Sojo, speaking at the Mexican Housing Day conference in New York. Mexico has recently signed an agreement with the OECD to conduct a study to determine if there are any barriers to entry in any of the country’s sectors, said the minister. And if any are found, Mexico will look to change and implement legislature to remove those barriers. The move is a bold one for Mexico, whose private sector is consolidated in the hands of a few powerful groups. There are less than 40 actively traded entities in the country and companies like Telmex, America Movil and Cemex hold a disproportionately large share of Bolsa’s total market cap. Among the goals of the secratariat for this year are to enhance the business and entrepreneurial environment, consolidate the country’s industrial policy and increase competition, says Sojo. “This year will be a more difficult year for Mexico, but we will take the opportunity to make the right decisions.”

Mexico has launched a MXP270bn National Infrastructure Fund to consolidate different initiatives within the government to promote infrastructure investment. It will start with MXP40bn and channel approximately MXP270bn into infrastructure projects over the next five years, according to the finance ministry. It will invest through guarantees, subordinated debt, risk capital and other vehicles that support loss-making projects. “The idea is to have a single platform from which we can execute the agenda established in the national infrastructure plan,” Mexico’s public credit head Gerardo Rodriguez tells LatinFinance. “The fund will operate in principle with the resources from the FARAC packages and later may incorporate some other resources,” he adds, referring to the toll road packages that are being sold off. Besides health, education and public services, Mexico is looking to use the fund to renovate roads, ports and airports, as well as energy and hydro-power infrastructure. It also wants the fund to function as a center of excellence for evaluating projects to assess their order of priority. Overall, Mexico sees infrastructure investment as part of a counter-cyclical economic policy and an important measure to counter the negative impact of a US slowdown this year.

Mexico launched Thursday the follow up to last year’s highly successful FARAC toll road auction. The so-called “Pacific Package” incorporates some existing roads – Guadalajara-Tepic, Mazatlan-Culiacan and Aeropuerto Los Cabos-San Jose del Cabo – and a few others to develop, Mexico’s public credit head Gerardo Rodriguez tells LatinFinance. Among the latter are the Mazatlan bypass, Culiacan bypass, Guadalajara southern bypass, Compostela-Puerto Vallarta and San Josa del Cabo-Cabo San Lucas. The government has predicted a $2bn value for 14 projects over 2008. The first package from Mexico’s Fideicomiso de Apoyo para el Rescate de Autopistas Concesionadas (FARAC) trust was sold in 2007 to Empresas ICA and Goldman Sachs Infrastructure Partners. The MXP37.1bn loan package secured was the first such international financing done in pesos, and the biggest local currency syndication the LatAm project market has ever seen. This year’s concessions were expected by bankers to yield more than $1bn in new debt.

Mexico’s BBVA Bancomer plans to test the local waters with its own 2011 senior secured bond. The bullet maturity floating-rate issue will be between MXP3bn and MXP5bn in size and is set to price next Wednesday. The Triple A issue will be priced over TIIE.

Ecuador’s telecoms superintendent Suptel has ordered the local unit of LatAm mobile giant America Movil to pay $27m it says the Mexico-based firm overcharged clients in 1999-2000. Suptel gave the firm 72 hours to pay. America Movil’s subsidiary Consorcio Ecuatoriano de Telecomunicaciones (Conecel) has provided mobile services in Ecuador since 1993. The license expires in August 2008 but Conecel expects to renew for an additional 15-year term. AMX L shares closed up 0.26% at MXP31.36 in heavy trade Wednesday which saw the IPC index retrace 0.56%.

Moody’s de Mexico has downgraded GMAC Mexicana Sofol’s long-term national scale debt rating to Baa1.mx from A3.mx, and the long-term domestic rating to Baa1.mx from A3.mx. The ratings have negative outlooks and follow a downgrade of General Motors Acceptance Corporation LLC’s senior unsecured rating to B1 from Ba3. “GMAC Mexican subsidiaries’ debt ratings are based on irrevocable and unconditional guarantees provided by GMAC, and as such, the downgrading of GMAC LLC has a direct impact on the ratings of their guaranteed debt,” says the agency. “Although the subsidiaries’ financial performance on a stand-alone basis remains adequate, the financial standing of GMAC LLC is now weaker,” it adds.