Category: Regions

Mexico’s ICA has taken a 50% stake in an approximately MXP5.2bn highway project in central Mexico through acquiring 50% of Viabilis Infraestructura, which won the project in November 2004. The Rio de los Remedios-Ecatepec project in Mexico State is expected to take 34 months to complete, ending in the fourth quarter of 2010. It includes a 25.5km. ICA says Viabilis is negotiating financing for the project with Spain’s Ahorro Corporacion Financiera, which would be complemented with capital contributions from ICA and other Viabilis investors. ICA shareholders recently approved a $550 million capital increase to be made over the next 12 months, with the money to be used for financing projects. ICA has won a number of high profile projects recently, most notably the first FARAC deal. It was also awarded the La Yesca hydro project.

A big lingering question for global financial markets is how the crisis in US subprime mortgages will impact credit availability globally, and Mexico is seen particularly vulnerable. “Mexico’s banking system would be most vulnerable to an eventual decision by large banking powerhouses to tighten credit availability,” says Credit Suisse. “Over 80% of assets in the Mexican banking system are owned by foreign institutions. Chile is next on the vulnerability list, with 46% of banking assets in foreign hands,” it adds. As with Mexico, two of the largest foreign banks doing business in Chile are Spain’s BBVA and Santander. Another concern on the radar is a drop in remittances from the US. “Vulnerability appears to be high for small Central American and Caribbean countries,” says Credit Suisse.

Fitch has upgraded Mexico to BBB+ (stable) from BBB following the passage of fiscal reform last week in Congress, which the agency believes will be signed into law in the near future. Fitch is also encouraged by the strengthening policy framework, continued resilience in the current unfavorable external environment, as well as prudent public debt liability management that has strengthened local capital markets. “The tax reform that could increase the non-oil tax revenues by 2% of GDP during President Calderon’s term is a step in the right direction to address one of Mexico’s key credit weaknesses related to its narrow tax base,” says Shelly Shetty, senior director in the Fitch sovereign group. Fitch expects the reform to increase flexibility in the event of an oil price shock and other spending pressures, allowing the authorities to boost infrastructure spending, which could have a positive spillover on growth. The reform also gives greater tax relief to Pemex, which should boost its much-needed investment spending and allow it to finance through internal resources. “The reform is likely to promote infrastructure spending and private investment, possibly leading to higher growth, which would be beneficial for debt dynamics in the medium-term,” says Fitch.

Mexican Industrial Conglomerate Alfa has agreed to acquire polymer production facilities in Mexico and Argentina from Tennessee-based Eastman Chemical Company. Terms of the transactions, which are expected to close during the fourth quarter of this year, were not disclosed. The sale includes facilities in Cosoleacaque, Veracruz, México, and Zárate, outside of Buenos Aires.

Cemex is in talks with Irish building materials firm CRH to sell a portfolio of assets worth $3.5bn-$4.5bn, it said in a filing with Mexico’s stock market. The package includes Florida and Arizona operations which Cemex was ordered by the US government to divest as a result of its acquisition of Australia’s Rinker Group, as well as certain businesses and plants in the US, Spain, Austria and Hungary. The transaction is subject to shareholder and regulatory approval. Citigroup, Merrill Lynch and Morgan Stanley are advising.

Goldman Sachs expects Colombia and Mexico to hold rates steady at this week’s meetings. In Colombia, it says the Central Bank to leave the policy rate unchanged at 9.25% to further reassess the domestic and external backdrop. “Although the non-tradable goods inflation dynamics are far from comfortable the negative headline inflation reading for August (-0.13% mom driven by the -1.1% decline in food prices) reduced the odds that the Central Bank will resume the tightening cycle in September,” says Goldman. It adds that price rises will leave it with no option but to hike rates again before the end of the year in order to protect the 2008 inflation target. In Mexico, Goldman predicts that Banxico will keep both the TdF and the corto unchanged at 7.25% and MXP79m, respectively. “Given that inflation remains above the target, we believe that the bias will remain hawkish,” says Goldman.

Mexico’s state-controlled oil company Pemex, plans to put up for bid MXP12bn worth of contracts, it said in a statement. The six deals are for maintenance and services supporting offshore oil production facilities in the Gulf of Mexico.

Mexico’s state-owned mortgage lender Infonavit is planning a $200m-$250m UDI-denominated issuance of Cedevis residential mortgage-backed securities on the local market. The timing of the sale has not been set, but is expected in early October, Miguel Angel Hernandez, Infonavit’s IR officer, tells LatinFinance. The issue follows Infonavit’s July issuance of MXP2.7bn in Cedevis, its biggest ever RMBS and among the largest in LatAm. Su Casita, a private Sofol, is also heard to be considering a domestic RMBS of up to $300m.

Santander is preparing to bring up to MXP2.5bn in local bonds backed by credit card receivables. The proceeds of the notes, heard to be have a tenor of 5-7 years, will be used to fund the bank’s credit card lending. Pricing will be over TIIE, according to bankers close to the transaction.