Mexico’s pension fund industry must evolve if it is to provide private sector workers with decent pensions for retirement, a panel at LatinFinance’s second Cumbre Financiera Mexicana in Mexico City, concluded today. Jose Eduardo Silva, CEO of Afore Profutoro said that pension funds must be able to invest more in floating rate instruments, credit derivatives and structured products to boost returns. Silva acknowledged that while second-stage reforms had helped to broaden investment alternatives, Mexico has not done enough to stimulate competition among pension funds. He noted that although fees had decreased dramatically, not enough has been done to boost performance. Moises Schwartz, chairman of CONSAR, Mexico’s pension fund regulator, noted that pension funds have not embraced the wider range of investment products available to them since the second-stage reforms in 2004 and 2005. Pension funds invested 71% of their assets in government debt last year compared with 95% in 2000 with just over half of the 21 funds preferring to concentrate portfolios in Mexican treasuries. Francisco Gonzalez, CEO of BBVA Bancomer’s Afore and chairman of the national association of pension funds, argued that public-sector funds should join the defined contributions system to create a national pensions system. And the industry must encourage workers to contribute more to pensions on a more regular basis. Pension fund assets in Mexico grew to 8.1% of GDP last year, with $65 billion in assets under management, from 3.1% in 2000, representing a compounded annualized growth of 16%.
Category: Regions
Peru Authorizes $720 Million Local Bond Program
Peru has authorized the issuance of up to $720 million worth of local-currency bonds (2.3 billion soles) during 2007. According to the Official Bulletin, the bonds will be used to raise money for non-financial needs of the public sector.
Mexico’s Banco IXE To Launch $100 Perp Bond
IXE Grupo Financiero, a Mexican bank, is set to launch a $100 million perpetual bond callable after five years. Goldman Sachs is the lead manager on the deal, which will begin its roadshow this week and look to price by the end of next week, according to bankers away from the deal. Fitch expects to assign a B+ rating to the securities.
Panama Canal Authority Appoints Mizuho Corporate Bank as Advisor
The Panama Canal Authority (ACP) has awarded the financial advisor contract for the Panama Canal expansion to Japan’s Mizuho Corporate Bank, the Authority said Thursday. The contract includes: reviewing the financial aspects of the ACP’s Master Plan and expansion proposal, providing strategic counsel on financing structures and strategies and creating and implementing an integrated financial model, among other items. Panamanians voted on October 22 last year to expand the Canal. Expansion involves building a third lane of traffic along the waterway through the construction of a new set of locks, which will allow more traffic and double Canal capacity.
Peru Picks up $14.7 Million for Last of SiderPerú
The Peruvian state picked up $14.7 million (47 million soles) on Wednesday for the last remaining shares to be sold of SiderPerú. Last year, the government took control of the country’s major steel-producer, paying $53 million for a 56.04% stake, following the failure of private owners Sider Corp to meet investment obligations. Brazilian steelmaker Gerdau bought just over 50% from the government in June last year and a further 32.84% in November and currently owns 83% of the company. According to market reports, Gerdau did not participate in the recent sale of the last remaining 4.27% stake.
Carrasquilla Confirms Departure
Colombia’s finance minister, Alberto Carrasquilla, has confirmed that he has resigned, local media report, turning down calls to reconsider his decision by President Alvaro Uribe. Despite news of his departure, the markets seem reassured that a successor will likely continue with his disciplined, market-friendly policies. According to earlier reports, the former minister offered Uribe the names of presidential advisor Oscar Iván Zuluaga and Roberto Steiner, Colombia’s representative at the IMF, as possible replacements. Carrasquilla became finance minister in 2003 but last year signaled his intention to step down for personal reasons.
Expanding Bandes
Venezuelan state-run development bank Bandes is to open an office in Ecuador by the end of the month, according to local media reports quoting bank officials. The Bank will have capital of $25 million. Bandes will invest a further $20 million into opening an entity in Nicaragua. The bank has just injected $12 million into its affiliate in Uruguay, Banco Bandes Uruguay. Bandes paid $10 million to buy savings and loans cooperative Cofac in March last year and committed to investing around $10 million to capitalize the entity. Bandes also announced that the Uruguayan Bank would have a new chairman – Luis Pacheco – who replaces Rafael Sandoval. Bandes has plans to open in Jamaica and Bolivia as well.
Cemex Prices $750 Million Perpetual Bond
Mexican cement maker Cemex priced a $750 million perpetual, non-call 8 bond yesterday at par to yield 187 basis points over comparable U.S. Treasuries. The transaction was tightened from 190 basis points over as orders exceeded $3 billion, according to bankers close to it. Cemex apparently went out initially looking for $500 million. The 6.64% coupon bonds step up to Libor+440bp in year 8. Proceeds will be used to pay for an eventual acquisition of Rinker, based in Australia, a hostile takeover which could happen as early as March, according to recent filings. If the deal falls through, the cash will be used to refinance existing debt. Barclays and JPMorgan were joint leads on the transaction, which settles February 12. Fitch rates it BBB.
EDF To Sell Mexico Power Assets
French utility EDF is reportedly selling its five gas thermal power stations in Mexico as part of its strategy to concentrate on European operations. The company hired JP Morgan last month to sell the plants, which are estimated to be worth around $3.9 billion. EDF has been present in Mexico for about 30 years as a consultant to the CFE (Comisión Federal de Electricidad) and, since 1998, as an investor and operator. EDF manages and operates the five plants – Anahuac, Lomas de Real, Saltillo, Valle Hermoso and Electricidad Aguila de Altamira – via parent company Comego.
Davivienda Raises $180 Million From Shareholders
Colombian bank Davivienda has succeeded in raising around $180 million from the issuance of new shares to existing shareholders. Sociedad Bolívar, the bank’s parent company contributed $75 million, as did the IFC which increases its equity stake in Davivienda from 4% to 9%. Minority shareholders accounted for $30 million. The funds raised will go towards financing Davivienda’s acquisition of Bancafe which was given the go-ahead by the financial regulator last week. Davivienda bought Bancafe from the government at auction for $927 million last October.