Mexican Local Borrowers Forced Short

The planned issuance of up to MXP5.7bn in 2-year bonds by Cemex as part of a liability management exercise highlights the constraints on Mexican duration faced even by its blue chips. The domestic market, virtually shut since September, may be creeping open. But issuers will have to rely on shorter-term debt – in some cases a year or less – for some time. “Next year is going to be very tough,” Tonatiuh Rodriguez, who oversees about MXP40bn at pension fund Afore XXI, tells LatinFinance. “I expect the long-tenor issue market will reopen in the second half or in the last quarter of 2009.” Short-term issuance will dominate the first half, and a return to the 20-year and 30-year local tenors of the past may be years away, Rodriguez says, with issuers getting 10 years at most when the market revives. Though his and other Afores are not normally short-term debt buyers, Rodriguez explains they do have an interest in providing liquidity by participating in short-term funding to companies, especially for names whose longer bonds they hold. To fulfill long-term needs early next year, he says Afores can look to infrastructure offerings coming from the Fonadin fund and other federal and state government programs.