Market consensus points to Mexico’s central bank leaving the monetary policy rate unchanged at 4.50% today. Morgan Stanley says that despite higher-than-expected January inflation of 1.09% month-over-month, the authority is likely to keep rates level. Credit Suisse says the bank will likely hike the overnight rate by a cumulative 100bp in late 2010, in four adjustments of 25bps each. Bank of America-Merrill Lynch believes any hike will come in the second half of the year.
Latest News
Posted inDaily Brief
Quintella Assumes Global Role at CS
Antonio Quintella, CEO of Credit Suisse’s Brazil business and head of the Sao Paulo-based investment bank, has been appointed co-head of a new EM council made up of 15-17 bankers, many of whom are heads of business lines, regions or one of 7 EM regions that include Mexico, Brazil, Middle East, Russia, India China and Indonesia. Quintella has been selected as a permanent co-head of the council alongside Russia CEO Fawzi Kyriakos-Saad. “The council will seek to increase transaction flows not only into EM but between EM countries,” Quintella tells LatinFinance, noting a pickup in south to south investment flows. He adds another main purpose will be to better connect the bank’s internal EM staff across regions, and help local market clients access the bank’s global EM network. Quintella will remain CEO of Brazil, but relinquishes stewardship of the investment bank. Jose Olympio, head of corporate finance for Brazil and Marcelo Kayath, head of equities, will become co-heads of the investment bank.
Posted inDaily Brief
Ashmore Talks Up Brazil
Brazil will be a major investment destination for global investors over the next decade, Ashmore Investment Management says in a note, with the country benefitting from a rebalancing in the global economy. The shop, which manages over $30bn in mostly EM and has large positions in LatAm and Brazil, expects continued increases in allocation to asset classes outside money markets, particularly into the equity market, which more and more of the country’s companies have been turning to for funds. “We’re also seeing strong opportunities in the fixed income market with high rates and a steep curve plus the likelihood of currency appreciation due to strong foreign direct investment and portfolio investments over the next 10 years. Money will follow growth,” says Ashmore Brasil CEO Eduardo Lopes. “As this new reality of global risks changes, so asset allocators are starting to realize they are massively underweight Brazil and other emerging markets,” chimes in Jerome Booth, Ashmore’s head of research, noting that the US and Europe are no longer the safe havens they were thought to be.
Posted inDaily Brief
Interbolsa Plans Bond Sale
Colombian investment bank Interbolsa says it is planning to issue COP120bn ($62m) in local bonds in late March or early April. The AA+ rated issue will have a 4-year term and be made in 3 series, one paying a spread over IPC, another over DTF and another one paying a fixed rate. The company says proceeds will be used to refinance debt and to finance its acquisition of Brasil’s Finabank, which it bought for BRL36.3m in November, and other investments. Esfinanzas is managing the issue.
Posted inDaily Brief
CapGold Expects More M&A
Capital Gold president John Brownlie defends the company’s acquisition of Canadian miner Nayarit Gold for $41m, saying the asset is part of a handful of acquisitions the company is eyeing. Analysts have questioned the deal as they deem the target too small to contribute to Capital Gold’s growth. “We are looking at a 70,000-ounce producer,” Brownlie tells LatinFinance, adding that a deal will hopefully be announced during the first half of the year. Brownlie says he is also looking to buy other mining assets in northern Mexico. If these deals go through, Capital Gold will surpass its goal of producing more than 100,000 ounces of gold a year, he claims. “We could go beyond 200,000-250,000 ounces with 70,000 ounces coming from El Chanate [Capital Gold’s main asset,] 50,000 from Nayarit and 70,000 [from the potential target,]” he says.
Posted inDaily Brief
Peru Securitizer Readies RMBS
Titulizadora Peruana plans to sell Monday its first ever mortgage-backed security offering, according to officials. The securitization specialist owned by Titularizadora Colombiana has been pitching the deal worth up to $35m to local investors. The 20-year paper, backed by mortgages from BCP and Interbank, has an average life of 9 years and will pay fixed rate. The bond is dollar-denominated to match the currency of the loans. Subordinated bonds will represent about 6% of the issuance. BCP’s Credibolsa unit and Inteligo are placement agents for the deal, rated AAA on a national scale.
Posted inDaily Brief
Barrick Buys into Chile Mine Stake
Barrick Gold has agreed to pay $475m for 25% of the Chilean Cerro Casale gold mining project from Kinross Gold. Of the total amount, Barrick will pay $455m in cash, the buyer says. In addition, a $20m so-called contingent obligation contract, which was payable by Kinross to Barrick, was canceled. After the close of the deal, Barrick’s interest in Cerro Casale will increase to 75%. On a life-of- mine basis, Barrick says its share of average annual production is anticipated to be about 600,000-650,000 ounces of gold and about 170m-190m pounds of copper at total cash costs of about $140-$160 per ounce. A Barrick spokesman says the deal was privately negotiated.
Posted inDaily Brief
ISA Focuses on Diversification
Luis Fernando Alarcon, CEO of Colombia-based ISA is focused on diversifying away from energy transmission. “We have determined that we want to grow in other areas such as highway concessions and gas pipelines, among others,” he tells LatinFinance. “By 2016, we want 20% of our income to come from these other sectors,” Alarcon adds. ISA is in the process of finalizing the acquisition of a 60% stake in Cintra Chile from Spain’s Grupo Ferrovial for about $300m. It plans to exercise an option to buy the remaining 40%. “Cintra expects to finish its Ruta 5 project in Chile in a few months and we want to have the support of [Grupo Ferrovial] until that project is completed. After that we would begin working on acquiring the remaining stake,” Alarcon explains. ISA recently won Autopista de la Montana, 40-year concession which will require an investment of $2.5bn. Alarcon expects construction to begin in 2011. Elsewhere, ISA is developing fiber optic networks through its Intenexa unit, which already operates in Ecuador, Peru and Colombia. “We aspire to connect all of South America and Central America,” Alarcon says. The diversification strategy does not entail divesting electricity transmission, the executive notes. ISA is working on an environmental impact study to build and operate an electrical interconnection line between Colombia and Panama, a project it will develop with joint venture partner Etesa of Panama. BBVA is helping ISA secure financing for the project. Alarcon says ISA has already received expressions of interest from multilaterals including the IDB, CAF and IFC, as well as private banks.
Posted inDaily Brief
Brazilian Sweeties Tie Knot
Odebrecht’s ETH Bioenergia unit and competitor Brenco have finalized plans to merge under the name ETH, the two say, in order to better compete in the Brazilian sugar and ethanol sector. The two will invest BRL7.3bn through 2012, as they push to take market share from leader Cosan. In the deal, Brenco’s assets will be absorbed into ETH’s, resulting in a structure where ETH shareholders control 65% of the new ETH, and Brenco’s 35%. ETH aims to produce 3bn liters of ethanol and generate 2,700 Gwh of biomasse energy per year by 2012. The new entity will feature a 10 member board, with 7 from the ETH ownership block of Odebrect and Japan’s Sojitz Corporation. Brenco is owned by investors led by venture capitalist Vinod Khosla and AOL founder Steve Case.
Posted inDaily Brief
Mexico Pension Reforms Boost Flexibility
Mexican pension regulator Consar has approved two changes to the investment regulations governing Mexico’s pension funds (Afores), allowing the funds more flexibility in volatile periods and more flexibility in equity investment, it says. Afores manage over $100bn in local assets. The first change is allowing the value at risk (VAR) limit the regulator places on the funds to adjust with market volatility. This aims to reduce the funds’ pro-cyclicality in crisis periods such as the end of 2008, when many funds had to sell off assets at depressed prices or ask for special permission to exceed the risk limit in order to hold onto them. Regulators will also now allow Afores to buy individual listed Mexican equities, that are part of an approved index and have “medium- to high” liquidity levels. The maximum weight of such an individual stock with these characteristics in the Afores portfolios will be equal to the stock’s weight in the Bolsa index. Previously, pension funds could only get exposure to individual large and medium stocks buy buying the index they were a part of, or by buying small stocks outside the index. “New opportunities to buy individual equities without having to replicate an approved index will present a new challenge for Afores managers to polish their stock-picking abilities, and could lead to increased divergence in investment performance. The downside, however, is that this could also lead to a widening gap in valuation and liquidity between the large- and small-cap names.” Credit Suisse says in a report. The bank also notes that the new VAR calculation appears to be more consistent with a wide open investment regime that remains yet largely unexploited by Afores.