Latin America

In local and international bond markets the Mexican government has led the way in recent years, demonstrating the importance of a proactive and innovative debt management strategy. This has allowed the country to calmly navigate periods of volatility in emerging markets. With such volatility likely to persist until after the Federal Reserve finally raises interest rates, GlobalCapital sat down with the country’s debt chief and leading bankers and local investors in Mexico City to find out what Mexico does and needs to do to achieve such stability.

Finance Minister Luis Videgaray’s decision to cut annual infrastructure spending by $1.15bn in his January 2015 budget was unfortunate considering how much needs to be spent on the country’s inadequate roads, railways, ports and power facilities. Philip Moore reports on whether the private sector can help fill the infrastructure finance gap.

Mexico’s private pension funds (Afores) have played a key role in supporting the growth of the domestic capital market since the late 1990s. Now it’s time for them to diversify, writes Philip Moore.

Mexico could hardly enjoy a better reputation among emerging market investors right now, with companies in the country revelling in their new role as darlings of the capital markets. GlobalCapital met leading borrowers and banks in Mexico City to discuss how far-reaching the effects of the energy reforms will be, and the prospects for peso-denominated funding amid the government’s attempts to entice international buyers into the domestic corporate debt market.

Mexico is seen as a bright spot in the emerging markets, and investors are hungry for assets. But while disintermediation has provided plenty of fodder in corporate funding markets, the banking sector has yielded far less issuance. Could an increase in lending tip the scales? Will Caiger-Smith reports.

Banco Mercantil do Brasil extended the settlement date for a buyback of its 2020 dollar denominated subordinated debt this week, because it has not yet received central bank approval to increase the amount it can purchase.

Larger companies needing growth capital have a useful source in Mexico’s stockmarket, where demand in roughly equal quantities from domestic and foreign investors has supported a strong rise in issuance. It is going through a dip this year – but as Jon Hay reports, if Mexico delivers on reforming energy markets, there will be plenty of deals to come.

In this round-up, Hong Kong deposits rose in April, but cross-border RMB trade settlement fell, Macau announced its March deposit figures, ICBC opened two new offshore branches in Montreal and Riyadh, RMB clearing in South Korea has reached a daily average of Rmb25bn, and Japanese bank MUFG helped Brazilian clients settle trade with China in RMB.

With hopes high among debt bankers that Brazil could become a core source of green bond issues, BR Foods (BRF) sold the first environmentally friend bond from the country last Friday.

Brazilian food group BRF sold its debut euro denominated note around 25bp wide of its dollar curve on Friday with a green bond issue that DCM bankers said was an impressive result for an inaugural deal in the currency.

Chile has taken the prized spot of being the first Latin American renminbi hub, with a clearing bank, a central bank swap line and an RMB qualified foreign institutional investors (RQFII) quota all being announced on May 25.

Lehman’s worst mistake was to get its timing wrong — six months ago it might have been saved by Hank Paulson. But Bear Stearns and the US mortgage agencies used up the Treasury’s willpower and that left Lehman horribly exposed and alone.