Market players eye Mexico’s new $10 billion shelf as new government receives benefit of the doubt

By Rebecca Melvin

New York, July 19 – While new bonds may not be imminent, market players were eyeing Mexico’s shelf registration statement filed with the Securities and Exchange Commission this week for $10 billion of debt securities and/or warrants.

Under the registration statement, Mexico may from time to time offer and sell securities including debt securities, although specific offerings were not outlined in the SEC-filed prospectus dated July 17.

Mexico “may be looking sometime soon or after Labor Day. We don’t know much about the financing plans, which will be depending on what the new government wants to do,” a New York-based market source said.

Meanwhile, Mexico’s bonds and the currency have strengthened since Andres Manuel Lopez Obrador was elected on July 1 to be the next president of Mexico. The president-elect has adopted a less confrontational tone regarding business and investment compared to during his campaign. In his victory speech, he urged fiscal responsibility, stressing that Mexico’s social overhaul will come about with central bank autonomy, respect for government contracts and fiscal responsibility.

The Mexican peso fell to 18.90 to the U.S. dollar on Monday from a peak of 20.85 before the election on June 15. On Thursday, the peso was off its strongest point, but still stood at 19.06 to the dollar.

The president-elect’s finance minister, Carlos Urzua, estimated that savings, efficiencies and reallocations in next year’s budget could lead to the government’s increase in infrastructure investment by 1% of gross domestic product and an increase in social spending by about 0.7% of GDP.

Currently debt to GDP stands at 46.8%, having risen more than 10% under the current administration of Enrique Pena Nieto.

Meanwhile, renegotiation of the North American Free Trade Agreement remains in the cross hairs. Lopez Obrador has said he wants to see it successfully renegotiated. On Wednesday, Mexico’s economy minister and chief trade negotiator, Ildefonso Guajardo said he thinks that a new deal can be sealed by the end of August as officials have agreed to step up negotiations.

Guajardo said he doesn’t see alternatives, such as bilateral agreements between the United States and Canada and the United States and Mexico, as beneficial as such agreements would take too long to move though the U.S. legislature. Instead the negotiator stressed the need for flexibility and some compromise on controversial elements of the pact.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.