MEXICO - Finance
President, Bolsa Mexicana de Valores
Jaime Ruiz Sacristán has solid experience in the banking and financial sector, in which he has held several leadership positions over a 35-year period. He is a Founder and Chairman of Banco Ve por Más since 2003. Prior to being unanimously elected as the new President of the Mexican Banks Association (ABM), he was Vice President of the Association during 2007-09. He is currently a member of various Boards of Directors in diverse businesses, such as financial institutions, as well as in the industrial and commercial sectors. He has also worked as CEO of Grupo Financiero Bital and was also member of the Board of Directors of all its portfolio companies.
Many companies around the country are not willing to participate in the Mexican stock exchange and go public. It is not just about being listed in equities, but also about the debt market. We are collaborating with the Mexican Association of Securities Intermediaries (AMIB) to visit every state in Mexico to speak with companies and convince them of the benefits of listing and participating in the stock exchange, not just in terms of equities but also in terms of debt. We want to show them how easy and beneficial the process is. The BMV is not as big as other stock exchanges around the world; our total value in terms of equities is only 40% of the Mexican GDP. We are preparing to launch a new instrument named FIBRA E that is expected to help increase the size and value of the BMV, and it is designed to attract companies from the energy sector in particular.
Many businesses are family businesses, and they may want to keep things in the family for security or cultural reasons or to simply maintain tradition. If Mexico is to keep growing, however, companies will need financing in order to expand and grow. Our task is to help bring these companies into the stock exchange, both the old and new ones.
Small businesses account for 95% of employment in Mexico, making it the most important sector in terms of employment and possibly GDP. Historically, the use of banking and other financing sources in Mexico have been low compared to other countries. But that has been changing over the past five years, as these kinds of finance have gone up from 22% to 28%, and that is mainly due to banks lending more to small companies. Low interest rates have also helped recently. Banking finance is expected to continue growing, mainly based on credit to small businesses, and we want this positive development to also translate into the stock market, both in terms of debt and equity. The aim is to provide companies with liquidity, and we need to find ways to make this more available to a greater portion of companies.
In a partnership with the Ministry of Finance, we recently announced the creation of a new asset class called FIBRA E. The term comes from “Fideicomiso de Bienes Raices,” which is similar to a Master Limited Partnership (MLP) in the US. A fidecomiso (trust) is an instrument that was launched 10 years ago to buy real estate (FIBRA), such as an office complex or a shopping mall, with investors investing in the fideicomiso through the stock market. The investors then receive rent payments from the cash flow produced by all the real estate covered by the fideicomiso. Currently, there is only one energy company listed in the BMV, which is one the reasons why the Mexican stock exchange is small in comparison to other countries; the large energy companies are not listed on the BMV. The energy reforms that were introduced in Mexico also paved the way for the creation of FIBRA E., which is essentially a fideicomiso but specifically designed for energy and infrastructure. FIBRA ibra E opens up an entire new asset class for investors, as well as new opportunities for the BMV. One of these instruments should arrive on the market early 2016, and we are currently in talks with Pemex and CFE in the public sector and also with several companies in the private sector.
Integration has been slow, because we have to convince investors in those countries to buy shares of a Mexican company, and also educate them as to what MILA is. This is why we are putting a strong emphasis on publicity, because investors need to understand and become acquainted with investment opportunities in countries other than their own. We are also promoting MILA worldwide; we visited Frankfurt and London recently to promote the union. MILA has a bright future considering the size of the economies involved and the large market the four create once united.
Mexico is the second largest market in Latin America after Brazil, and by working together with Chile, Colombia, and Peru, it is a huge market on a global scale. We are also integrated with those countries in the Pacific Alliance. If we are to realize the potential that MILA and the Pacific Alliance offer, however, we need to ensure that all of these countries’ stock markets have growth potential in order to be able to finance the companies operating in them. In these countries, there are many truly multinational Latin American companies, operating in a region with similar historical, cultural, social, and political environments. These types of alliances and initiatives can help deepen that integration and facilitate business further across borders.
Global markets were volatile in 2015, though the Mexican market has performed well given the circumstances, the fluctuations of exchange rates, and the revaluation of the dollar vis-í -vis other currencies. The Mexican peso is historically one of the largest trading currencies in the world, and many investors hedge other currencies using the Mexican peso. Investors use the Mexican peso because it is a major market and conditions remain relatively stable and predictable. Also, there are a large number of companies waiting to be listed on the stock exchange, which makes the outlook for 2016 trend positive. Growth is expected to be around 2.7-2.8% for the following year, and we are expecting a better performance of Pemex due to the results from the energy reforms.
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