OPIC Board Approves $250 Million to Strengthen U.S. Support for Mexican Capital Markets
September 17, 2009
WASHINGTON, D.C. – The Board of Directors of the Overseas Private Investment Corporation (OPIC) today approved up to $250 million in financing to support a bond issuance in Mexico that will expand the local capital markets and support improvements to the infrastructure of the State of Mexico.
The project involves an approximately $315 million bond issuance in the local capital market that will be repaid from the future revenues of the Instituto de la Función Registral del Estado de Mexico, a decentralized agency that has assumed the responsibilities of the State of Mexico’s Public Registry of Properties. Promotora de Infrastructura Registral, a Mexican financial institution indirectly owned by MBIA Inc., a New York-based company, will use the OPIC guaranty to issue the bonds. Proceeds of the bonds will be used for modernizing the Institute and other investments in the state’s infrastructure.
The transaction, which is the first bond issuance in Mexico backed by property registry fees, will provide local capital markets investors with a AAA-rated investment-grade, fixed-rate, peso-denominated long-term asset. This transaction is expected to serve as a catalyst for future high-grade issues, thereby expanding investment options for local investors, opening new sources of financing for basic infrastructure development and further developing Mexico’s capital markets.
Although the Mexican securities market is Latin America’s second-largest (after Brazil), it remains small compared to developed markets and has been hit hard by the global financial crisis: long-term debt issues in Mexico are down 49 percent in 2009 compared to the same period in 2008. Consequently, local Mexican capital markets investors such as pension funds and institutional investors currently have few opportunities to invest in long-term assets.
“Development of domestic capital markets is critical to the establishment of a robust financial system in emerging economies – and this project will help Mexico continue to advance even in the current challenging economic and financial environment,” said OPIC Acting President Dr. Lawrence Spinelli. “OPIC is pleased to support a project that will broaden Mexican capital markets as well as modernize the State of Mexico’s property registration system, in the process generating employment and opportunities in housing development and mortgage lending as well as infrastructure and the local economy more broadly.”
The State of Mexico, located in the central part of the country, contains approximately 14 percent of the country’s population, and accounts for more than ten percent of Mexico’s GDP. Despite its large economy, however, a large and growing population is putting increasing strain on the state’s resources and infrastructure. The state’s administration has launched an ambitious economic development program seeking to improve the competitiveness of the state in Mexico and the international marketplace.