Published by Vanzetti Navarro
Yields on bonds issued by many of Mexico’s leading companies have risen sharply in the past few weeks, signalling growing doubts about the ability of some to repay debts amid current market turmoil.
In the case of Cemex, the Monterrey-based buildings materials supplier and the world’s third-largest cement manufacturer, the yield on $62m of its dollar bonds maturing in October 2009 reached 41.2 per cent on Friday, a rise of almost 37 percentage points in the past month.
Telmex, the telecoms company belonging to Carlos Slim, one of the world’s richest men, has seen the yield on its 2010 bonds jump more than 7 percentage points to 11.8 per cent.
The sharp rise in yields has added a new layer of complexity to companies’ attempts to deal with the crisis because it raises the cost of issuing new debt to prohibitive levels, and therefore of meeting forthcoming debt repayments, at a time when liquidity has become a serious problem.
Last week, the situation became so acute that the centre-right administration of President Felipe Calderón was forced to announce two programmes worth a combined 90bn pesos ($6.7bn) to help re-establish liquidity in the commercial paper market.
Although the main reason for the pronounced increase in yields has to do with the global crisis and investors’ flight to safety, new concerns have developed about Mexico’s corporate sector.
The first has to do with a steep depreciation in the peso, which on Friday closed at 13.6 to the dollar, slightly higher on the day, but it was just over 10 to the dollar in August. The currency’s fall has sparked concern about groups’ exposure to dollar-denominated debt and their ability to meet obligations.
The second is that there is a growing realisation that the problems in the US will hit the Mexican economy harder than most economists had thought only a few weeks ago.
Lastly, there are worries about companies’ exposure to dollar-denominated derivatives, which have already inflicted huge mark-to-market corporate losses. Agustín Carstens, Mexico’s finance minister, admitted to the Financial Times last week that total derivatives losses were “probably in the order of $15bn”.
The move this month by Comercial Mexicana, the country’s third-largest retailer, to seek Chapter 11 protection after failing to meet one derivatives-related debt payment shocked Mexico’s business class. It also sparked fears that more cases could be waiting to happen.
As Damian Fraser, UBS Pactual’s Mexico City-based director of Latin American research, puts it: “Comercial Mexicana was Mexico’s Lehman Brothers.”
Well I know we aren't economists but I think we should consider to give an opinion about how does the world financial crisis will afect Mexican Economy (or even your own economy)
By the way this article has been taken from the Financial Times
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3 comentarios:
I agree with Carlos, there are many financial terms that I didn’t understand. But the main idea is the economical crisis that we are living now, Mexico is been seriously affected by the USA crisis because we’re so dependents of him. Mexican companies are suffering by the crisis, and there are doubts about how do they will can overcome their economical lost and their debts repayments. Mexico will require a lot of billions of pesos for re-establish the commercial market, and if these companies require money the prices will increase.
Our currency is devaluating and I hope that this devaluating doesn’t be increasing. If what Carlos says it’s true, we’re going to lose a lot of the money that we have now by the currency change and we don’t know until when we can recover of this inflation.
One of my teachers told us about inflation that our country lived in the past (I really don’t remember the date) and he said that the people had to spend their money immediately because by the next days the peso didn’t have the same value and if they didn’t change they lost their money. It’s difficult to imagine how to live with this kind of events that in fact happen, for example in many African countries.
We have to be attentive of what’s happening with our currency.
ADRIANA CABALLERO
Hello. Thanks for keeping posted and thanks for the advice too.
I did not know anything about this
"Amero" money, it is good to be informed.
Mark: 9
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