Latin Finance - March/April 2009 - 51

credit markets Mexico Reanimating Capital by Ben Miller espite years of stability and solid gains, Mexico’s economy has been dragged down by troubles in the developed world, especially its northern neighbor. Crisis at several domestic blue-chip corporates has spooked investors. Swap lines from the US and multilateral “I’m optimistic that backing have attempted to provide conditions are going to be there support, though the government in 2009,” says Gerardo confirmed in February that the country Rodríguez, Mexico’s deputy was heading towards recession, undersecretary for public debt, announcing a 1.6% contraction of the of the local debt markets. He economy in the last quarter of 2008. explains that foreign investors Mexico awaits signs of recovery looking for EM opportunities abroad, meanwhile trying to return its could jump start the local capital markets to normal levels of markets. However, the key volume, if not prices. Opinions are question is how the financial mixed, and few are able to draw solid world is going to react to conclusions as the global crisis lurches stimuli from different from bad to worse. governments. “I can’t say I see a strong recovery in “From what we’ve seen, it’s 2009,” says Lupin Rahman, vice going to be a slow recovery,” president of emerging markets portfolio says Mauricio Jannet, CEO of management at Pimco, which had over GMAC Financiera. “Investors $747 billion in assets under management are not going to be jumping globally as of December 31. She notes back into the markets.” that an economic rebound in Mexico or Investors are uncertain and see No imminent recovery expected, says Pimco’s Rahman EM generally is a matter of resolving a lot of downside risk in local core economic problems in the US and debt, especially after the other external markets. failings of several blue chip corporates in recent months. Rahman adds that full de-leveraging is a question of “We’ve seen a few points where it’s looked like a recovery several quarters, if not years. Speaking at February’s has come, and actually it has gotten worse. That hasn’t Cumbre Financiera Mexicana, a LatinFinance event, helped to steer investors back,” Jannet says. Suffering most are the export sectors, says Ellis Juan, the Rahman explains that the fundamentals of the Mexican IDB’s representative for Mexico, while there may be economy are strong, though all emerging markets face opportunities for producers of domestic goods that might competition from US high-yield opportunities for investor replace more expensive imports. And despite concerns cash. Credits backed by the US government look especially about corporates following a sharp rise in defaults, he says strong in comparison. Rahman declines to indicate how Pimco is positioned in Mexico, or what sectors might be the the risk is not systemic. Balance sheets are in good shape and leverage is relatively low. most compelling. D Mexico’s markets are stalled, but investors remain confident about long-term prospects. Recovery will be painful, but perhaps include long-awaited structural changes. LatinFinance Roundtables are underwritten by sponsors, although the magazine’s editors retain control over the content of these articles to ensure their objectivity and independence. 2009 March/April LATINFINANCE 51

Latin Finance - March/April 2009

Table of Contents for the Digital Edition of Latin Finance - March/April 2009