From primary public and debt offerings to more sophisticated instruments, the various financing options on the Mexican Stock Exchange (Bolsa Mexicana de Valores, BMV) are diverse. Many of the BMV’s offerings are a sound option for obtaining financing. As the stock market allows individuals and organisations to multiply their savings through the contribution of capital to finance a wide array of development projects, both companies and the government in Mexico use this tool. All securities and derivatives market operations are carried out on the BMV, which is authorised by the Ministry of Finance and Public Credit and is responsible for facilitating transactions and promoting the development, expansion and competitiveness of the market.
Given the quick and recent uptake of new trading technologies, the consolidation of government institutions, changing international trends and the establishment of revised financial regulations, the BMV has been forced to modernise its business model over the years. First established informally in 1894, in 1907 the BMV was officially named the Private Exchange of Mexico, following the approval of regulatory reforms, and then reconstituted as the BMV in 1911. Since the end of 1999 the Mexican bourse has seen its market capitalisation grow by 376%, from MXN1.46trn ($88bn) to MXN6.95trn ($418.9bn) in 2015.
In 2016 the bourse saw three initial public offerings and three secondary offerings, worth MXN38.4bn ($2.3bn), which is some 828% higher than the same figure from 1999. Due to the regulatory changes following the banking and financial reforms of 2014 and 2015, the latter year saw the smallest single issuance on the BMV in the last 15 years, signalling that it is now possible for an increasing number of smaller firms to secure financing through the stock market. In 2016 in the short-term debt market there were a combined 782 issuances worth a total of MXN304bn ($18.3bn), while in the medium- and long-term market there were some 110 issuances worth around MXN158bn ($9.5bn).
Over the years, the BMV has become more efficient and accessible. This is demonstrated by average daily activities, which increased from 3840 movements per day in 2000 to 283,322 per day in 2016, an increase of more than 7000%. While it is true that a large proportion of the organisations that go to the bourse to raise funds are private companies, some state and municipal governments have also seen it as an option for diversifying their financing schemes. The BMV can assist them in their objective of becoming more financially self-sustaining and promoting local development within the remit of their own resources.
Approved in 2016, the Law on Financial Discipline encourages the above mentioned option through the implementation of control and transparency standards. The main objective of this law is to promote sustainable local public finance through the responsible use of public debt, and greater transparency and communication of information to the public. It also encourages the development of competitive processes within state entities by providing access to cheaper financing.
Despite the fact that the financial markets have been an alternative for some state and municipal governments when it comes to financing, there are still several barriers to entry, such as the high cost of issuance and the difficulty of restructured debt, a practice commonly pursued by sub-national governments. Proof of this is that despite the fact that the debt of states and municipalities has grown by around 180% in the eight years since 2008, debt issues have only risen by 96.4% from MXN203bn ($12.2bn) in December 2008 to MX569bn ($34.3bn) in December 2016. In relative terms this means that in 2008 debt issues accounted for 21% of total debt, but only 15% at the close of 2016. In summary, capital markets can, therefore, be seen as a more transparent, efficient and cost-effective way of channelling resources to benefit the interests of all participants, while simultaneously improving access and coverage of capital markets throughout the country.
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