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 Business News | April 2005 
Mexico to Increase Domestic Borrowing
 Wire services
| | Finance Secretary Francisco Gil Díaz |
Mexico will sell more debt in domestic markets and reduce borrowing in U.S. dollars in response to higher international interest rates.
Finance Secretary Francisco Gil Díaz said at meetings with International Monetary Fund (IMF) officials over the weekend he will seek to expand the nation's capital markets, boosting public and private borrowing in local currencies, to lessen the effect of rising borrowing costs abroad.
"To be able to meet most of the financing needs of both public and private sectors in your own country is becoming crucial," Gil Díaz said in an interview with the press in Washington. "This move is going to accelerate not only in Mexico but in many other large emerging economies."
Gil Díaz made the remarks after emerging market bonds slumped last week on concern global growth is slowing and higher rates in the United States will hurt demand for riskier assets. JPMorgan Chase & Co.'s main emerging market bond index last week had its biggest decline in three and dropped 1.2 percent in the first quarter, the steepest fall since the second quarter of 2004.
The nation's bond due 2015 rose 0.6 cent on the dollar to 104.20 to yield 6 percent on Monday after dropping 0.8 cent last week.
Developing nations including Mexico have stepped up borrowing on domestic markets as their economies expand. The IMF last week boosted its forecast for economic growth in Latin America's largest economy, saying Mexico would grow 3.7 percent this year. In 2004, the nation's economy grew 4.4 percent.
Mexico has reduced its net foreign debt to about US80 billion, or 11 percent of gross domestic product at the end of 2004, from 32.4 percent in 1995 by replacing it with peso securities. The nation's net international debt as a share of GDP is at its lowest in 32 years and is the fifth lowest among all developing economies, according to JPMorgan.
Petroleos Mexicanos, the nation's state-owned oil monopoly, sold 15 billion pesos (US1.3 billion) of bonds in February, tapping into demand from the nation's pension funds to help lower its borrowing costs. About half of the company's total debt is in pesos.
Gil Díaz said the country's 2005 borrowing needs were already met. The country also has pre-financed half of the US3 billion of international debt payments due next year with bond sales in November 2004 and January this year. |
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