Securitization in Mexico

This page updated regularly deals with securitization developments in Mexico. If you have any news or development to contribute to this, please write to me.

More on this site and elsewhere:

very detailed article by Manuel Caloca González on Mexican securitization - also has elaborate write up on securitization process etc.: click here

Article on Mexican securitization by Guadalupe Ornelas click here

Another (later) article by Guadalupe Ornelas: click here

Mortgage securitization in Mexico - a report from Fitch IBCA in PDF format:
http://www.fitchibca.com/PDF/PDF2-98/1MEX0514.PDF

Full book on Mexico housing including write up on financing:
http://www.gsd.harvard.edu/jcenter/Publications/State%20of%20Mexico's%20Housing/toc.htm

Section of the above book dealing with financing of Mexico's housing:
http://www.gsd.harvard.edu/jcenter/Publications/State%20of%20Mexico's%20Housing/future.htm

10th Jan 2002: Latest market report
Please see a news report on our site giving market data for 2001 and expected activity for 2002. Notably, in 2001, Mexican securitization volume grew 290%

19th July, 2000:
This page was comprehensively revised.

Late breaking additions: 3rd April, 2000:

Consumer finance giant Grupo Elektra has announced securitization of accounts receivables - click here for the news item.

State of the Market:

Securitisation transactions are being talked about in Mexico: some deals have been concluded in the past couple of years or so.

Most of the securitisations in Mexico have been future flows or export receivables securitisation. In 1997, there was an offer of $1.2 billion in future flow structured transactions. There was also a credit cards receivables deal by Banco Nacional de Mexico S.A. worth $215 million. Grupo Minero Mexico S.A. de C.V. came to market with $420 million secured export notes. Industrias Peñoles S.A. de C.V. , the Mexican silver mining company, issued a unique note where the payments to the note holders were to be made in kind, that is, in form of silver.

During 1994, Aeromexico, an airlines company, had also securitised its airlines ticket receivables.

In March 1998, a securitization was completed by Grupo Minero Mexico, the mining subsidiary of the Grupo Mexico conglomerate. The US$500 million guaranteed senior note issue was supported by warranties on the company's export receivables, principally copper, zinc, and silver.

Like in other emerging markets (e.g., Turkey and Pakistan - see in our country pages devoted to these countries) there have also been securitisations of foreign inward remittances - in October 1998, Banamex, a bank issued US$300 million remittance-backed securities.

The first publicly offered transaction in Mexico was towards end-1998 by a consumer goods retailer Grupo Elektra S.A. de C.V., which issued securities backed by trade receivables.

Mortgage backed securitization in Mexico:

Rating agency Standard and Poor's in a report in Structured Finance July 2000 has pointed to the following structural problems in securitisation of mortgage receivables in Mexico:

Difficulties in the securitization of standard mortgages that are adjusted according to two indices;
Insufficient volume of mortgages originated through the government�s new low-income housing program, due mainly to its recent creation;
Need for increased liquidity in the banking system to allow for lending to resume;
Present state of legal reforms, including frameworks for insolvency and foreclosures; and
Further development of capital markets for long-term investments.

Future flows securitisation in Mexico:

Mexico has the distinction of being the first country in the world to introduce future flows securitisation: see for details our page on securitization of future flows. Since then, Mexico has always been an important centre for securitization of future flows.

Legal initiativess:

The Mexican government also has made a number of reforms aimed at creating a more efficient housing finance system. In the early 1990s, it authorized the creation of finance companies (SOFOLs) to encourage competition in the industry, and it is currently looking to reduce the cost and timing of foreclosure.

FOVI, the Mexican housing trust, has been trying to work out an MBS mechanism for financings of SOFOLs.

The legal requirements for assignment of mortgages entailed notification to the obligor as also a compulsory registration, implying costs as well as inconvenience. Towards this, several of the States have begun modifying their civil codes to allow for the assignment of mortgages without the need for obligor notification and registration. Besides, mortgage foreclosure laws have also been amended by most of the States.

Tax issues:

One of the significant issues in Mexican securitisation will be the issue of withholding tax. The Income Tax Law provides that income in credit, obtained by a non-resident through the acquisition of a credit right of any kind, whether present, future or contingent, that is sold by a resident in Mexico, will be subject to a withholding tax rate of 10%. The income will be determined, generally, by subtracting the contractual price from the face value of the credit right. The law mentions that the withholding takes place when the accounts are considered sold. This issue is important in the case of selling future receivables.

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