Rodriguez: doors stay open
|Rodriguez: doors stay open
We are not thinking of capital controls at the moment
because we have an open and market-based economy, Gerardo
Rodriguez, head of the Mexican finance ministrys public
debt unit, told Emerging Markets
In order to stabilize the economy, the country would rely on
fiscal and monetary measures, he said.
Brazil this week slapped a higher levy on foreign purchases
of fixed-income securities in a bid to restrain the reals
rally, triggering fears that speculative capital will flee to
neighbouring economies in the region.
Agustin Carstens, the Mexican central bank governor, told
Emerging Markets that capital flows in the country were driven
by structural improvements in the economy.
Mexico looks attractive to the market and capital
flows keep coming as showed by the latest bond issue. The kind
of capital that is coming is essentially long term, the average
maturity [of Mexicos public debt] has significantly
Mexico has front-loaded its borrowing needs this year by
issuing $4.2 billion in euro and dollar debt this year, to take
advantage of record low US interest rates. On Wednesday, the
government sold $1 billion of 100-year bonds, the longest
maturity ever issued by a Latin American government.
Royal Bank of Canada issued a report yesterday that said the
Mexican debt deal heralds that a bubble is brewing
in the global credit market.
While not making any direct comment about the relative
pricing of Mexico, we are left feeling that this sort of trade
is highly reminiscent of the height of the bull market
era, said the report, entitled Im forever
Rodriguez said a strong investor base, principally insurance
funds and high-quality institutional accounts, drove
Mexicos historic deal this week. They know what
they are doing, though, clearly, the excess global liquidity
was a contributor to the success of the deal.
Latin American economies should consider well designed taxes
to avoid the risk of excessive capital flows and financial
leverage, Nicolas Eyzaguirre, the director of the funds
Western Hemisphere department, told Emerging
Carstens said investors are positioning themselves in the
equity and debt markets to gain exposure to the countrys
fundamentals. And the country had beefed up its defences in the
event of capital volatility thanks its strong external
There is no issue with the financial system. We are
well capitalized and hold a record level of reserves.
Rodriguez said. The rise in the value of the peso this year
reflected the true position of the economy as we are now
growing very rapidly after the recession.
In other comments, Rodriguez said Mexico is set to issue a
150 billion yen 10-year deal in the coming weeks thanks to
backing from the Japan Bank for International
EM VIDEO EXCLUSIVE: Mexico debt chief
rules out capital controls