MINING IN MEXICO — Stock market to benefit from investment

Already among the world’s 10 largest stock exchanges in terms of market capitalization, the Bolsa Mexicana de Valores (Mexican Stock Exchange) will soon benefit from a package of reforms to the National Securities Law expected to be enacted in the current session of the Mexican Congress.

The reforms seek three major objectives. The first is to enable the Mexican securities industry to maintain itself and expand in the face of the strong competition expected from U.S. and Canadian financial firms once NAFTA (North American Free Trade Agreement) is adopted.

This objective is seen as key to the strategy of developing Mexico into Latin America’s premier financial centre.

The second objective is to increase the total capital pool in Mexico by encouraging the free play of equity from abroad in Mexican capital markets. This is seen as essential to the continued development of Mexican industry and the creation of jobs.

The third objective is to enhance investor confidence and enthusiasm by improving market stability. It is expected that this will broaden the base of investors, increasing their numbers and encouraging savings which will finance the productive growth of the country by channeling more capital into the economy.

The reform package works towards these objectives by establishing the trading of foreign issues on the Bolsa, as well as the trading of negotiable instruments of Mexican companies that were issued abroad. Thus, issues from domestic or foreign companies, originating either in Mexico or abroad, regardless of the nationality of the issuing company, will be able to be traded on the Bolsa.

To accomplish this, an international section will be created in the Bolsa for the trading of foreign issues. New issues in Mexico of stocks of foreign corporations will have to be issued by Mexican subsidiaries and traded on the domestic section of the exchange.

Another important reform in the program is a new requirement that all stocks listed on the Bolsa must comply with the same international standards that apply in New York, London and elsewhere.

It is anticipated that the new provisions will encourage listings by additional Mexican companies and by the Mexican subsidiaries of multinational companies. Similarly, listings for Mexican companies that fail to meet international standards will be eliminated. Thus, the Bolsa’s volume should be substantially increased and the index significantly stabilized. The market capitalization of the Bolsa grew from a total of US$16 billion in 1988 to US$139 billion at the end of 1992. Since 1989, some US$14 billion of foreign investment has flowed into Mexico through the stock market. During the same four years, the proportion of gross domestic product represented by stock valuations rose from 14% to 42%.

— From a Mexican Investment Board, Mexico City, publication.