The summer was not a good one for much of Latin America, with continuing crises in Argentina, Brazil and Venezuela. I am happy we received good news from Mexico, which was able to sign a new trade agreement with the U.S.
Even if the conditions related to the rules of origin are stricter than in the previous accord, Mexican companies can feel a sense of relief, as there seems to be again a stable framework under which they can operate. Mexican corporate leaders such Cemex, Grupo Bimbo, Nemak--part of Grupo Alfa, America Movil, Televisa and many others now need to adjust to the new rules, but the uncertainty has been removed. Not surprisingly, the Mexican peso went up against the dollar.
Other good news from Mexico has been the launch of BIVA (Bolsa Institucional de Valores), the second stock exchange to operate alongside the long-established Mexican Stock Exchange (the Bolsa Mexicana deValores, or BMV), created in 1975. The listings, market capitalization, and liquidity in Mexico are far below what would be expected in an economy of its size and development.
Due to the absence of competition, the Mexican stock market was lagging those of other developing countries both in sophistication and size. BMV was the second-biggest stock exchange in Latin America after that of Brazil. Yet, with just 140 listed companies--compared with 368 in Brazil--its market capitalization represented only 34% of gross domestic product, versus 42% for Brazil.
This leaves wide potential to boost stock market penetration.
Although Mexico's fixed income market was deep and liquid, its equity market struggled. Relatively few of Mexico's family-owned companies opted to list their shares, often out of reluctance to...