Greater Controls for Green Bonds Needed; Digital Payments Grow

This week we spoke to green finance experts about the limitations and areas of improvement in the green bond market and the growth of online payments during the pandemic. Meanwhile, IMF’s Alejandro Werner said Mexico will not see pre-pandemic levels until 2026 or 2027.

Welcome to The Week in Finance.

Higher Standards Needed for Brighter Green Bond Future

Mexico’s sovereign bond issued in September last year was a major step in the country’s move toward the sustainability plans that Deputy Minister of Finance Gabriel Yorio said the government has for the country’s finances. The sovereign bond generated US$889.73 million for the country with the money going toward projects to increase access to health and education in poorly served sections of the country, the government said.

But a framework around the verification of the use of the financing was thin on the ground. This is not a new problem in the world of ESG, green or sustainable bond issuance, Carolina Barreto, Program Manager Latin America for the investor-focused non-for-profit Climate Bonds Initiative (CBI), told MBN. According to the green finance expert, investors are using their clout to improve standards of proof on entities issuing green bonds, but Latin America remains behind the curve.

How can this problem be resolved?

Digital Payments Boom in Times of COVID-19

CEO and founder of digital payment company Kueski Adalberto Flores offered his insights into the huge acceleration that digital payments experienced during the past 12 months due mainly to the COVID-19 pandemic.

“In Latin America, the intensive use of cash has been endemic for reasons both cultural and practical,” Flores points out. But more recently, with opinions about the security risks of shopping online improving, more people than ever are purchasing online.

And there is still room for retailers to entice clients that may be unsure about online shopping and prefer the benefits of entering a brick-and-mortar store. “A study conducted by Kueski Pay identified that users prefer to make purchases online through financing instead of using their credit or debit card, with 66 percent of people preferring to make purchases online if they had the opportunity to finance them and 87 percent saying they would increase their average ticket if they could buy now and pay later,” said Flores.

Mexico’s Economic Recovery Delayed

Director of the IMF’s Western Hemisphere Department Alejandro Werner said that he does not expect Mexico to recover pre-pandemic levels before 2026 or 2027.

During the ITAM's Annual Economic Outlook Seminar, Werner cautioned against excessive optimism as Mexico recovers strongly from the deep recession it suffered in 2020. “It must be made clear that this is a statistical rebound due to the low base of comparison that the GDP will have with respect to the contraction of 2020,” he said. “The important thing here is not to confuse this rebound and effect of the external locomotive as a sign of structural improvement of the economy.”