José-Oriol Bosch
Director General
Grupo Bolsa Mexicana de Valores (BMV Group)
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View from the Top

Tapping BMV to Finance Infrastructure Development

Wed, 11/01/2017 - 11:57

Q: What are the main challenges in promoting the participation of companies in the BMV?

A: Lack of participation is an issue the country faces in general. The biggest challenge is creating a financial culture in Mexico that is open to investing in the stock exchange. The country has 5 million registered companies and only 350 are using the BMV as a form of finance, of which 150 participate in the capital market. Another issue is that over 90 percent of the 350 companies on the BMV are from only four states in Mexico: Mexico City, Nuevo Leon, Jalisco and the State of Mexico. There are 32 states in the country and 12 of these, such as Zacatecas, Durango and Guerrero, do not have any companies listed on the Mexican Stock Exchange in either capital or debt markets, regardless of the industry. This is inhibiting economic growth. But the root of the problem goes beyond the number of companies listed. If 200 companies were to list on the BMV tomorrow, there would not be a market big enough to buy these shares. To create a healthy trading market, a balance of both companies and investors is required. If we had a larger retail base like that in Canada, for example, we could increase participation in the exchange. Banks and brokerages could help redefine this context by offering more financial education.

Q: What is the BMV doing to strengthen Mexico’s financial culture?

A: Our main priority in this matter is to continue developing a stronger financial and trading culture when it comes to businesses, investors and brokerages. The stock exchange and brokerage firms are collaborating to develop products and services that can better serve different types of companies and projects. Traditionally, the stock exchange serves the debt and equity markets as other exchanges, but in the last years it developed equity-financing nontraditional instruments such as CKDs. This tool was developed out of the country’s need for investment to generate resources, employment and new companies. CKDs have financed over MX$100 billion since their creation with close to 80 issues. The main industries that participate in CKDs are infrastructure, real estate and private equity.

Q: What are the benefits of having more Fibras participating in the market?

A: Having more than 10 Fibras in the market benefits the industry and we welcome even more. Other countries, such as the US, have had similar tools, such as Real Estate Investment Trusts (REITS), since the 1980s. In Mexico, they were only created in 2011 with Fibra Uno. Growth was quick and at one point we were questioning if the market was being oversaturated with Fibras. But considering the size of our economy and the existing potential in the real estate industry, Mexico should have many more Fibras. We just need to make sure growth is gradual to avoid a crash or inflation of shares. These tools help facilitate real-estate investment and are a good choice for anyone interested in investing in the realestate industry. They are also quite diverse — we have Fibras for hotels, commercial centers, offices and more.

Q: How is the creation of a second stock exchange, BIVA, impacting BMV and what opportunities to collaborate have you identified?

A: We are hoping the impact will be positive. We recognize that issues in Mexico’s financial culture cannot be automatically fixed through the creation of a second stock exchange. The regulation in Mexico had to be changed to allow more than one stock exchange to participate. The BMV strives to make sure the additional costs of having a second exchange will not result in inefficiency or fragmentation. Even though there is more than one stock exchange, both are regulated according to the same norms and legislation.