How to Modernize The Mexican Stock Market?

The million-dollar question for the Mexican mining industry is how to meet investor expectations and strengthen the capital market. The answer requires the creation of a favorable stock market ecosystem that is affordable, accessible and profitable, panelists participating in the Mexico Mining Forum 2018 at the Sheraton Maria Isabel in Mexico City agreed on Wednesday.

John-Mark Staude, President and CEO of Riverside Resources, grabbed the audience’s attention by asking Mexicans among them to raise their hands. Most attendants did. When asked how many were also investors, only three hands went up. The quick dynamic framed the industry’s need to foster more national investment and to create better conditions in the country for foreign investors.

Riverside Resources believes in the mining potential of the country but it is “concerned about the increasing number of hurdles mining faces, such as the difficulties regarding the liberation of mining titles,” Staude said. “These have foreign investors gazing at other mining jurisdictions to continue growing their businesses.” Carlos Espinosa, Founding Partner at SoftLanding Group, agreed while stressing that “investors look for a safe, stable and profitable place to invest, which in Canada is known as safe jurisdictions.”

The Mining Development Bank (FIFOMI) strives to help in this endeavor by addressing the mining hurdles though its 14 regional offices in the country, said Israel Gutiérrez, FIFOMI’s CEO. “We seek to address the needs and concerns of miners by focusing on technical assistance and training. Likewise, by collaborating with other financial entities we can increase FIFOMI’s scope and provide a better response to the industry’s demands,” he said.

The lack of access to capital remains a key concern for both national and foreign investors. In a country in which the stock market appeared to be accessible to educated people only, the demand calls for the fostering of a stock culture. “The reality is that in Mexico the stock market culture is poor, which is one of the main challenges that Mexican Stock Exchanges face,” said Fernando Pérez, Executive Director of the Institutional Stock Exchange (BIVA).

Stock market players, such as BIVA, seek to be disruptive actors in the market, with the target of enhancing competition and achieving a better vertical integration so the market can become more dynamic and develop at a faster rate. BIVA’s goal is to add value through first-level technology that can modernize the stock market and provide international investors with the stock conditions they are used to. “We need to make the stock market grow. First, by attracting more issuers and through different mechanism such as the Fibras and CKDs. It is also a question of how to provide foreign institutional investors the conditions they are used to in other stock markets,” said Pérez.

Despite the hurdles, the Mexican stock market has been an integral support for the mining industry throughout the downturns and upturns of its supercycles. Commercial opening has been the greatest ally. “At the moment, FDI is US$33 billion for this administration. Before, it was between US$4 and US$5 billion, so the trade policy is helping,” said FIFOMI’s Gutiérrez. Macroeconomic stability is also crucial to ensure the fiscal and monetary capabilities required to better navigate any international changes and dynamics that otherwise could be devastating.

The panelists were optimistic about the future, however, amid the stock market’s modernization. “Just by having a credit card Mexicans can access cryptocurrencies, which are online stock markets,” said Staude, demythologizing the belief that only big companies can access stock markets. “I am optimistic about the future in the country. Events like the Mexico Mining Forum are key for creating dialogue between decision-makers, investors and the public sector. We need to build together to better adapt to changes,” he said.