A real estate investment trust ('FIBRA' in Spanish) is a real estate investment vehicle that can be managed through a stock exchange trust. Three FIBRAs are currently listed on the Mexican Stock Exchange; the outlook for further FIBRA development in Mexico is highly favourable, due to increased interest from both domestic and foreign investors seeking to diversify their portfolio risks.
The investment regime has been modified for Mexican investment companies specializing in pension funds, known as sociedades de inversión especializada en fondos para el retiro (SIEFOREs). The changes create a new form of trust securities certificate, allow SIEFOREs to invest directly in individual shares of companies on the Mexican Stock Exchange and change the calculation of a SIEFORE's value-at-risk.
Mexico's Securities Market Law seeks to facilitate access to the securities market for medium-sized companies or corporations by encouraging them to adopt sound corporate practices, including measures to protect the rights of minority shareholders.
The new Securities Market Law, due to come into effect on June 28 2006, provides corporate governance provisions applicable to investment promoting corporations with regard to, for instance, the board of directors and disclosure to shareholders. Investment promoting corporations grant increased protection to minority shareholders and reflect an advance in good corporate practices.
The Mexican Congress has passed the new Securities Market Law. The Chamber of Deputies made several amendments to the Securities Market Bill and returned it to the Senate, where it was approved. The amendments increased the level of uncertainty over the bill, and this uncertainty continues to surround the new Securities Market Law.
The Securities Market Bill is being reviewed by the Mexican Congress. The Chamber of Deputies has approved the bill and returned it to the Senate for ratification. Among other things, discussion in the chamber focused on the scope of the defined terms, information disclosure, the independence of board members, the penalty regime and the constitution of the audit committee of the board of directors.
The treatment of certain debt instruments as part of a bank's capital seeks to raise the bank's capital base to enable the growth of its loan portfolio. Subordinated bonds are expressly considered as bank capitalization instruments, regardless of their place of issuance. In addition to capitalization purposes, subordinated bonds are used to re-finance prior notes.
The Securities Market Bill has been approved by the Mexican Senate but has stalled at the Chamber of Deputies of the Mexican Congress. Overall, the amendments to the Securities Market Law should introduce a desirable degree of flexibility for small and medium-sized companies, without creating overly cumbersome day-to-day compliance requirements.
Further provisions have been enacted to foster investment in the Mexican real estate sector, and Mexican real estate investment trusts (REITs) are now offering substantial benefits from legal and tax viewpoints. The possibility of financing through real estate participation certificates (known as 'CPIs') and the new tax features are a breakthrough for Mexico's capital markets.
Mexican retirement mutual funds may now access international markets for investment purposes. Beyond sound risk management practices, ethics and compliance, proper legal advice and good contacts with the regulators may play key roles in the avoidance of losses recently experienced by mutual funds on, for instance, the US financial market.
Recent additional provisions to the Income Tax Law attempt to foster investment in the real estate market by granting certain tax benefits to Mexican real estate investment trusts (REITs), which are loosely based on their US counterparts. Mexican REITs are mainly aimed at domestic and foreign pension and retirement funds.
The use of derivative instruments in Mexico has increased in recent years, both on the Mexican Derivatives Exchange and in the over-the-counter market. Standardized documentation has facilitated trading in derivatives and foreign banks are taking advantage of a market that remains relatively untapped.
Mexico state recently securitized its local payroll tax revenue. The transaction involved a reform of its Financial Code and the creation of a complex structure to isolate state payroll tax revenues from the rest of the revenues of the state. Such securitization gives states and municipalities alternatives to the securitization of federal tax revenue transfers.
A new short-term security has recently been introduced onto the Mexican securities market. It is a debt instrument that can be either denominated in pesos or indexed to the currency exchange or investment units, and can be issued as part of a programme by companies and state and federal governments.
On April 16 2002 exchange traded funds (also know as trackers or 'tracs') were incorporated into the Mexican capital market. This update explains the purpose of trackers and gives details of the first issue.
Including: Legal Framework; Stock Market; Public Offering Requirements; Regulatory Authorities; Other Bodies.