Mexico Enters 3rd Stage of Latin American Securitization After Achieving Investment-Grade Rtg

In light of the recent Standard & Poor's upgrade of the United Mexican States to investment grade, new developments can be expected in its structured finance market. Within Latin America, Mexico has been one of the most important sources for local and cross border structured finance transactions. Thus, its new investment-grade rating will open up the structured finance market to new companies and asset types, as well as permit access to a more diversified international pool of investors

Mexico Enters 3rd Stage of Latin American Securitization After Achieving Investment-Grade Rtg
Juan J Flores, Mexico City (52) 55-5279-2020; Cesar Fernandez, New York (1) 212-438-2681; Rosario Buendia, New York (1) 212-438-2410

NEW YORK (Standard & Poor's) Feb. 14, 2002--In light of the recent Standard & Poor's upgrade of the United Mexican States to investment grade, new developments can be expected in its structured finance market. Within Latin America, Mexico has been one of the most important sources for local and cross border structured finance transactions. Thus, its new investment-grade rating will open up the structured finance market to new companies and asset types, as well as permit access to a more diversified international pool of investors.
   In recent years, Mexico has reached the second market stage of Latin American securitization. In this stage, issuers have started to securitize existing assets in local currencies in the domestic capital markets. Local investors, with important investment muscle (namely pension funds), have exercised their strength by demanding new and more innovative structured finance transactions (that is, accounts receivables securitizations and partial credit guarantees). "Local investors now view structured products as an interesting investment alternative to more traditional fixed-income securities," said Juan Flores, Standard & Poors Associate Director for Structured Finance in Mexico City.
   As a result of the improvement in Mexicos country risk, reflected in the recent upgrade to investment grade, Standard & Poors expects Mexico to enter into the third market stage of Latin American securitization in 2002. In this stage, issuers tap international markets with existing asset securitizations denominated in local currencies.
   The existing asset types that are better equipped to pioneer the third market stage in Mexico are both the residential and commercial mortgage-backed markets. In recent years, Mexico has suffered from a large housing deficit, as well as an increasing demand for commercial office space. As a result, the recent announcement by the Mexican government to build 750,000 low-income housing units per year by 2006, could trigger the opportunity for developers to look for financing in the structured finance international markets. At the same time, the recent creation of Mexicos federal mortgage bank will certainly foster the development of primary and secondary mortgage markets in Mexico. As of September 2001, the low-income housing mortgage portfolio totaled just over Ps42 billion.
   Under these circumstances, Standard & Poors expects that Mexicos investment-grade rating will ease the way for the country to achieve the third market stage of Latin American securitization, and as such, create more efficient approaches to access long-term international funding.
   For a copy of the related article, The Three Stages of Latin American Securitization," published June 14, 2000, please visit RatingsDirect, Standard & Poor's web-based credit analysis system at www.ratingsdirect.com, or contact: Juan Jose Flores, Latin America Structured Finance, juan_flores@standardandpoors.com; or, Cesar Fernandez, Latin America Structured Finance, cesar_fernandez@standardandpoors.com.