Earlier this week, Mexican President Enrique Peña Nieto sent a bill to the Mexican Congress which, if it becomes law, would bring about major reforms in the Mexican telecommunications industry, including the introduction of greater governmental powers to combat monopolies and rules which could ease the path for more foreign investments. This news should be encouraging for investors for a number of key reasons, according to Fran Rodilosso, Fixed Income Portfolio Manager at Market Vectors ETFs.
“These proposed reforms are the latest in a recent series of encouraging signs that we have seen coming out of Mexico. The new administration has an aggressive reform agenda, and the proposed telecommunications reform is a positive sign of its willingness to take on some of the most powerful business interests in the country,” said Rodilosso. “As a long-time investor in high-yield emerging market bonds, I have seen how the market has treated the ‘also-rans’ in Mexico’s telephony and broadcasting industries; companies whose ability to compete in that country has at times seemed to be at the whim of the dominant players or the courts. Even last year, a smaller fixed line competitor lost important rulings on fees that severely hurt its profitability. In my view, this type of reform could level the playing field somewhat and open up some of these companies to foreign ownership.”
“Of course, if this bill passes and becomes law, the question remains of its effectiveness,” continued Rodilosso. “The courts have historically been friendly towards Mexico’s dominant companies and politically ingrained elites. Even the recent pro-creditor ruling on the Mexican bankruptcy case involving Vitro SAB happened on U.S. soil. If Vitro did not have U.S. subsidiaries, then creditors would have been left with very little leverage to combat the company’s reorganization plan was approved in local courts.”
“In my opinion, there are a variety of risks associated with investing in the small market, mostly fixed line, operators in Mexico. But the movement towards reform at this early stage in President Peña Nieto’s administration should be seen as an encouraging step in opening up the competitive landscape to potentially more foreign ownership,” he added.
Mr. Rodilosso has 20 years of experience trading and managing risk in fixed income investment strategies, including 17 years covering emerging markets. Among the Market Vectors ETFs under his watch areInvestment Grade Floating Rate ETF (NYSE Arca: FLTR), Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), LatAm Aggregate Bond ETF (NYSE Arca: BONO), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), International High Yield Bond ETF (NYSE Arca: IHY), and Renminbi Bond ETF (NYSE Arca: CHLC). As of December 31, 2012, the total assets for these ETFs amounted to approximately $1.4 billion.
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Please note that the information herein represents the opinion of the portfolio manager and these opinions may change at any time and from time to time. This is not a recommendation to buy or sell any security nor is it intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $27.6 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of December 31, 2012.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $36.6 billion in investor assets as of December 31, 2012.
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