Treasury and Trade Solutions
Corporate Challenges
and Opportunities
in Mexico
Ricardo Armendariz Cemex México Treasurer
Jorge Subirachs Premium Restaurant Brands Treasury Director
Hugo Velázquez Mexico TTS Sales Head, Citi
Antonio Muñoz Mexico Global Subsidiaries Group Head, Citi
1. Country Macro Overview
2. Industry Diversification and Impact of Reforms
3. Panel: Business Opportunities in
Strategic Industries
4. Additional Information
A. Citi’s Strengths and Commitment
B. Recommended Product Solutions
Macro Overview—Mexico
Generals
Population: 112.3 million (INEGI)
GDP (2014): US$1.3 trillion (INEGI)
GDP Per Capita (2014):
US$11.6K (INEGI)
Exports FOB (2014): US$397 billion
Imports CIF (2014): US$400 billion
Labor force 2014: 52.4 million (INEGI)
Unemployment rate: 4.7% (INEGI)
Enrique Peña Nieto (from de
PRI party) became president for
the 2012–2018 period
500-member Cámara de Diputados
(House of Representatives)
128-member Cámara de
Senadores (Senate)
Sovereign Risk Ratings: S&P BBB
(Neutral), Moodys, Baa1 (Neutral),
Fitch BBB (Neutral)
Summary 2012 2013 2014
Real GDP Growth Rate (%) 3.90% 1.10% 2.10%
Population (Millions) 116.9 118.1 119.3
Inflation (YTY % Change) 4.11% 3.75% 4.00%
Market Interest Rates 4.29% 4.06% 4.00%
Overnight Interest Rates 4.30% 4.10% 3.00%
Monetary Aggregate (Real %) 11.8 11.2 8.9
Official RateFX 12.9 12.7 14.8
Unemployment (% Labor Force) 5.00% 5.00% 4.80%
Oil Basket Price ($/Barrel) 101.1 106.6 52.3
Indicators
Source: LatAm Macro and Strategy Outlook.
3
Economic Growth-drivers
World Trade
Stronger Local Consumption
Construction Crisis
US Economic Activity
Fiscal Impulse
Construction Revival
Fiscal Reform Global Geopolitical Risks
Public Under
Expenditure
Reform Uncertainty
Solid External
Demand,
Mainly from US
Lower Oil Prices
Local Demand
Starting to Recover
US Economic Activity Organized Crime Fed’s Normalization
Years
1.4%
2013 2014 2015
2.2%
3.4%
2016–2018
4.5%
Structural Reforms
4
Adjustment in Public Finances
The government recently announced a 0.7% GDP cutback on public spending
during 2015 and similar for 2016.
Public Expense Cutback (MXN$ mmp)
Public Sector Deficit (GDP %)
Source: SHCP. Source: SHCP y Banamex.
62
10
18.2
34.1
Pemex CFE Inversión GastoCorriente
Total : 124.3mmp
Empresas Públicas
Gobierno Federal
-1
1
2
3
4
5
00 02 04 06 08 10 12 14 16
Balance Ampliado Balance Tradicional
Pronóstico
Extended Balance Traditional Balance
Investment Current Expense CFE PEMEX
Public
Companies
Federal
Government
Forecast
5
NAFTA Link
US Manufacturing Industry and Mexican
Manufacturing Exports (Yearly, Three Month Moving Average, %)
Wallet Share on US Manufacturing Imports (%)
0
2
4
6
8
10
12
14
0
1
2
3
4
5
6
M12
J S D M13
J S D M14
J S D
EUA sector manufacturero México: exportaciones manufactureras
6
10
14
18
22
26
98 00 02 04 06 08 10 12 14
Mexico
China
Japan
Canada
US Manufacturing Industry Mexico: Manufacturing Exports
Source: Bloomberg, INEGI. Source: US Department of Commerce.
Economic Linkages Between US and Mexico Remain High,
Particularly on the Manufacturing (Auto) Sector
6
Exchange Rate: Volatility Phase
Local currency tends to overreact to high volatility periods.
European Crisis Peripheral (July 21, 2011 Index = 100)
“Mighty Dollar” (August 19, 2014 Index = 100)
“Tapering” (May 8, 2013 Index =100)
Source: Bloomberg and Banamex.
98
100
102
104
106
108
110
112
may-13 jun-13 jul-13MXN EM
7.02
0.8
1 mes
98
103
108
113
118
123
jul-11 sep-11 nov-11 ene-12
MXN EM
13.11
4.04
2.4 meses
96
100
104
108
112
116
México Emergentes
6.8
Mexico Emerging Markets
7
Interest rates
1.5
1.7
2.1
2.5
2.9
4.5
4.9
5.3
5.7
6.1
6.5
J13 M S J14 M S A15
Mexico
US
10-YEAR BOND
1
3
5
7
9
2
4
6
8
10
12
14
16
18
00 02 04 06 08 10 12 14 15
Banxico
Fed
MONETARY POLICY SHORT-TERM INTEREST RATE
%
Source: Bloomberg
8
Productive Capability
Automotive industry productive capacity will increase 25% in the next five years.
Automotive Industry Investment Projects (Millions of Units, Annualized)
Source: AMIA and Banxico.
2
3
4
5
10 11 12 13 14 15 16 17 18 19 20Auto output Production capacity
VW
Chrysler
GMFord
Ford
NissanChrysler
Mazda Honda
ToyotaMazda Audi
Kia
Nissan-infiniti
Nissan-Mercedes BenzBMW
Production Installed Capability
9
1. Country Macro Overview
2. Industry Diversification and Impact of Reforms
3. Panel: Business Opportunities in
Strategic Industries
4. Additional Information
A. Citi’s Strengths and Commitment
B. Recommended Product Solutions
Reforms’ Status
Energy Reform
Round One: 1st Bidding. Exploration in
shallow waters. 34 companies started
the pre qualification process.
(April 1, 2015)
Round One: 2nd Bidding. Extraction in
shallow waters. 15 companies have
been granted access to the data room
and four have started the pre
qualification process. (April 1, 2015)
CENACE y CENAGAS have
been created
New Electronic Market Rules have
been presented to Cofemer (Federal
Regulatory Improvement Commission)
for comments
Electricity Prices. (20)% industrial rates;
(12)% commercial rates; (7)% high
level consumption household market
rates; and (2)% household subsided
due to low consumption rates
Financial Reform
SHF (Federal Mortgage Society)
developed a new support program for
the housing industry, 17.6 billion pesos
(November 2014)
BANOBRAS increased credit to
667 States and Municipalities, out of
which 152 are considered of
extreme poverty
NAFIN created a new program to
support local energy companies
development (launched May 2014).
Five loans are in process (706 million
pesos) and 5 have been authorized
(1.5 billion pesos)
NAFIN with its SME’s program
(started August 2014) has granted
+1,200 loans for 1.6 billion pesos
DESARROLLO RURAL credit program
(started August 2014) has granted
2 billion pesos to 36,000 small
producers and 7 billion pesos to
14,000 producers of the primary sector
Telecommunications Reform
TV 2 new networks have been bid
Shared Mobile Network (SMN). Pilot
phase project took place for LTE
technology in 700MHz in Guadalajara,
Monterrey, Acapulco, and Mexico City.
Huge step forward in the
SMN development
Connectivity Free internet in 250,000
public areas (25)% from objective
Increased Competitiveness World class
operators are now live in the country:
ATT, Virgin Mobile, and Eutelsat
Telecom rates: (41)% in long distance
rates; (16)% in mobile rates; (4)% local
service rates; (0.3)% internet service;
and (100)% for in-country long
distance rates
IFETEL Operation rules for new
regulator have been approved
and published
Asymmetrical Regulation America Movil
and Televisa have taken response
measures to having been considered
as predominant players
11
Economic Forecast
2014 2015F 2016F
GDP % 2.1 3.0 3.9
US Manufacturing (%) 3.6 4.0 4.0
Public Balance (% of GDP) (4.0) (4.0) (3.5)
Current Account (% of GDP) (2.1) (2.3) (2.4)
Inflation Average (%) 4.0 3.3 3.8
Short-term Interest Rate, Average (%) 3.0 3.5 4.3
Ten-year bond, Average (%) 5.8 6.4 7.0
Exchange Rate, Average (pesos per $) 14.8 14.7 13.9
Source: Banamex Economic Research.
12
1. Country Macro Overview
2. Industry Diversification and Impact of Reforms
3. Panel: Business Opportunities in
Strategic Industries
4. Additional Information
A. Citi’s Strengths and Commitment
B. Recommended Product Solutions
Treasury and Trade Solutions
Corporate Challenges
and Opportunities
in Mexico | Panel
Questions
Ricardo Armendariz Cemex México Treasurer
Jorge Subirachs Premium Restaurant Brands Treasury Director
Hugo Velázquez Mexico TTS Sales Head, Citi
Antonio Muñoz Mexico Global Subsidiaries Group Head, Citi
1. Country Macro Overview
2. Industry Diversification and Impact of Reforms
3. Panel: Business Opportunities in
Strategic Industries
4. Additional Information
A. Citi’s Strengths and Commitment
B. Recommended Product Solutions
Citi’s Strengths and Commitment—Mexico
Coverage Competitive Landscape
Branches ATM’s POS
Banamex 1,540 7,185 101,316
BBVA Bancomer 1,821 9,233 187,757
Santander 1,208 5,620 97,799
Scotiabank 576 1,934 21,754
HSBC 984 5,730 31,967
Banorte Ixe 1,269 7,032
157,720
Otros 5,317 6,069
137,869
Total 12,715 42,803 736,182
Source: CNBV.
The Best Combination of Local Leadership and Global Capabilities
16
Full Range of Corporate and Investment Banking Services
Strategic Funding Treasury Risk Management Asset Management Payment Transaction Corporate Services
Investment Banking
M&A/Strategic
Advisory
Equity
Ratings/Capital
Structuring
Advisory
Loan Structuring
Bridge Facilities
Acquisition Financing
CP Backstop
Structured Finance
Synthetic Lease
Leverage Lease
Real Estate Finance
Other Tailored Solutions
Fixed Income
Bonds/Convertibles
FX/Options
Derivatives
Commodity Hedging
Liability Management
Commercial Paper
Project Finance
Advisory
Financing
Asset Securitization
Trade Receivables
Future Receivables
“Take or Pay” Contracts
Whole Business
Securitization
Risk Management
Interest Derivatives
Currency Derivatives
FX Hedging
Commodities Hedging
Asset Management
Investment
Management
(Equity, Fixed Income,
liquidity and Alternative
Strategies)
Pension Custodian/
Administration
Captive
Insurance Business
Pension Services
Synthetic Lease
Leverage Lease
Real Estate Finance
Other Tailored
Solutions
Cash Management
Disbursements
International Cheque
Payments
Collections
Concentration
Pooling/Netting
Treasury Outsourcing
Trade Management
Services
Import/Export finance
Trade
Services/Collections
Letters of Credit
Bid/Performance Bonds
Corporate Cards
Purchasing Cards
T&E Cards
Electronic Accounts
E-Commerce
E-Billing
Web-based Account
Access
Web-based BX
Digital Certificates
Exchange Products
and Infrastructure
Securities Services
Global Custody
Depository Receipts
Global Clearing
Agency and Trust
Corporate Services
ESOP
Relocation Services
Employee
Mortgage Programs
Consumer “Bank
at Work”
Private Banking
for Executives
17
Treasury and Trade Solutions Product Offering
Liquidity/Account Services
Local Pooling (MXN, Local US$)
– Pesos
– Mex-dollar
Account Services (MXN, Local US$)
Investment Desk
– REPOS
– Time Deposits
Off-shore Investments (Citi NA)
– Time Deposit
– IBDDA
– Sweep
– On Line investments
Payments
Local Payments (B2B, Street Side)
Cross border Payments
Payroll
Federal and Local Taxes
Custom Taxes
Manager checks
Referenced Payment Orders
Multicurrency payments
Off-shore Payment and Clearing
Integration into Supplier
Finance solutions
Cards
Commercial Cards
TU Banamex Liquidity/
Account Services
Payments Receivables
Channels/
Information Services
Trade Cards
Implementation
Trade
Trade Finance
Trade Services
– Import/export Letters of Credits
– Standbys and Guarantees
– Collections
EAF
– Long-term CapEx ECA Financing
Trade Working Capital Finance
– Buyer and Seller side solutions
– Regional/Global platforms
– H2H CitiDirect solutions
for sponsors
Receivables
Utility Payments
ACH (Direct Debit)
Speed Collections
Cash Services
Remote Deposit Capture
Universal Collections
Implementation and
Account Management
Dedicated group
Specialized Support
Project Management
(implementation)
Standard Account Documentation Channels/Information Services
Electronic Platform—CitiDirect
Online/BE
CitiDirect and Bancanet Mobile
Bancanet Empresarial
Bancanet Empresarial Premium
Swift/Citiconnect
Automated Information Systems
Payment Notifications
Integrated Payments Services
18
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