Mexico’s Federal Competition Commission (Cofeco) has lobbied Congress to increase fines for companies and impose prison sentences for executives found using competitive practices, according to a Financial Times report.

Under current law, a company has to have committed anti-competitive practices three times within 10 years in order to be subject to break-up by Cofeco, the report said.  Eduardo Perez Motta, Cofeco’s chief, said that such a high legal standard made break-ups almost impossible to prove and carry out.

The threat or imposition of stiffer penalties on Mexican companies for anti-competitive behavior would be a positive development for Mexican consumers and business.  Several sectors of Mexico’s economy appear to  be dominated by one or two major players.

Grupo Aeroportuario del Sureste (Asur), S.A.B. de C.V. (NYSE: ASR) has acquired approximately 321 acres of land in Huatulco Bay, Oaxaca state, for approximately US$21.6 million, according to a report in Business News Americas (BNA).

Asur acquired the land on October 20, 2008 from Mexico’s National Trust for Tourism Development (FONATUR).  The Mexican government has sought to make Huatulco a new pacific coast tourist hub.

The terms of the acquisition require Asur to build 1,300 hotel rooms on the property over a four-year period, the BNA report said.

Mexican President Felipe Calderon and the National Trust for Tourism Development (FONATUR) have announced the development of a major tourism infrastructure project to be located in the southern part of the Sinaloa State, according to an article at mexicorealestateinvestment.org.

The development plans include four golf courses, two marinas, 44,200 hotel rooms, a five-mile beachfront boardwalk, a light rail, and possibly a new airport.  Work is scheduled to begin in 2009 and to be completed by 2025, the article said.

Monterrey-based glassmaker Vitro, S.A. (NYSE: VTO) may be forced to file for bankruptcy protection (concurso mercantil) in Mexico because of derivative losses in natural gas, according to a Bloomberg report.

The report said that Vitro’s Binswanger Glass unit is the biggest glass-retailer in the U.S., with more than 100 stores in 22 states.

The signficant modifications to Mexican tax law effective as of January 1, 2008, including the new IETU (flat tax on business operation) and IDE (tax on cash deposits) are well-summarized in a brief article by Everardo Teran of Connell & Associates, available here.

A surge of enforcement activity against undocumented farm workers by U.S. immigration officials is causing many U.S. agribusinesses to move operations to Mexico, where labor abounds, according to an article by Moises Ramirez of U.S. Citizenship and Immigration Services. 

The article said that Sonora, Baja California, Jalisco, Guanajuato, Queretaro, and Sinaloa were the Mexican states receiving the majority of the investment from U.S. agribusinesses, which include Bill Packer, Frank Capurro & Son, Sahara, Veg Packer, and Driscoll’s, among others. 

A farmer cited in the article said that the foreign investment was increasing land values.

Add Mexican poultry, egg, and hog producer Industrias Bachoco, S.A.B. de C.V. (NYSE: IBA) and Monterrey-based Monterrey-based magnesium and steel alloy producer Compania Minera Autlan, S.A.B. de C.V. (MXK: AUTLANDB) to the list of major Mexican companies suffering significant losses from currency derivatives. 

Industrias Bachoco reported a US$50 million loss from currency derivatives and Minera Autlan posted a US$40 million for the cancellation of currency derivatives, according to a report in the October 15, 2008 edition of the International Herald Tribune. 

Expect more derivative-related losses to be disclosed by Mexican companies over the next few weeks.

Disclosure: I own a few Industrias Bachoco American Depositary Receipts.

Mexico’s National Bank and Securities Commission (Comision Nacional Bancaria y de Valores – CNBV) has opened an investigation of several undisclosed Mexican banks and investment banks relating to foreign-exchange derivatives they sold to Mexican corporations resulting in mark-to-market losses to those corporations in excess of US$2 billion, according to a report by Adam Thomson in the October 20, 2008 edition of the Financial Times. 

The report said that the investigation expands on an investigation commenced by the CNBV last week of the corporations that suffered the losses.  An excerpt from the report follows:

Just over a week ago, Comercial Mexicana, Mexico’s third-largest retailer, took the market by surprise when it declared bankruptcy after failing to meet a $400m loan payment. The company, which had hitherto reported strong growth, later admitted that it had accumulated more than $1bn (€743m, £578m) in debt from exchange-rate derivatives.

Since then, several Mexican companies have issued statements clarifying the extent of their exposure to exchange-rate derivatives.

Among them is Gruma, the corn flour and tortilla producer, whose mark-to-market losses stood at $684m on October 8 compared with just $291m a week before. Cemex, one of the world’s biggest cement producers, last week announced that its mark-to-market derivatives losses had topped $700m.

Mr Babatz said that his investigation would focus initially on two Mexican non-financial companies, though he said he could not provide names because of legal reasons.

He also clarified that the probe would only look at whether these companies had complied with their legal obligation to inform authorities and the market about their derivatives positions in a timely fashion.

Mr Babatz said it would be unlikely that the investigation could have legal consequences for any banks, but added that they would be called to account if they were found to be selling derivatives without sufficiently explaining the risks involved.

“We would be shutting our eyes if we didn’t think that the people who were selling these instruments should have known better,” he said. “These are not the standards that we want to see in our markets.”

He said the initial results would be known by the end of November, and could involve fines for companies and individuals of up to 5m pesos ($390,000, €292,000, £227,000) for each case of wrong-doing.

Mexico Law Blog believes that the mark-to-market derivative-related losses disclosed by Comerical Mexicana, Gruma, and Cemex may be the first of many such losses to be disclosed by significant Mexican companies.

Legislators in Mexico blocked President Felipe Calderon’s plan to allow private companies to refine oil for state-owned Petroleos Mexicanos (Pemex), according to a Bloomberg.com report.  The report said: “The defeat for Calderon follows draft legislation he sent to Congress in April seeking to allow private and foreign companies to operate oil refineries in Mexico, and to explore for and produce oil for Petroleos Mexicanos, or Pemex. Under current law Pemex can hire private companies to upgrade plants but can’t contract with them to refine oil.”

Phoenix-based law firm Snell & Wilmer, LLP announced today that it has opened an office in Los Cabos, Mexico, making it the first U.S. law firm to have a physical presence in Baja California Sur.