Jeremy Schwartz’s Uncovering Mexico Blog has a nice post cataloging his foreign press corps visit with Carlos Slim, an excerpt of which is set forth below:

The talk, which perhaps naturally focused on the financial crisis gripping the U.S., was mostly pleasant, although Slim did get testy when pressed about his personal wealth and monopolistic practices. Here are some highlights:

—Slim urged more flexibility and creativity in dealing with homeowners facing foreclosure, suggesting temporary, interest-only loans as an alternative to seizing a home. “There need to be solutions…that aren’t total punishment,” he said.

—There was much curiosity about Slim’s recent purchase of 6.4 percent of the New York Times’ stock. Many of the ink-stained wretches wondered what Slim saw in newspapers at a time when the industry is suffering through its own crisis. Slim, much to our relief, argued that there will always be a need for quality content regardless of the packaging. “It’s an evolution,” he said of the newspaper business. “The ones that don’t evolve will disappear.”

—Slim took umbrage to any suggestion that his companies were bad for Mexico, lashing out at one reporter: “To think that in poor countries there shouldn’t be strong companies is perverse,” he said. “Why should foreign companies (be the only ones that prosper)…The ideal would be that there were more companies like this.”

—He also turned the tables when asked about monopolistic practices, complaining that Mexican regulators won’t let him run video over phone lines as part of a so-called Triple Play of cable, telephone and Internet service. On the other hand, cable and other phone companies have accused Telmex of charging outrageously high connection costs to hook up to its monolithic network, forcing many would-be fixed line providers out of the market.

Mexican retailer Coppel, S.A. de C.V. (MXK: ALMACO) and cement holding company Cemex, S.A.B. de C.V. (NYSE: CX) announced last week that they have placed short-term debt backed by government guarantees issued by Mexican development banks Bancomext (Banco Nacional de Comercio Exterior) and Nacional Financiera, according to a Guardian report.

The guarantees have enabled the companies to roll over commercial paper amid the turmoil in the credit markets. 

The report also said that Monterrey-based supermarket chain, Organizacion Soriana, S.A. de C.V. (MXK: SORIANB), had recently been downgraded by Moody’s on concerns it depends too much on commercial paper.  In addition to its Soriana and other branded multi-format stores, Soriana indirectly controls Gigante, S.A. de C.V., which operates 198 stores in Mexico and the U.S. under the Gigante, Bodega Gigange, and Super G brands.

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.

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.

Cash America International, Inc., the world’s largest pawnshop operator, announced on September 29, 2008 that it would spend US$90 million to purchase an 80% stake in the Mexican company that owns and operates the Prenda Facil (Easy Pawn) pawnshop chain in Mexico, according to a Bloomberg report.  The report said that Prenda Facil operates pawnshops in 16 Mexican states. 

The pawnshop business, which is probably older than prostitution, has been growing at a steady clip in Mexico over the last several years.  The growth is attributable to many factors, including the preference of many Mexicans not to use, or lack of access of many Mexicans to, traditional banks. 

In August 2007, EZCORP, Inc. announced its acquisition of the assets of 20 Mister Money Mexico pawnshops in Mexico from MMFS Intl., S.A. de C.V., a subsidiary of Mister Money Holdings, Inc., for approximately US$14 million.

Hipotecaria Su Casita, S.A. de C.V. (HSC) and El Puerto de Liverpool, S.A.B. (EPL) (MXK: LIVEPOLC1) have signed a collaboration agreement under which they will provide loans to consumers to finance home furnishing or appliance purchases at Liverpool and Fabricas de Francia department stores, both of which are operated by EPL, according to a September 4, 2008 report in El Universal. 

The loans will available to consumers who obtain mortgage loans from HSC and do not borrow the maximum authorized amount, as determined by HSC based on consumer credit histories and income levels.  Such consumers will be offered a credit card, branded with both the HSC and EPL logos, that enables them to use the difference between the amount they actually borrow for their mortgage loans and the maximum authorized amount to make home furnishing and applicance purchases at Liverpool and Fabricas de Francia department stores.  Gonzalo Palfox, director of business development at HSC, said in the report that HSC has determined that 30% of Mexican mortgage loan borrowers do not use maximum authorized amount of mortgage financing.

The loans will bear interest at 35% per year, mature in five years, and be prepayable by consumers without penalty, according to a report in El Financiero.  The report also said that the collaboration agreement provides that EPL will place HSC kiosks in its Liverpool and Fabricas de Francia department stores, where consumers may request information about HSC mortgage loans.   

HSC was founded in 1994 as the first specialized mortgage lender in Mexico.  It is structured under Mexican law as a limited purpose finance company (sociedad financiera de objeto limitado - SOFOL), which means, very generally, that it is a specialized financial institution in terms of the types of loans it grants.  SOFOLs became particularly prominent in Mexico’s mortgage sector after December 1994, when the tequila crisis resulted in the collapse of the Mexican banking system and the banks ceased all mortgage lending operations.  SOFOLs, which now offer loans in various sectors of the Mexican finance market (e.g., agriculture, automotive, consumer goods, real estate, etc.), are not authorized to accept deposits.

Mexican pawnshop operator Prendamex and Mexico’s National Pawnshop Association (Asociación Nacional de Casas de Empeño - ANACE) are drafting a proposal for regulation of pawnshops in Mexico, according to a report in today’s El Financiero.  

Prendamex’s CEO, Roberto Alor, said in the report that Mexico’s pawnshops must be regulated to maintain the integrity of the market, which consists of approximately 4,500 pawnshops nationwide.  He also said that regulations should obligate pawnshop operators to maintain insurance and post an irrevocable bond to ensure that they will honor their obligations to customers. 

Interest rates on pawn loans issued by Mexican pawnshops that are ANACE members generally fluctuate between 4% and 8% percent per month, according to Aldolfo Venez, President of ANACE, who was quoted in the report.  The report said that neither ANACE nor Prendamex indicated when the proposed regulations would be released.

A pawn loan is a loan of money to a consumer borrower secured by personal property of the borrower.  In Mexico, pawn loans are typically documented by a short-form loan and pledge agreement (contrato de mutuo con garantia prendaria).

Businesses engaged in the sale or assignment of loans or other extensions of credit in Mexico, whether through securitization or otherwise, may wish to read a nice article published in the July 31, 2008 issue of Latin American Law & Business Report by my colleagues John E. Rogers and Leonora Olmedo Beltran.

The article discusses the February 2008 amendments to the Law Regulating Credit Information Companies (Ley Para Regular las Sociedades de Informacion Crediticia), which mandate that any financial institution or other lender that sells or assigns to any other person loans or receivables that were previously reported to any Credit Information Comapany (Sociedad de Informacion Crediticia - CIC) inform the CIC thereof within 20 business days after the relevant customer of the financial institution or other lender is required to be so notified under applicable law.  The article suggests that the failure of the seller or assignor and buyer or assignee to contractually agree regarding which party will assume the reporting and other obligations set forth in the amendments could lead to unintended consequences.

Alberto Vilar, chief executive of MetLife Mexico, S.A., forecasts 8%-10% growth in Mexico’s life insurance market in 2008, according to a report by Ken Parks of Dow Jones Newswires released on May 30, 2008. 

MetLife Mexico’s life insurance sales in Mexico totaled MN$23.08 billion (approximately US$2.23 billion) in 2007, giving the company a 30% share of the total market.  Life insurance appears poised for growth in Mexico because of the country’s young population, emerging middle class, and limited use of financial services.   

One of MetLife Mexico’s target markets is lower- to middle- income Mexicans, to which it has been selling life insurance since 2006 through a joint venture with Wal-Mart de Mexico (WALMEX.MX).