On October 16, 2008, Grupo Modelo, S.A.B. de C.V., its Series A Shareholders, and its subsidiary Diblo, S.A. de C.V. (collectively, the “Modelo Parties“) filed a notice of arbitration against Anheuser-Busch Companies, Inc., Anheuser-Busch International, Inc., and Anheuser-Busch International Holdings, Inc.  According to the Anheuser-Busch press release on the matter:

The notice of arbitration claims the transaction between Anheuser-Busch Cos. Inc. and InBev S.A./N.V. violates provisions of the 1993 investment agreement between Anheuser-Busch International Holdings Inc., Modelo and other parties. It seeks pre-closing and post-closing remedies, including an order prohibiting Anheuser-Busch from exercising certain governance rights under the investment agreement, from impairing the right of first refusal of the Series A shareholders under the investment agreement and from any other alleged breach resulting from closing the transaction with InBev or otherwise, as well as monetary damages.

The notice of arbitration is not a public document, but based on our review of the 1993 Investment Agreement, it appears that the centerpiece of the Modelo Parties’ argument is Section 6.6 of the Investment Agreement, which prohibits the parties from selling or offering to sell their Grupo Modelo shares to “any [person or entity] or its controlling shareholders engaged, directly, or indirectly, in the production, distribution, or sale of beer in or to the United States or Mexico”.  As we noted in a July 28, 2008 post, this argument appears to be a stretch of the plain language of the 1993 Investment Agreement, as amended by the First Amendment and Second Amendment thereto.

Pemex Exploracion y Produccion awarded ICA Fluor Daniel, S. de R.L. de C.V., a joint venture between Fluor Corporation and Mexican construction company Empresas ICA, S.A. de S.V., a US$45 million contract for the engineering and construction of a crude oil dehydration system for Mexican Maya crude oil, according to a September 24, 2008 report in El Financiero.

The report said that the project ICA Fluor Daniel will be responsible for converting the Maya crude held in two 500,000 barrel oil storage tanks at the Dos Bocas marine terminal in Tabasco into deydrated crude oil.

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.

VivaAerobus announced today that it will add two new flights per week between Austin, Texas and Puerto Vallarta on January 15, 2009, according to a report in today’s El Financiero. 

The Puerto Vallarta route will be the third direct Mexico flight that the airline operates out of Austin, adding to its existing Austin-Monterrey and Austin-Cancun routes. 

Last month, the airline also started offering ground transportation service for VivaAerobus customers to and from Houston and San Antonio and its Austin airport hub for US$20 each way.  The CEO and President of VivaAerobus, Mike Szucs, who was interviewed in the report, said that approximately half of the airline’s passengers in May flying from Austin came from Dallas, Houston, or San Antonio.

VivaAerobus is the only airline that offers direct flights from Austin, Texas to destinations in Mexico.  Aeromexico, which once operated an Austin-Mexico City route, cancelled the route early this year.

The ripple effects of the credit crisis in the United States appear to have reached Cancun’s time-share real estate market, where the monthly cancellation rate on time-share purchase contracts increased to 8% in October 2008, which is 4% to 6% over the average monthly cancellation rate, according to a report in today’s El Financiero. 

Miriam Cortez, executive director of the Association of Vacation Clubs (Asociacion de Clubes Vacacionales - Acluvac), who was interviewed in the report, said that for the first time in many years the outlook for new time-share sales looks bleak.

Hilton Hotels Corp. announced plans to build 60 hotels in Mexico over the next five years as part of its plan to quadruple its presence in Latin America and the Caribbean, according to a report in today’s El Financiero. 

Hilton currently owns 19 hotels in Mexico, which operate under various brands, including the Hampton Inn and Homewood Suites marques. 

Hilton was acquired by Blackstone Group in October 2007 for approximately US$26 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.

Mexico’s Federal Commission for Protection Against Sanitary Risk (COFEPRIS) will hold a seminar at the U.S. Embassy in Mexico City on October 3, 2008 on the registration procedures for imported medical devices. 

The seminar will take place from 8:00 a.m. to 2:00 p.m.  Please email me for more information.

Grupo del Blanco, a Hidalgo, Mexico-based housing construction company, and Federal Development, a Washington, DC-based real estate development company, have formed a joint venture to develop homes and resorts in Mexico, according to an August 27, 2008 report in El Financiero. 

The first project of the joint venture will be a US$500 million development called Golf & Resort, Real del Monte, located to the north of Mexico City.  The project will include homes, a golf course, and the longest synthetic downhill ski run in North America.

The President of Grupo del Blanco, Ernesto del Blanco Arjona, said in the report that vacation and retirement homes have been the fastest growing segments of the Mexican real estate market in recent years, with annual growth in excess of 80%.  He said that experts forecast sales of 25,000 homes in Mexico with a value of $9 billion in 2008.  Annual sales were expected to rise to 40,000 homes by 2010, he added. 

John Infantino, President of Federal Development, said in the report that the joint venture expected to develop projects in Mexico City, in Mexico’s beach communities, and other regions.  (In other words, anywhere the group finds opportunities.)

Mexico’s Congress is unlikely to loosen the country’s tight limitations on foreign investment in the country’s oil resources, according to a September 10, 2008 Bloomberg report.  The report said that “lawmakers this year are likely to pass only a measure making it easier for state-owned Pemex to hire outside service contractors.” 

Last week while in Mexico City, I had the opportunity to meet with an executive of the Mexican subsidiary of a major foreign oil company, who said that Mexico’s failure to open its economy to foreign investment in the petroleum sector, even on a limited basis, would continue to hinder Mexico’s economic growth.  He said that the price of gas in Mexico, which is kept low by government subsidies, was artificially low, and that the subsidies were benefiting the upper class more than the poor.

Pemex lacks the money and technology to exploit Mexico’s remaining oil resources, which are are significantly depleted.