To counteract the paralysis in terms of investment in public works, the subnationals could take advantage of the opportunities of the implementation of the Financial Discipline Law of the Federal Entities and the Municipalities and go for the generation of sustainability bonds, specialists agreed during the annual seminar Moody’s Inside Latam Mexico.
Moody’s senior analyst vice president, María del Carmen Martínez, explained that after an accelerated growth rate in the generation of sustainable bonds has been registered internationally in recent years, they identified a new investment opportunity. “Public works fell, and there are many infrastructure needs in the country, so we believe that at least potentially there is a market,” she assured.
He stated that these types of stations are becoming more attractive due to a series of factors, among them, that shortly before the pandemic, investment in public works fell, added to the fact that the inflationary situation is worsening and, therefore, puts pressure on the access to traditional financing, such as banks.
Another point is that the latest amendments to the Financial Discipline Law will allow greater accessibility to these bonds with an environmental focus.
“With a new transparency exercise, it is possible to have closer information (…) Today there is financial information every quarter and an annual evaluation exercise is given, this determines the level of leverage and debt service, in such a way that Fortunately, there is richer information that allows decision-making,” added the general director of Credit for the State of Mexico, Víctor Medina González.
He assured that modifications were also made to the Securities Market Law, which is also allowing states and municipalities to access financing of this nature. “This source makes it possible to guarantee or give the investor a lot of certainty and attract the capital they require for financing.”
Carmen Martínez specified that these new financings and the modifications to the laws with a long-term view could help local economies finally reactivate and also solve new environmental and social challenges, such as water stress and gender parity.
“The states are going to seek to generate these new financing mechanisms to reactivate their economies. These types of bonds allow the construction of concrete projects that have a positive impact on society and environmental care,” she added.
Behaviour
Unlike the issuance of green bonds, where Mexico City was the only entity to go for this type of resources, the analyst explained that it is projected to generate a different behavior with sustainable ones.
He added that sustainable bonds allow investments to be focused on different areas and not only for environmental care.
“What sustainability offers, by its definition, is that it gives the opportunity to finance projects that are related to the environment and the social. They seek more a spirit of gender parity. The sustainable gives them precisely that flexibility, of not having very specific financing for a type of project”, he reiterated.
The director of Promotion and Issuers of the Mexican Stock Exchange, Juan Manuel Olivo Tirado, pointed out that there could be a behavior where states and municipalities are more active in stock issues.
Likewise, Víctor Medina reported that the State of Mexico is the first federal entity to issue a fully sustainable bond as such; the sustainable bond is for 3,000 million pesos, with a term of 15 years.
estados@eleconomista.mx
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