This week, Mexico Mining Review, sat down with Fernando Pérez, Executive Director of new stock exchange BIVA to discuss the implications of its creation and how it’s going to benefit Mexican companies.
Miners often lack access to funding in the Mexican market and normally choose to list their companies on foreign exchanges, particularly the TSX. One potential solution to Mexican miners’ financing woes could be BIVA, the country’s new stock exchange that will compete with the BMV. “We think that it is important for mining companies to approach financial intermediaries, expand their funding sources and reach the public market,” says Fernando Pérez, BIVA Adviser. “Our value proposition for encouraging mining companies to list on BIVA is to provide them with strong visibility.”
With about 150 listed issuers, Mexico has not yet reached the point at which BIVA is able to segment the market and offer a specific value for each sector. But first things first; for the market to grow substantially, the myths surrounding it need to be clarified, says Pérez. “We must help demystify the stock exchange, which is achieved through information sharing, communication and by approaching different players, such as broker dealers, investment banks, investors, associations and universities, amongst others.”
Pérez adds that one of the biggest myths about the Mexican public market is that it is very expensive to join. He explains that, when setting aside the effort and investment required for companies to improve their corporate governance and financial reports and once they reach their institutional peak it is costly neither in relative nor absolute terms. For example, all equity placements made between 2012 and 2017 cost less than 3.5 percent of the total amount placed, on average, while in the US this expense fluctuates between 6 and 8 percent. Pérez says that listing gives a company a rubber stamp that fully repays its investment.
Another myth that needs to be wiped out is that the stock exchange is only for high-net-worth investors. “The truth is that broker dealers as well as investment funds are welcoming retail investor participation,” says Pérez. For example, RLH issued MX$500 million in capital a few years ago and was so successful that it followed up with another option for MX$1.5 billion and has other issuances scheduled. “BIVA strives to be a much more inclusive and approachable stock exchange,” he says.
BIVA also understands that a stock exchange by itself cannot significantly increase market participation, so its focus is rather to perform as a disruptive player that will generate a virtuous cycle. One of the desired impacts is to modernize both the stock market and its regulatory framework. “Thankfully, a regulatory overhaul was performed by the Mexican Financial Authorities, not only for the creation of BIVA but to modernize the market regulatory framework as a whole,” says Pérez. As for stock upgrading, he says BIVA will have the one of the most advanced stock exchange technologies worldwide, such as a negotiation engine and a market-surveillance system, both provided by NASDAQ and used in over 70 foreign markets. The incorporation of these technologies will position Mexico as a modern market internationally.
This is an exclusive preview of the 2019 edition of Mexico Mining Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy Mexico Mining Review or access our digital copy of the 2018 edition.