Mexico seeks sapi expansion of securities market

Mexico is in the process of reforming its securities laws in order to get more companies to list on the stock market there as well as to give foreign investors more confidence in the Mexican stock market.

The main change proposed is the creation of a new category, an “investment promotion group” or “sapi”. The sapi listing would be halfway to a full listing.

Minority shareholders in such a sapi would have full rights, but companies would not have to meet all the reporting requirements of fully public companies. Investment in sapis would be open only to institutional investors and to private investors who sign a wavier indicating that they understand the risks involved in their investment.

In introducing the bill to create these reforms, the country’s treasury minister pointed out that there are only 149 companies listed on Mexico’s exchange and that in 2004 there were only two new initial public offerings.

These new listings were more than offset by several delistings during the year. He compared Mexico’s market to South Korea’s, which has a slightly smaller gross domestic product than Mexico’s but 1,500 companies listed on its stock exchange.

As it stands, most trade on Mexico’s stock exchange involves a few dozen large international companies. Meanwhile, smaller companies remain in control of the families that founded them.

These families have no reason to go public because they can fund their operations with credit. This ability to finance their businesses without going public is seen as the biggest factor in the Mexican stock market’s lack of growth.

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