Mexico’s Proposed Telecommunications Reforms a Positive Sign for High Yield Investors, Says Market Vectors’ Fran Rodilosso
Earlier this week, Mexican President Enrique Peña Nieto sent a bill to
the Mexican Congress which, if it becomes law, would bring about major
reforms in the Mexican telecommunications industry, including the
introduction of greater governmental powers to combat monopolies and
rules which could ease the path for more foreign investments. This news
should be encouraging for investors for a number of key reasons,
according to Fran
Rodilosso, Fixed Income Portfolio Manager at Market Vectors ETFs.
“These proposed reforms are the latest in a recent series of encouraging
signs that we have seen coming out of Mexico. The new administration has
an aggressive reform agenda, and the proposed telecommunications reform
is a positive sign of its willingness to take on some of the most
powerful business interests in the country,” said Rodilosso. “As a
long-time investor in high-yield emerging market bonds, I have seen how
the market has treated the ‘also-rans’ in Mexico’s telephony and
broadcasting industries; companies whose ability to compete in that
country has at times seemed to be at the whim of the dominant players or
the courts. Even last year, a smaller fixed line competitor lost
important rulings on fees that severely hurt its profitability. In my
view, this type of reform could level the playing field somewhat and
open up some of these companies to foreign ownership.”
“Of course, if this bill passes and becomes law, the question remains of
its effectiveness,” continued Rodilosso. “The courts have historically
been friendly towards Mexico’s dominant companies and politically
ingrained elites. Even the recent pro-creditor ruling on the Mexican
bankruptcy case involving Vitro SAB happened on U.S. soil. If Vitro did
not have U.S. subsidiaries, then creditors would have been left with
very little leverage to combat the company’s reorganization plan was
approved in local courts.”
“In my opinion, there are a variety of risks associated with investing
in the small market, mostly fixed line, operators in Mexico. But the
movement towards reform at this early stage in President Peña Nieto’s
administration should be seen as an encouraging step in opening up the
competitive landscape to potentially more foreign ownership,” he added.
Mr. Rodilosso has 20 years of experience trading and managing risk in
fixed income investment strategies, including 17 years covering emerging
markets. Among the Market Vectors ETFs under his watch are
Investment
Grade Floating Rate ETF (NYSE Arca: FLTR), Fallen
Angel High Yield Bond ETF (NYSE Arca: ANGL), LatAm
Aggregate Bond ETF (NYSE Arca: BONO), Emerging
Markets Local Currency Bond ETF (NYSE Arca: EMLC), Emerging
Markets High Yield Bond ETF (NYSE Arca: HYEM), International
High Yield Bond ETF (NYSE Arca: IHY), and Renminbi
Bond ETF (NYSE Arca: CHLC). As of December 31, 2012, the total
assets for these ETFs amounted to approximately $1.4 billion.
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About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and
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