Mexican Bolsa Boosts Company Disclosure as Peso Sinks

By Fabiola Moura and William Freebairn
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Oct. 10 (Bloomberg) -- Mexico's stock exchange is demanding companies give investors more information about their finances as the peso's 18 percent tumble in two weeks raises concern businesses will face growing foreign exchange-related losses.

The Bolsa Mexicana de Valores SAB halted trading in shares of more than 30 companies this week in a bid to increase disclosure, the exchange's President Guillermo Prieto Trevino said in an interview in New York. Controladora Comercial Mexicana SAB, a supermarket operator, filed for bankruptcy yesterday after saying foreign-currency costs rose ``significantly.'' The stock tumbled and trading was suspended.

``We are working with all the companies whose trading was halted to make sure they are fully aware that they need to provide information to the market,'' Prieto Trevino said.

Since Mexican President Felipe Calderon said Sept. 25 in New York that his country could weather the global credit-market crisis, the central bank has drawn on near-record foreign reserves to prop up the peso, the benchmark stock index dropped 22 percent and the government unveiled a 65.1 billion-peso ($5 billion) stimulus plan to help tourism, energy and construction industries overcome an economic slowdown.

``People say that when the United States gets a cold, Mexico gets pneumonia,'' Calderon told a gathering of the Economic Club of New York on Sept. 25. ``This is not exactly the case today.''

Stocks Fall

The Bolsa stock index fell 2 percent today to 19,905.27, a seventh straight decline.

The central bank spent $8.9 billion defending the peso the past three days after the currency touched its lowest level since the 1994 devaluation. The peso, which traded at 10.7125 per dollar two weeks ago, rose 1.3 percent today to 13.0452.

Mexico's credit markets will tighten as domestic companies that sought funding in the U.S. begin to search for financing at home, Deputy Central Bank Governor Guillermo Guemez Garcia said in an interview yesterday with Bloomberg Television.

``They will have to go to the Mexican market and that will cause some sort of credit crunch that will increase the cost of credit,'' Guemez said in the interview in New York.

The credit squeeze has also spread to companies in Brazil, where two of the nation's biggest exporters, Aracruz Celulose SA and Sadia SA, lost more than half of their market value since saying last month they made bad currency bets that may cost them a combined $1.2 billion. Aracruz had its long-term foreign currency rating cut to BBB- from BBB today by Standard & Poor's.

`Got to Be More'

``From an investor's standpoint there's got to be more disclosure,'' said Will Landers, who manages $5 billion in Latin American equities at BlackRock Inc. in New York. ``They have to do these things on balance sheet. They shouldn't be done off balance sheet. We need to better regulate this thing.''

Companies in Mexico have rushed to disclose their dollar liabilities as stocks tumbled. Banco Compartamos SAB, a bank that lends to the working poor, said it has no dollar liabilities or derivatives.

Promotora Ambiental SAB, a waste-disposal company, said a third of its 1.04 billion pesos in debt is denominated in dollars and 87 percent of its debt excluding certain projects is hedged through June. Empresas ICA SAB, Mexico's biggest construction company, said the drop in the peso will not have a ``material effect'' on its financial results.

Grupo Industrial Saltillo SAB, a maker of auto parts and building materials, said it took a charge of 600 million pesos in the third quarter because of derivatives, or securities that derive their value from an underlying asset, linked to exchange rates. The stock started trading again yesterday after the company's disclosure, dropping 15 percent to 10 pesos.

Bankruptcy Filing

Controladora Comercial Mexicana's bankruptcy filing came after the company failed to sell commercial paper yesterday that would have allowed it to repay 400 million pesos of debt due yesterday, Moody's Investors Service said. Comercial Mexicana, which said it has $1.08 billion in financial derivatives, and liabilities of $2 billion, fell 75 percent today to 2.16 pesos.

Mexico's exchange halts trading when shares rise or fall more than 15 percent until the company makes a statement about the move, and may suspend them again if the decline continues. Shares also can be suspended when the bourse determines more information is warranted, according to regulations on the exchange's Web site.

``It's important that companies provide enough information so investors can make the adequate decisions,'' Prieto Trevino said.

To contact the reporter on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Fabiola Moura in New York at fdemoura@bloomberg.net