Mergers, Sales or Dilution: Large Mexican Enterprises Facing a Financial Crisis
10 Pages Posted: 18 Feb 1998
With high debt levels both in pesos and dollars, several large Mexican economic enterprises, were surprised by the December 1994 peso devaluation. Local banks had taken important positions in foreign currency, increasing their short-term debt mainly with foreign brokers. The abrupt peso devaluation interrupted the economic expectations created by NAFTA and the stabilization reached in interest rates and inflation. The 100% nominal devaluation and the following increase in local interest rates were elements that caused significant changes in large enterprises and financial groups, which were created during the nineties. The aim of this paper is to point out the level of indebtedness of large Mexican enterprises, their diversity, and the different strategies adopted to find a solution to the debt. Some domestic enterprises have instituted payment stoppages, some have dissolved their holders' participation to exchange debt for stock, some others are restructuring, and others have refinanced in the international capital markets.
JEL Classification: N16, G32
Suggested Citation: Suggested Citation