Mergers, Sales or Dilution: Large Mexican Enterprises Facing a Financial Crisis

10 Pages Posted: 18 Feb 1998

See all articles by Gregorio Vidal

Gregorio Vidal

Universidad Autonoma Metropolitana-Iztapalapa

Eugenia Correa

Universidad Nacional Autonoma de Mexico

Abstract

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

Vidal, Gregorio and Correa Vazquez, María Eugenia, Mergers, Sales or Dilution: Large Mexican Enterprises Facing a Financial Crisis. Available at SSRN: https://ssrn.com/abstract=58518 or http://dx.doi.org/10.2139/ssrn.58518

Gregorio Vidal

Universidad Autonoma Metropolitana-Iztapalapa ( email )

Mexico
(52-5) 724-47-50 (Phone)
(52-5) 612-56-82 (Fax)

María Eugenia Correa Vazquez (Contact Author)

Universidad Nacional Autonoma de Mexico ( email )

Fte. de la Escondida 36, Lomas de las Palmas
Me 52760
(52-5) 623-00-78 (Phone)
(52-5) 623-00-92 (Fax)

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