01.20.2012
By Terry Flanagan

Exchange Partnerships to Proliferate

Markets Media CEO, Mohan Virdee, sat down with Bolsa de Valores de Colombia head Juan Pablo Cordoba to discuss the state of the global markets as well as issues facing Latin America’s local investors.

With the mega merger between NYSE Euronext and Deutsche Borse hanging in the balance, observers note that the era of global exchange consolidation via M&A activity may be coming to an end. However, Latin America’s Mila cooperative shows that there are other avenues for integration that can just as beneficial as a merger.

“The visibility of Mila has been tremendous, we have had great success with enhancing the visibility of our individual markets,” said Juan Pablo Cordoba, chief executive officer of BVC. “Having Mexico want to join Mila is a good signal for investors, as they will have easy access to four of the top markets in Latin America in a single vehicle.”

BVC is one of the three South American exchanges in Mila, or Mercado Integrado Latinoamericano, along with Chile’s Bolsa de Comercio de Santiago and Peru’s Bolsa de Valores de Lima. Mexico’s stock exchange, Bolsa Mexicana de Valores, in December announced plans to join Mila, which will further boost the standing of the collective exchanges.

“The mood today is less toward mergers and more towards alliances and strategic partnerships,” added Cordoba. “Mila has been one of the most successful partnerships. It’s like being a single market, as investors in one market have access to the instruments of the other three markets. It provides a good compromise between full-fledged integration and the need for local regulators to feel in control of what’s going on within their borders.”

“As a block we can generate a lot of synergies and become more relevant in the international markets,” Javier Artigas, BMV’s senior vice president of strategic planning, told Markets Media at the time of the announcement. “We can be helpful in using different tools to bring liquidity to (Colombia, Peru and Chile).”

Having Mexico’s BMV join Mila is one of many steps that the Latin American markets have taken to attract foreign investors. About half of Mexico’s market activity comes from foreign investors, while about a quarter of Chile’s activity comes from abroad. While only about 8% of Colombia’s market activity originates from foreign investors, that number doubled from just two years prior. Cordoba hopes to double that to about 15% within the next few years.

“We will target the international investor over the next couple of years,” said Cordoba. We feel that foreign investors have bypassed Colombia and in a way they’ve missed out on the tremendous growth over we’ve seen over the last few years. It’s a market with very positive dynamics.”

The signs are starting to show. The oil and gas as well as mining sectors are among the fastest growing in Colombia, and as such, 2011 was a record year for foreign investment in those markets, with Canada providing much of the capital.

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