MEXICO CITY, March 6 Mexico announced a new
program aimed at buoying the country's battered homebuilders by
promising to put up billions of pesos to back commercial credit
to the industry.
The 15 billion pesos ($1.2 billion) fund "will favor a
healthy flow of credit for the construction of new homes," said
Deputy Finance Minister Fernando Aportela, speaking a press
conference in Mexico City on Wednesday.
Under the program, the government would guarantee losses of
up to 30 percent of the total amount loaned to homebuilders this
year, to the tune of 15 billion pesos. That sum represents 40
percent to 50 percent of all the money loaned to the sector last
In exchange for the guarantee, banks would pay a premium,
though the government did not detail the amount.
The news boosted shares in Mexican homebuilders, whose
earnings have faltered in the last two years as the government
adopted policies favoring pricey urban high-rise and sustainable
development. Many homebuilders have large land holdings outside
cities that have lost value thanks to the new policies.
But Arianna Gonzalez, an analyst at Signum Research in
Mexico City, said the jury is still out on whether the indirect
support will induce Mexico's famously cautious banks, which are
still mindful of the 1994-95 banking crisis, to lend.
"I'm very skeptical of the effect (the program) can have,"
She explained that instead of direct government support to
lenders, the program is based on "triangulation" through
commercial banks, and merely replaces another program that
offered a 6 percent government guarantee to homebuilders.
"We'll have to wait and see if there really is enough of an
incentive for financial institutions (to lend to developers) ...
because they are facing a sector that has margin pressures and
balance sheet problems."
Nevertheless, shares in Mexican homebuilding companies
soared after the government announced the plan.
Urbi rose more than 18 percent, even after the
stock exchange halted trading in its shares due to their steep
"The (government) guarantees give additional certainty to
developers, and serve as a catalyst for the return to normality
in bank financing," Antonio Jorge, Urbi's director of investor
relations, said in a statement.
Fellow homebuilder Geo rose more than 14 percent,
while Homex added over 13 percent.
The Habita index, which groups homebuilders, added
more than 11 percent.