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Update, Aug. 18: The city of Tijuana publishes full-page ad outlining its debt renegotiation.
Full-page ad, El Mexicano.

Many business leaders back the renegotiation, and Protego consultant Fernando Aportela pointed out that the previous administration had loans where it was only paying interest, and not on the principal. Story, Frontera.

Green Party, Workers Party council members say there was not as much transparency on the debt negotiation as Mayor Carlo Bustamante has indicated. Story, El Mexicano.

Update, Aug. 17: Rubén Roa Dueñasm, president of the State College of Economists of Baja California, told Frontera newspaper he figured that Tijuana officials did the best they could for the short term in renegotiating the city's debt, although he said the long-term consequences are yet to be seen.
Story, Frontera.

Tuesday, Aug. 16, 2011

Tijuana finance official defends debt renegotiation

Finance director says refinancing has contributed to 23% increase in the debt, but has given it and future administrations maneuvering room

He says El Mexicano's story saying the principal and interest the city would pay over 20 would double could become true only under an unlikely worst-case scenario

Tijuana finance director Rufo Ibarra Batista said Monday that refinancing has not doubled the city's debt, and that only in a worst-case scenario would the city have to pay double the principal and interest under its new debt refinancing plan. El Mexicano on Monday had published a front-page story saying the city would wind up paying double what it would have paid under the refinancing plan. Story, Frontera. Story, El Mexicano. Jump page.

Such an increase could occur because the debt was renegotiated under a variable rate that could move up. Council members Najla Wehbe Dipp of the New Alliance Party and Erwin Aréizaga of the National Action Party on Monday faulted the administration for not locking in a fixed interest rate.

El Mexicano reported Tuesday that the administration, in seeking to lower its monthly debt payments, could have damaged future administrations, particularly those in the 2020s. The paper said the city reduced its monthly payment from 27 million pesos to 18 million, while noting that the 27 million peso payment was a tremendous drag on the city's liquidity.
(27 million pesos=$2.2 million; 18 million pesos=$1.46 million)

Ibarra said the previous administration of National Action Party Mayor Jorge Ramos increased the city's debt from 551 million pesos to 2.85 billion pesos. That was cited as a 279% increase, but actually may be a 417% one.
(551 million pesos=$44.8 million;2.85 billion pesos=$231.7 million)

He said the current administration of Institutional Revolutionary Party Mayor Carlos Bustamante has further increased the debt 23%, in part to make it easier for the current and future administrations to pay off the debt. "This administration has increased the debt a maximum of
23%, it is not doubling the debt," he said. He said future administrations could further renegotiate the debt under more favorable terms.

He said some of the debt was renegotiated because the previous administration set it up so that only interest, and no principal, was being paid.

The president of the Tijuana Chamber of Commerce, Karim Chalita, told Frontera he applauded the debt renegotiation because it gives the city more financial maneuvering room and also said the city was making the information public, which he said did not happen before.

 


Monday, Aug. 15, 2011

El Mexicano says Tijuana mayor's debt renegotiation doubles amount to be paid
(actual increase, if paper's numbers are right, appears to be 57.7%, however)

el mexicano front pagecarlos bustamanteEl Mexicano, in a front-page story, said Tijuana Mayor Carlos Bustamante's debt renegotiation has doubled the amount the city owes, to 6.167 billion pesos in principal and interest by 2031 instead of 3.91 billion by 2028. The story does not quote Bustamante or other city officials, however, and the figures it cites showed an increase of 57.7%, hardly a doubling, but still more than 1 1/2 times more.
(At the current exchange rate, 6.167 billion pesos=$504 million; 3.91 billion pesos=$319 million).

While El Mexicano's analysis appears to have its flaws and to be incomplete, it does appear to put some important information out in the public arena.

pedro aspeMuch of the renegotiation was done through former federal finance minister Pedro Aspe's company, Protego Asesores, and El Mexicano said it apparently flattens out the debt over the next seven administrations. The paper said it appeared Protego would receive around 25 million pesos. (25 million pesos=$2 million)

Story, El Mexicano. jump page. Editorial, El Mexicano.

Here are some of the debt figures El Mexicano cited:
588 million pesos owed to Scotiabank at 9.23% .......($48 million)
25 million pesos owed Cofidan at 8.63%..................($2 million)
1.714 billion pesos owed Cemex at 10.28% (as part of last administration's ambitious repaving program, or PIRE)
.........................................................................($140 million)

The paper said this added up to 2.078 billion pesos (although the numbers it cited actually add up to 2.327 billion).
It said 220 million pesos in other debt from the past administration raised the total to 2.56 billion pesos
(2.078 billion pesos=$170 million; 2.327 billion pesos=$190 million);
220 million pesos=$18 million); 2.56 billion pesos=$209 million.

The paper said a refinance with Banobras involved nearly 1.83 billion pesos with a contract cost of 8.575 million pesos.
It said a refinance with Banorte involved 725 million pesos with commission of 725,000 pesos.
The paper said both refinances involved variable rates, which might cause additional short-term and long-term costs. The paper did not list the interest rate or rates or interest rate ranges or say how it arrived at the total interest that would be paid, as it is unknown what the variable rate will be at a given point in time.)

(1.83 billion pesos=$149 million; 8.575 million pesos=$700,000; 725 million pesos=$59 million)