MexECON Blog

OPIC Supports Property Registry Bond

On Wednesday, the Overseas Private Investment Corporation (OPIC) said it would partner with a U.S. bond-guarantee firm to support 2.765 billion pesos of bonds issued in the local Mexican market by a Mexican state government.  Proceeds from the issuance will be used to modernize the state's public registry of properties, with repayment coming from property registry fees.  Once the upgrade is completed, a home owner living in the state will reportedly be able to register his or her ownership in just days.  OPIC also expects that support of the bond will help expand the Mexican bond market, thereby ensuring more development in Mexico is supported by domestic rather than foreign investors.  According to OPIC, the transaction was its first-ever support of a local-currency bond issuance by a sub-sovereign issuer.

Comment:  OPIC is a U.S.-government agency that helps U.S. businesses invest overseas and manage the risks associated with foreign direct investment.  The agency is a good example of the kind of developmental finance institution that Terra Nova intends to utilize in order to help bring capital to its portfolio companies.  The bond for the property registry system is also interesting because it fits with the thesis of Hernando De Soto's The Mystery of Capital:  Why Capitalism Triumphs in the West and Fails Everywhere Else.  In that book, economist De Soto shows that a key problem holding back many less-developed countries is the lack of recorded title to property.  That lack promotes uncertainty in property rights, limits the ability of property to serve as collateral for the acquisition of credit, and otherwise inhibits investment.  OPIC support for the state government's property registry therefore promotes two important objectives:  development of the country's financial system and the potential for greater economic growth.

Patrick Fearon, CFA
Vice President, Fund Management

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