Background on the Mexican Secretariat of Finance and Public Credit (SHCP)
The Mexican Secretariat of Finance and Public Credit (SHCP) is the primary financial institution responsible for managing the country’s public finances. It oversees budget formulation, fiscal policy, and debt management to ensure the government’s financial stability and sustainability.
Who is the SHCP?
The SHCP is a crucial part of the Mexican government, working under the direction of the Ministry of Finance. Its main objectives are to maintain fiscal discipline, ensure debt sustainability, and support economic growth.
The Bond Prepayment Details
On Wednesday, the SHCP initiated the early redemption process for two sovereign bonds totaling $3.593 billion, originally set to mature in 2026.
- One bond, worth $2.060 billion, is denominated in US dollars.
- The other bond, worth €1.327 billion (equivalent to $1.533 billion), is denominated in euros.
To fund the US dollar bond repurchase, the SHCP utilized the entire Remanente de Operación del Banco de México (ROBM) for the 2024 fiscal year, amounting to 17,995 million Mexican pesos.
Impact and Benefits
This prepayment is part of a program aimed at reducing the federal government’s debt, as stated by the SHCP in an official release.
- The remaining portion of the operation was covered by funds from a previous emission on June 23, totaling $2.501 billion.
- These operations have reduced planned external debt amortizations by 85% for the upcoming year, providing greater flexibility to capitalize on opportunities in international financial markets.
- Combined with the June 23 bond management operation, the federal government has refinanced a total of $6.094 billion in external debt so far this year.
- The current administration has achieved a net benefit of over $1 billion through deleveraging, contributing to a more organized and sustainable debt maturity profile.
Commitment to Responsible Fiscal Management
The SHCP reaffirmed its dedication to responsible and prudent fiscal management, adhering to the Annual Financing Plan 2025 and in line with authorized debt ceilings set by the Mexican Congress. This ensures a solid and sustainable trajectory for public debt.
Key Questions and Answers
- What is the purpose of this prepayment? The SHCP aims to reduce federal government debt and improve financial flexibility in international markets.
- Which bonds were prepaid, and what are their values? A US dollar-denominated bond worth $2.060 billion and a euro-denominated bond worth €1.327 billion (equivalent to $1.533 billion) were prepaid.
- How was the prepayment funded? The prepayment was funded using Mexico’s central bank’s (Banxico) operational surplus for the 2024 fiscal year and resources from a previous bond emission.
- What are the benefits of this prepayment? This action reduces external debt amortizations by 85% for the upcoming year, allowing greater flexibility in capitalizing on international financial market opportunities.
- How does this prepayment impact Mexico’s debt profile? The federal government has refinanced a total of $6.094 billion in external debt so far this year, contributing to a more organized and sustainable debt maturity profile.
