Mexico to Join MILA in Boost for LatAm Exchange

By David Gacs

Mexico’s BMV bourse signed an agreement of intent to join Chile, Colombia, and Peru’s exchange. The new member would nearly double the size of the integrated market.

In a move that will almost double its size, Latin America’s first stock exchange conglomerate is set to increase its market reach by merging with Mexico’s BMV Exchange. In a move set to further deepen ties between Chile, Colombia, Mexico, and Peru—the Pacific Arc countries—the Mexican exchange signed an agreement of intent to join the Integrated Latin American Market, know by its Spanish acronym MILA. The decision took place at the Second Pacific Alliance Summit, held on December 4 in the Yucatan city of Merida. MILA, which currently brings together the bourses of the Pacific Arc countries minus Mexico, will see this merger increase its market capitalization to $1 trillion. In Latin America, it will rank second in size only to Brazil’s giant $1.24 trillion BOVESPA exchange and could offer an attractive destination for investment to the region.

MILA, Latin America’s first stock market combination, has been conducting cross-border exchanges since May 2011 and is valued at a combined market capitalization of $549 billion. By merging with Mexico’s BMV exchange, MILA’s market operators are hoping to increase investor confidence and deepen market reach by bringing in Latin America’s third largest bourse, presently valued at approximately $450 billion. The merger will also bring in a host of global companies, including América Móvil, media giant Televisa, and Cemex, one of the world’s largest suppliers of building materials. The agreement of intent paves the way for the study of regulation in the four participating countries’ exchanges and necessary adjustments to ease their coming together.

Chile’s exchange currently has the largest participation in MILA at 48 percent of all exchanges, followed by 40 percent from Colombia, and 12 percent from Peru. Each market has its own complementary investment niche, with Chile focusing on the retail, extractive, and services sectors; Peru on mining, construction, and materials; and Colombia on the financial and energy sectors. Colombian economists Carlos Ignacio Rojas and Alejandro Vera write for Americas Quarterly that the combined exchange can “offer investors the advantages of economies of both scale and scope. Issuers and investors from the three countries will receive a higher aggregate value in financing terms without increasing transaction costs.”

The exchange merger appears to be part of a broader Pacific integration scheme discussed during the Pacific Alliance Summit, which had in attendance the presidents of Chile, Colombia, and Mexico; Peru’s minister of foreign relations; and the Panamanian president, whose country currently holds observer status in the group. The summit declaration covers the group’s goal to “build a common space with the intent to deepen our political, economic, social, and cultural integration.” But the document also looks to Asia to expand business, laying out the objective of greater involvement in the Asia-Pacific region. All MILA countries are members of the Asia-Pacific trade bloc APEC aside from Colombia, which is currently seeking membership.

Learn More:

  • MILA website
  • Mexican Stock Exchange website
  • Santiago Stock Exchange website
  • Lima Stock Exchange website
  • Colombia Stock Exchange website
  • Video of Mexico’s President Felipe Calderón’s closing remarks at the Second Pacific Alliance Summit