Funding of Priority Sectors

Tourism

Worth mentioning is the participation of BANCOMEXT in the retirement tourism segment, as it provided direct financing for the construction of two communities for the elderly in Querétaro and Mexico City. The Mexico City operations began in June 2017, comprising 135 suites, a 119 hotel suites, an office tower and a commercial area.

Within the segment of sun and beach tourism, BANCOMEXT granted a loan for the construction of the Mexico Xcaret Hotel, the first thematic hotel in the country which includes the "All Fun Inclusive" concept, creating a synergy with the entertainment parks that Grupo Xcaret already operates. Additionally, the year 2018 begins with a pipeline for the construction of another 3,500 new hotel rooms, it is estimated to start operations in the next two years.

The financial reform has strengthened the role of development banks by boosting growth drivers in the country’s strategic sectors, especially in supporting small and medium-sized enterprises. In this area, BANCOMEXT, in partnership with the commercial banking sector, implemented the “Mejora Tu Hotel” (“Improve Your Hotel”) program, announced in April of 2016, which aims to modernize the hotel infrastructure. This program assists the sector through commercial banks with credits of up to 60 million pesos, at competitive interest rates, maturity periods that allow for an adequate growth of investment projects, but for the most part supported by Bancomext. Also, credits in excess of 60 million pesos rely on Bancomext as a First-Tier lender. By the end of 2017, a total of 109 credits amounting up to 3.5 billion pesos were approved via the “Mejora Tu Hotel” Program for projects in 21 of the country’s states.

The tourism industry is one of the driving forces that stimulate the world economy, contributing to the development of our country in a direct, indirect and induced way, impacting the value chains and contributing to GDP and employment growth. Considering the sector’s economic contribution of and its transversality, BANCOMEXT furthered its tourism sector model focused on developing investment projects, relating and identifying compelling investment corridors and competitive tourist poles, as well as destinations where hotel infrastructure is being fostered to house business, sun and beach tourism. As a result of this strategy, BANCOMEXT's tourism investment direct loans portfolio integrates projects in 24 states across Mexico.

The 2017 first tier portfolio indicators for the Tourism sector were as follows:

The tourism is the most important portfolio, in total balance and the number of counterparts in the entire private sector credit portfolio.
Resources placement during 2017 amounted to 7.9 billion pesos.
This sector’s portfolio benefited 121 companies.

With BANCOMEXT’s first tier financial support for the tourism sector, the construction of 3,600 new hotel units and the remodeling of 470 rooms, in nine of the country’s states, were completed during 2017. The new hotel units incorporated into the tourism sector during 2017 resulted in the creation of 4,300 new direct, permanent, long-term jobs, with an estimated 5,000 additional indirect jobs.

Export Maquiladora Industry / Industrial

Infrastructure Development

The industrial real estate sector has shown an outstanding performance in recent years, making it an alternative to housing construction and public works that have diminished their contribution of resources to this economic sector; this is why BANCOMEXT continued to offer specialized products for the development of industrial infrastructure in the country, encouraging foreign investment, employment growth, and foreign currency revenue generation. The industrial infrastructure development program has adjusted the conditions of the loans over time and provides liquidity over time and provides liquidity to the developers of industrial infrastructure, by advancing the flow of rents coming from industrial warehouses lease contracts.

During 2017, 9.2 billion pesos were destined, among other projects, to the following:

Acquisition of a 1.6 million square feet industrial portfolio, located in the cities of Tijuana, Irapuato, and Nogales.
Financing an industrial portfolio with 1.3 million square feet located in Tepotzotlán, Silao and Ramos Arizpe.
Construction of two industrial infraestructures of 354,000 square feet, located located in Ciudad Acuña, Coahuila.
Financing of a stabilized 863 thousand square feet industrial portfolio located in Tijuana, BC.

During this year, the Institution also participated in four syndicated loans to stock market instruments, such as CKDs and FIBRAS, encouraging the participation by commercial banks.

The portfolio indicators of 2017 for the Export Maquiladora Industry were as follows:

The first-tier portfolio balance in this sector was 26.7 billion pesos, making it BANCOMEXT’s second most significant sectorial programs portfolio. The portfolio presented a 5% growth when compared to 25.3 billion pesos in 2016.
97 companies were benefited, a growth of 4.3% when compared to 93 in 2016; 9.2 billion pesos were allocated to resources placement for financial support, a growth of 53% when compared to 6 billion pesos in 2016.
At the end of 2017, this sector presented a pipeline for 12.5 billion pesos with 53 cases under study.

Automotive Industry

Given the importance of the automotive sector in jobs creation and foreign; currency revenue generation, BANCOMEXT continued its participation providing financial support to companies aiming to support the needs of the terminal industry and its supply chain, through.

Short and long-term financing, thus strengthening BANCOMEXT’s presence in this vital branch of the economy and positioning it as an essential player in its development.

During 2017, three credits stand out for this sector, for a total amount of 141.7 million dollars (2.6 billion pesos) destined for:

The improvement of the debt profile of a company with high experience in the manufacture of crankshafts located in Tenango del Valle, EdoMex.
The acquisition of equipment, molds, and tools for a Korean company certified supplier for General Motors, located San Luis Potosí.
An investment for the construction and commissioning of a plant in San Luis Potosí, for a leading company in the development of tires for cars.

These actions are aligned with the institutional mandate and contribute to the attraction of direct foreign investment, thus increasing Mexico’s productive plant.

During 2017, the sector’s value chain was strengthened, with support to 2 OEMs, 15 TIER 1 and 11 TIER 2 and 3, with a balance of 11.7 billion pesos, consolidating amongst others foreign investment in the sector through the complementary financing of investment projects, for a total amount of 4.1 billion pesos.

The portfolio indicators for this sector, at the end of 2017, were as follows:

The portfolio balance reached the amount of 11.7 billion pesos, an increase of 25% when compared to 9.4 billion pesos in the previous year.
The resources placement was 13.3 billion pesos for the period, surpassing by 52% the 8.7 billion pesos registered in 2016.
45 companies were benefited; this represents the third most central portfolio for strategic sectors.
The prospective operations portfolio for this sector, at the end of 2017, amounted up to 15.5 billion pesos, with 44 projects under study.

Energy and Renewable Energy

BANCOMEXT has promoted the energy sector through medium and long-term financing for the project development, construction, and start-up, in the "oil gas" and clean energy generation subsectors. In this sense, BANCOMEXT, in response to the priority strategies of the Federal Government, participated in 2017 in "clean" energy projects (wind, photovoltaic, hydro) to promote the use of renewable sources of energy and biofuels and contribute to the national energy generation goals. Additionally, it supported the adoption of technologies that provide higher energy efficiency and savings to the general population.

During 2017, two wind projects located in Tamaulipas and Nuevo León, five photovoltaic and one combined cycle for 488 million dollars were authorized and contracted. The generation capacity of these projects is 2,607 MW¹, an investment of over 2,700 million dollars, and a petrochemical project for 50 million dollars whose total investment was 600 million dollars

Also, during the same period, seven photovoltaic projects, located in Sonora, Chihuahua, Aguascalientes, San Luis Potosí and Tamaulipas, were in the process of being structured, as well as a combined cycle plant situated in Chihuahua, with a generation capacity of 1,563 MW and an investment over 1.6 billion dollars (28.9 billion pesos) and a wind project with a generation capacity 1,400¹ MW, an investment of 2 billion dollars. Participating in these operations are Development Banking, Multilateral Banking, and Commercial Banking institutions, fostering risk sharing schemes.

All renewable energy projects being implemented and structured will be equivalent to:

The results obtained for the leading indicators for 2017 were as follows:

This sector’s portfolio balance was 21 billion pesos, making it BANCOMEXT’s third most valuable sectorial programs portfolio.
The resources reported during this period amount to 11.4 billion pesos.
39 companies were benefited in this sector, with a 25 billion pesos line of prospects and 35 projects under study.

Transportation, Logistics, and Aerospace

In 2017 BANCOMEXT participated in the inauguration of the new container terminal in the Port of Tuxpan financed by BANCOMEXT, channeling 67.7 million dollars (1.2 billion pesos) for the acquisition of 8 aircraft, as well as the authorization of 104.5 million dollars (1.9 billion pesos) destined to the purchase of 20 aircraft for another airline, plus a PSV type vessel for service to PEMEX and the construction and commissioning of a terminal specialized in automobiles in the port of Lázaro Cárdenas, Michoacán, This will allow this pole of industrial development to detonate investment attraction, quality jobs creation, value chains development, meeting the demand for local services and general benefits for the local population.

The portfolio indicators reported during 2017 for this sector were as follows:

In 2017, the Transportation, Logistics and Aerospace sector showed an increase in the portfolio balance of 2.0%, from 9.7 billion pesos in 2016 to 9.9 billion pesos in 2017.
The portfolio of this sector generated the most significant contribution of resources placement for BANCOMEXT’s 1st tier portfolio, with 39.2 billion pesos, (27% of total placement resources for the 1st tier portfolio). Also, it exceeded in 10% the 35.7 billion pesos for 2016.
The prospective operations portfolio for this sector, at the end of June, amounted to 9.1 billion pesos, with 18 projects under study.

Telecommunications

In 2017, BANCOMEXT reinforced the actions to support companies that provide information technology, communications (including broadband), telecommunications and broadcasting services aiming to benefit the entire population. The relevant projects that stand out for this period are:

a) The financing for the Red Compartida (Shared Network) project through a syndicated credit line for 4.2 billion pesos, out of a global amount of 17.7 million pesos. This project will allow wireless data transportation to optimize the use of the allocated spectrum, reduce prices to end users, increase coverage, and encourage new operators in the market.

b) BANCOMEXT will support, in partnership with commercial banking, the strategic investment plan of a telecommunications company with more than 3 billion dollars (54.2 billion pesos) during the next seven years.

With these projects, BANCOMEXT is promoting the modernization of the sector and direct foreign investment in the country exceeding 4.5 billion dollars for a seven-year period. At the end of 2017, this sector reported a 7.2 billion pesos portfolio balance, surpassing by 9% the amount of 6.6 billion pesos reached in 2016, with 1.5 billion pesos in resource placement.

Creative Industries

The Orange Economy represents a tremendous development opportunity for Latin America and the Caribbean; however, it is crucial to understand the specific needs of this industry, as it comprises an endless number of interconnected concepts that go beyond the creative themes that, together, result in the creation of a cultural legacy of high relevance for every region in the world.

Currently, in our country, this industry generates 7.4% of the GDP and 2 million direct and indirect jobs. It should be noted that in Mexico, 20% of total tourism corresponds to cultural tourism and that our country is the most competitive destination for the development of software, video games, and web and multimedia applications in America. Given the diversity of each industry’s characteristics, Bancomext developed a support scheme aimed at the Mexican film industry, with consideration to its national history and international recognition, its contribution to the national economy, and the export potential, given that its behavior may be assimilated to an investment project.

Our institution offers products and services that meet the particular needs of the agents that participate in this sector; we understand

the industry’s cash flow, the need to secure financial resources as there is a high expectation of risk, especially in the pre-production, production and post-production stages, as well as a high uncertainty in future flows. Moreover, this scheme contemplates the need for an ad hoc credit structure, since primary and secondary cash generation occurs over a period of approximately four years, the producer being the last one to receive any income.

Bancomext manages a financing structure for creative industries considering the possible scenarios:

1) The credit is to be paid with the box office incomes or
2) The remaining balance is to be within 24 months since the box office resources overlay part of the said credit.

This last scenario will require a secondary guarantee of payment through a stabilized film portfolio or fixed cash flows from its streaming rights.

Letters of Credit

During 2017, BANCOMEXT continued to provide letters of credit to clients having a line of credit and to clients having fund provisions, giving advice and overview to ensure issuance.

The 2017 results were as follows:

5.5 billion pesos in Letters of Credit were issued to first-tier companies with qualified line and with the provision of funds, including the public sector.
The balance reported at the end of 2017 was 5.4 million pesos.
The volume of operations for letters of credit issued has been maintained due to the greater operability of recurring customers.