beyondbrics

If ever there were doubts about how serious China has become for América Móvil, the company’s plunge into the off-shore renminbi debt market in Hong Kong surely laid them to rest.

América Móvil on Wednesday became the first LatAm corporate to tap the so called “dim sum” bond market. The RMB 1bn ($158m), 3-year issue with a coupon of 3.5 per cent is a reflection of the fact that Latin America’s largest telecoms company, controlled by Mexican billionaire Carlos Slim, is doing an ever greater portion of its procurement with Chinese exporters.

For now, the purchases are mainly network equipment. But you can be pretty sure that before long, a lot of the smart phones that the company offers to its 200m-plus subscribers throughout the Americas will come from China, too.

That is where the bond issue comes in. Until now, America Movil was paying its Chinese suppliers in US dollars, which represented a significant exchange-rate risk for the exporters. By paying them in local currency, it can now explore the possibility of improving terms with those suppliers.

As Carlos García Moreno, America Movil’s chief financial officer, told beyondbrics on Wednesday, “if we pay our Chinese suppliers in their own currency, we should get better terms and they will eliminate the currency risk…it’s a win-win”.

García Moreno confirmed that all of the funds from the bond issue would be used to cover purchases of equipment made in China.

Nor is it likely to be the last foray into that market. With the company’s capital expenditure programme running at about $9bn last year and roughly the same this year, America Movil says that it wants to be involved in the RMB debt market on a long-term basis.

“To do a one-off transaction does not make much sense,” said García Moreno. “If our trade relationship is growing, then it has to go hand in hand with a financial relationship.”

So much so, says America’s CFO, that Wednesday’s excursion is “the first step towards a more permanent presence” in the RMB bond market.

Related reading:
Brazil: a taste for dim sum, beyondbrics
Redback vies for share of Latam trade, beyondbrics
Latin America ponders role of the renminbi, FT
China’s renminbi drive, beyondbrics