structure their issues typically pay a higher investment banking fee, of a total of near 2- 2.5%, to offset the higher placement costs and/or underwriting services, if necessary.

**Table 4: Costs of a Plain Vanilla Domestic Bond Issue (in Mexican Pesos)**

||**Face Value**|**Issued - 1000s**|**Mexican Pesos,**|**(approx US$100**|**0s below)**|
|---|---|---|---|---|---|
||200,000|500,000|1,000,000|2,000,000|4,000,000|
|**Cost Category:**|(18,180)|(45,500)|(91,000)|(181,800)|(363,640)|
|Investment Banking Fees|2,000,000|5,000,000|8,000,000|15,000,000|16,000,000|
|Regulator Fee|360,000|900,000|1,558,288|2,458,288|4,258,288|
|Technical Study|14,456|14,456|14,456|14,456|14,456|
|Bondholder Representative|287,299|287,299|287,299|621,000|621,000|
|Stock exchange registration|232,500|500,000|500,000|500,000|500,000|
|Depository|625|625|625|625|625|
|Legal Fees|425,000|425,000|425,000|425,000|425,000|
|Marketing / Disclosure|150,000|150,000|150,000|150,000|150,000|
|Rating Agency|504,850|642,850|872,850|1,150,000|1,150,000|
|**Total Costs**|**3,974,730**|**7,920,230**|**11,808,517**|**20,319,369**|**23,119,369**|
|**% of Issue Size**|**1.99%**|**1.58%**|**1.18%**|**1.02%**|**0.58%**|

As is the case in Chile, the corporate climate, outside the small group of large (and often international) companies, consists of many family owned businesses that are reluctant to incur the indirect costs of “going public” via regulatory registration or external auditors. As such, the fees represented in this table are for companies who have already registered, and thus have complied with the standards for the initial opening of the company to the public’s eye.

Consequently, the table illustrates that for the standard high rated, plain vanilla bond, issuing costs in Mexico are not very high (about half that of Chile). On a nominal level, most of each category’s fees are higher in Mexico than Chile, but Mexico does not impose the issuing tax on the securities. Given the fee structure shown above, most banks advertise the minimum deal size for a local issue at about MX$ 200 million (around US$18 mn), though there have been a few smaller issues in the past five years. For these small deals, total issuance costs amount to roughly 2% of face value. For large issues near US$200 million, the fees drop to 1%; for those US$400 million the costs are as low as 0.58%. As mentioned above, total fees for a structured deal or for a newly registered (unknown to the market), lower rated firm would amount to 2-3.5% due to the added complexity. Over the past two years, approximately 20% of all issues were structured.

Firms wanting to issue into the Mexican equity market face much higher costs than with debt, ranging from 3.68%-4.73%, depending on issue size. These costs are detailed in Table 5. There have not been many IPOs in the last five years, as many companies had been waiting to “time” the market and were faced with a global decline in equity market interest. The investment banking fees again dwarf the other components of costs, comprising between 3-4% of issue size. A company that is doing an IPO, but which has been known in the market (through previous registration, product awareness, etc) can expect to pay 3-3.5%, where a 4% fee is common for the unknown corporations. For a company who wants to issue additional shares, subsequent to an IPO, the investment banking fees total around 2%.

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