Vía de los Poblados s/n 28033 Madrid Tel. +34 91 374 3181 · 5/20/2010 · Vía de los Poblados s/n 28033 Madrid Tel. +34 91 374 3181 Dear client, I am writing to inform you that

Vía de los Poblados s/n 28033 Madrid Tel. +34 91 374 3181

Dear client, I am writing to inform you that on 19 May we launched a new image for Europe and Latin America. This change of image is one of a series of measures aimed at continued improvement of the independent and high value-added analysis we offer our clients. The unit will now be known as Market & Client Strategy, and together with the former Economic Research Department it will be part of the BBVA Research brand. Our aim is to expand our knowledge base, bringing together views from economists, analysts and strategists. The new structure reinforces our strategists’ specialized focus on underlyings, with coverage of all of the different areas of analysis (technical and fundamental analysis, short-term and long-term ideas, derivatives, etc), and our global service adapted to local needs. We will maintain our focus on markets where our expertise is superior: Spain, Portugal, and Latin America. I would like to take this opportunity to stress that we remain committed to our clients, to the quality of our work, and to the effort we put into our services and products. Regards,

Antonio Pulido Director - Market & Client Strategy

PLEASE SEE ANALYST CERTIFICATION AND OTHER IMPORTANT DISCLOSURES ON PAGE 12 OF THIS REPORT This document has been produced by BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA BancomerFor further information please contact the areas listed in this document. No part of this report may be copied, conveyed or distributed into the countries in which distribution is prohibited by law, or furnished to any person or entity in those countries. The failure to comply with these restrictions may breach the laws of the relevant jurisdiction.

Daily LatamLatam

Market AnalysisMarkets

Mexico City, May 20, 2010

Strategic Outlook Market prices in rate cutsAmid clearly negative market sentiment, the flight-to-quality effect took German bond yields to historic lows, a movement that was exacerbated by new lows in G-3 inflation readings.

Brazil Interest Rates: Decline in monetary yields picks up steamExpectations for a hike in Selic rate ease.

Exchange Rates: Brazilian realThe weekly report of forex flows released yesterday by the central bank shows real’s retreat is related to speculative factors.

Chile Interest Rates: Appetite for long-term bonds……amid uncertainty and global risk aversion.

Exchange Rates: Chilean pesoPeso loses ground again on weakness in copper prices.

Colombia Interest Rates: Hike in yields comes to a haltDespite persistent risk aversion, future corrections seem limited.

Exchange Rates: Colombian pesoMajor decline of the peso despite release of positive activity data.

Peru Interest Rates: Pressures on yields persistThe market nonetheless continues to consider local factors for valuation of the debt curve.

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No part of this report may be copied, conveyed or distributed into the countries in which distribution is prohibited by law, or furnished to any person or entity in those countries. The failure to comply with these restrictions may breach the laws of the relevant jurisdiction.PLEASE SEE ANALYST CERTIFICATION AND OTHER IMPORTANT DISCLOSURES AT THE END OF THIS REPORT PAGE 2

Daily LatamMexico City, May 20, 2010

Strategic OutlookMarket prices in rate cutsAmid clearly negative market sentiment, the flight-to-quality effect took German bond yields to historic lows, a movement that was exacerbated by new lows in G-3 inflation readings.

Volatility remains high, placing emerging assets, currencies in particular, at attractive levels from a medium-term perspectiveGlobal investors continue to sell high risk assets as fallout from the European sovereign debt crisis continues to ripple across markets. This ongoing negative trend is reflected in the flight-to-quality effect, with 2Y German bond yields declining to a level of about 0.5%, a new historical low, which already partly reflects that the market has priced in further reductions in the Eurozone benchmark rate currently at 1%. This movement in debt markets is also being underpinned by recent inflation readings, with the US core yield falling to 0.9%, its lowest in decades, triggering further declines in breakeven inflation rates (the gap between nominal and real bonds). Amid an environment of rising volatility (e.g. the VIX has reached levels of around 35%), emerging market currencies continue to depreciate against the USD, losing their correlation with the EUR which has gained some ground against the greenback. The central issue will continue to be fears of a European contagion of emerging markets, but to the extent such fears are allayed, we expect to see the return of some selective risk appetite. We see good entry levels in currencies with solid fundamentals and attractive carry (e.g. the MXN).

Mortgage delinquency data and foreclosures did not help market sentiment eitherThe mortgage delinquency rate rose by almost 60bp to levels of 10.1% as at 1Q10 while foreclosures rose only 5bp to 4.6%. This is why construction-related sectors underperformed the market in the US. In Mexico, this data was mainly reflected in Cemex, which dropped almost 3x more than the IPC. However, the data should be put in context, as recent home starts have come in above consensus expectations, which could generate opportunities once risk aversion settles down and volatility eases.

APPENDIXMacro Calendar

Brazil

Chile

Colombia

Peru

Daily change on LatAm CDS 5 years Daily change on MSCI Index

-2.0 0.0 2.0 4.0 6.0 8.0 10.0

Argentina

Brazil

Chile

Colombia

M exico

Peru

% -5.0 -4.0 -3.0 -2.0 -1.0 0.0

DevelopedWorld

EM Europe

EM Latam

EM Asia

EM General

%

Source: Bloomberg and BBVA Global Markets Research, S.A. Source: Bloomberg and BBVA Global Markets Research, S.A.

Equity LatAmChief AnalystRODRIGO [email protected] +52 55 5621 9701

Interest Rates LatAm/MexicoChief Strategist DAVID [email protected]+5255 5621 9616

Exchange Rates LatAm/MexicoChief StrategistMOISES [email protected]+5255 5621 9380



BrazilInterest Rates

Decline in monetary yields picks up steamExpectations for a hike in Selic rate ease.

After the central bank increased the target Selic by 75bp, flattening of 30bp in the 12M-1M PrexDI swap slope evidences eased expectationsWith DI futures yields from the Jan-11 contract forward declining over several days (e.g., the Jan-11 DI future yield has declined by 15bp this week), market expectations for the target Selic rate have begun to ease. Thus, this trend could continue as global market pressures persist and recent inflation indicators remain below expected levels (e.g., the IGP inflation estimate was 0.95% vs. 1.06%e). In fact, our outlook for flattening of PrexDI swap slope has begun to materialize, as it closed at 191bp (we suggested so when it was at 217bp, with a target of 180bp). Meanwhile, yields on the middle-long segments of the NTN-F debt curve declined on average by 2bp, though levels still stand above those seen last week, despite volatility and risk gauges on the rise (e.g., the VIX index closed above 35%). While slight steepening is evident, this is largely due to eased pressures on yields on the short end of the curve which are the result of shifting expectations on the monetary market. Thus, the perception of cycle risk in the local market remains constrained for the time being.

DI Futures Slope NTN-F Bonds 8Y-3Y

8.3

9.3

10.3

11.3

12.3

13.3

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep

-11

Nov

-11

Jan-

12

19-M ay-10 18-M ay-1012-M ay-10 19-Apr-10

%

-130

-80

-30

20

70

120

170

220

Jan-

07A

pr-0

7Ju

l-07

Oct

-07

Jan-

08A

pr-0

8Ju

l-08

Sep

-08

Dec

-08

Mar

-09

Jun-

09S

ep-0

9D

ec-0

9M

ar-1

0

bp


Strategic Outlook

Chile

Colombia

Peru


Antonio [email protected]+5255 5621 9849

Liliana Solí[email protected]+5255 5621 9877



BrazilExchange Rates

Brazilian realThe weekly report of forex flows released yesterday by the central bank shows real’s retreat is related to speculative factors.

According to the central bank’s weekly forex trade report, despite recent turbulence in global markets, the first two weeks of May saw a forex trade balance of US$2.7bn. The report emphasizes, however, a fall of US$975mn last week, 30% of which was the result of financial outflows, with the remainder resulting from a negative trade balance. The report also shows a decline in central bank daily dollar purchases from an average last month of US$256mn to US$94mn last week. In our view, the fact that government intervention continues and forex flows remain in positive terrain reflect how the fall in the currency is driven largely by speculative factors. This can be appreciated from two points of view: 1) on one hand, foreign investors’ positions in the BM&F stand against the real by US$1.5bn; and 2) on the other, implied volatility continues on an uptrend across all maturities, once again moving to levels above 19% in 1M volatility. As such, we stand by our favorable outlook in the short term, though we expect the real to trade across a broad range.

Strategic Outlook

Chile

Colombia

Peru


Claudia [email protected] +5255 5621 9715

Implied vs. Historic Volatility BRL vs. WTI

0

10

20

30

40

50

60

70

80

Aug

-08

Oct

-08

Dec

-08

Feb

-09

Apr

-09

Jun-

09

Aug

-09

Oct

-09

Dec

-09

%

1.5

1.7

1.9

2.1

2.3

2.5

2.7

1M Imp. Vol. 1M Act. Vol. BRL

1.5

1.7

1.9

2.1

2.3

2.5

2.7

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09F

eb-0

9M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9S

ep-0

9O

ct-0

9N

ov-0

9D

ec-0

9

0

20

40

60

80

100

120

140

BRL Oil




ChileStrategic Outlook

Brazil

Colombia

Peru

Interest Rates

Appetite for long-term bonds……amid uncertainty and global risk aversion.

The results of the 10Y Treasury bond auction in pesos and UF continue to reflect an improvement in medium-term cyclical expectationsOn the one hand, we continue to see a downward correction in short-term yields in both CLPxCam swaps and shorter-term BCPs. As we have said before, this stems from adjustments following the central bank’s decision to hold the MPR steady (e.g. the 6M CLPxCam swap yield decreased 6bp to close at 1.25%), and we believe there is still room for a further (albeit limited) decline. Furthermore, the results of the 10Y BTP and BTU bond auctions reflect still high medium-term inflation expectations through ongoing strong appetite for long-term instruments (a bid-to-cover in pesos of 3.21x vs. an historical average of 2.82x, and 3.32x in UF vs. a 2.92x historical average), as well as rising long-term implied inflation (from 3.34% to 3.39%) and a reduction in risk premiums associated with a bigger paper supply (the 10Y UF yield below 3% and returning to levels of below 6.4% in pesos). In terms of slope, we expect a more moderate temporary steepening of the BCU curve, and as inflation expectations return (as reflected in the bonds auction) we expect a bigger decline in 5Y UF yields.




Swap CLPxCAM Slope Bonds BCP 5Y-2Y

-20

-10

0

10

20

30

1d 1w 1m

1Y 6M

bp

-130-80-302070

120170220270320370

Jan-

08F

eb-0

8M

ar-0

8M

ay-0

8Ju

n-08

Aug

-08

Sep

-08

Nov

-08

Dec

-08

Feb

-09

Mar

-09

May

-09

Jun-

09A

ug-0

9S

ep-0

9N

ov-0

9D

ec-0

9F

eb-1

0M

ar-1

0M

ay-1

0

bp




ChileStrategic Outlook

Brazil

Colombia

Peru

Exchange Rates

Chilean pesoPeso loses ground again on weakness in copper prices.

In line with most Latam currencies, the peso closed 0.54% weaker yesterday. As has recently been the case, the main currency driver is still the trend in global risk premiums, mainly the metal prices trend (i.e. a more than 7% drop in the copper price over the past week). Given a dearth of relevant domestic news, this trend should continue in the short term. Thus we do not rule out a move to USDCLP555 in the near term. However, given expectations of foreign currency inflows (mostly from insurance brokers) and the risk-free characteristic of local assets, we do not expect ongoing weakness in the currency in the medium term.



CLP vs. 5y CDS CLP vs. Copper

400

450

500

550

600

650

700

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09F

eb-0

9M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9S

ep-0

9O

ct-0

9N

ov-0

9D

ec-0

9Ja

n-10

Feb

-10

Mar

-10

Apr

-10

May

-10

0

50

100

150

200

250

300

350bp

CLP CDS

500520540560580600620640660680700

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09F

eb-0

9M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9S

ep-0

9O

ct-0

9N

ov-0

9D

ec-0

9Ja

n-10

Feb

-10

Mar

-10

Apr

-10

May

-10

120

170

220

270

320

370

420

CLP Copper




ColombiaInterest Rates

Hike in yields comes to a haltDespite persistent risk aversion, future corrections seem limited.

In Colombia, as well as in other Latam countries, uncertainty and global risk aversion will exert limited influence in the short term Upward adjustments to economic activity expectations are helping ease pressures on the cycle risk premium. Banco de la República is expecting growth at 2.3%-3.1% for 1Q10 and at 3.0%-3.5% for 2010 (above government estimates of 2.5%), while March industrial production and retail sales topped expectations: 6.4% vs. 4.5%e, and 9.3% vs. 6.0%e, respectively. These positive numbers are also easing fiscal risks that were priced in by the market earlier in the year, especially now that government-owned Isagen will not be sold during this administration. As a result, the Jul-20 TES bond yield dropped 6bp and returned to 8.25%-8.3% levels. Meanwhile, the 2017 and 2023 UVR bond auction had a 2.21x bid-to-cover ratio, below its year-to-date average of 2.89x, and yields —faced with declining inflation in the medium term— were higher than those seen in the previous auction. We expect the market to remain cautious in the short term.

Strategic Outlook

Brazil

Chile

Peru




Cross Currency Swaps 1Y Slope Bonds TES 10Y-3Y

3.04.05.06.07.08.09.0

10.011.012.013.0

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

%

04080

120160200240280320360400

Jan-

09Ja

n-09

Mar

-09

Apr

-09

May

-09

May

-09

Jun-

09Ju

l-09

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10F

eb-1

0M

ar-1

0A

pr-1

0

bp




ColombiaExchange Rates

Strategic Outlook

Brazil

Chile

Peru

Colombian pesoMajor decline of the peso despite release of positive activity data.

Despite positive activity data (industrial production came in at 6.4% vs. 4.5%e, and retail sales grew 9.3% vs. 6.0%e), the peso closed yesterday 0.90% weaker on risk aversion in global markets. Although the COP had remained relatively well positioned over the week vs. other Latam currencies —which declined about 3.3% while the peso dropped only 1.8%—, further pricing in of external pressures (mentioned in previous reports) have weighed in on the COP. In this regard, we believe three short-term factors should be considered: 1) although the parliamentary commission approved a pre-financing that would kick in if the sale of Isagen were not to materialize, the fiscal risk in the medium term is still a factor; 2) considering that elections will take place on May 30, the peso could return to the vicinity of USDCOP2,020 in coming sessions; and 3) all the other local assets (fixed-income instruments, equities and CDSs) have fully priced in external volatility in the last two weeks.



COP vs. 5y CDS COP vs. IGBC

1500

1700

1900

2100

2300

2500

2700

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09F

eb-0

9M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9S

ep-0

9O

ct-0

9N

ov-0

9D

ec-0

9Ja

n-10

Feb

-10

Mar

-10

Apr

-10

May

-10

0

100

200

300

400

500

600

700bp

COP CDS

1500

1700

1900

2100

2300

2500

2700

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09F

eb-0

9M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9S

ep-0

9O

ct-0

9N

ov-0

9D

ec-0

9Ja

n-10

Feb

-10

Mar

-10

Apr

-10

May

-10

6000

7000

8000

9000

10000

11000

12000

13000

14000bp

COP IGBC




PeruStrategic Outlook

Brazil

Chile

Colombia

Interest Rates

Cross Currency Swaps 2Y Slope Sovereign Bonds 30Y-2Y

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

%

2060

100140180220260300340380420460500

Jan-

09Ja

n-09

Feb

-09

Feb

-09

Mar

-09

Apr

-09

Apr

-09

May

-09

May

-09

Jun-

09Ju

n-09

Jul-0

9A

ug-0

9A

ug-0

9S

ep-0

9S

ep-0

9O

ct-0

9N

ov-0

9N

ov-0

9D

ec-0

9D

ec-0

9Ja

n-10

Feb

-10

Feb

-10

Mar

-10

Mar

-10

Apr

-10

May

-10

pb


Pressures on yields persistThe market nonetheless continues to consider local factors for valuation of the debt curve.

Even as external factors do not favor the sovereign curve, there is no evidence of a market overreaction While yields all along the sovereign curve have undergone pressures from risk aversion in global markets, they have remained largely stable and have yet to breach significant technical supports that might drive a general sell off. In fact, the solid participation of PFMs in the 2042 sovereign bond auction (closing at a yield of 7% and bid-to-cover ratio of 2.42x) impelled the placement of PEN150mn instead of the PEN100mn originally offered. Moreover, the government’s recently announced austerity measures should begin to be priced in by the market as soon as the external climate improves. As such, we stand by our outlook for lower medium-term yields on the middle-long segments of the curve.






Appendix 1Summary of the LatAm Market

Change % Change bpClose 1D 1W YTD Close % 1D 1W YTD

Currencies BrazilArgentinian peso 3.89 0.59 0.21 -2.32 Selic O/N 9.40 0 0 75Brazilian real 1.83 -0.33 -3.03 -4.78 DI Jan-11 Future 10.97 -6 -15 47Chilean peso 547.88 -0.54 -3.32 -7.97 LTN Jan-11 11.00 -5 -13 47Colombian peso 1,999.75 -0.90 -1.84 2.15 NTN-F Jan-13 12.64 -1 -4 10Mexican peso 12.83 -0.70 -3.80 1.96 NTN-F Jan-17 12.69 -2 7 -63Peruvian nuevo sol 2.85 -0.14 -0.25 1.47 NTN-B Aug-14 6.87 8 -5 -88

5 year CDS ChileArgentina 1,066.64 8.00 18.41 16.66 TPM 0.40 -9 -5 10Brazil 142.25 -0.90 20.33 16.11 TAB 90d UF 0.10 0 0 -710Chile 100.56 4.96 14.30 47.18 Swap CLPxCAM 2Y 3.35 -4 -12 30Colombia 170.59 0.42 20.12 19.34 Swap CLPxCAM 5Y 5.03 -4 -15 -20Mexico 140.28 -0.81 21.28 4.86 Swap CLPxCAM 10Y 5.95 -1 -4 -12Peru 141.27 -0.13 21.31 14.37 Swap UFxCAM 2Y 0.10 5 -1 -115

Swap UFxCAM 5Y 1.69 0 -13 -49Equity indexes Swap UFxCAM 10Y 2.40 0 -14 -18Argentina MERVAL 2,178.40 -0.22 -5.31 -6.13 Swap basis 2Y 47.00 -1 -2 -21Brazil IBOV 59,689.32 -1.89 -8.49 -12.97 Swap basis 5Y 42.00 -1 5 -13Chile IPSA 3,849.75 -0.14 -1.04 7.49 Swap basis 10Y 73.00 0 2 -13Colombia IGBC 11,932.91 -0.74 -3.31 2.85 BCP Jan-2012 4.21 -2 -9 44Mexico IPyC 30,992.76 -0.46 -4.28 -3.51 BCP Aug-2014 5.59 -9 -10 37Peru ISBVL 21,800.30 -1.98 -6.07 -2.83 BCU 5Y 2.30 -1 5 -52VIX Index 35.32 33.55 25.52 21.68 BCU 10Y 2.97 -2 -6 -23

Commodities ColombiaCRB Industrial 486.20 0.00 -1.10 0.56 Reference rate 3.00 0 0 -50COMEX Copper 295.00 -2.40 -7.12 -11.34 DTF 90d 3.71 0 -6 -40WTI 69.87 0.66 -7.64 -11.96 TES Aug-2012 5.39 -7 0 -392Gold 1,193.75 -2.56 -3.65 8.82 TES May-2014 7.18 -4 11 718Sugar 16.81 0.00 0.00 0.00 TES Jul-2020 8.30 -6 23 -19Soy 938.50 -0.11 -2.80 -11.40 UVR Mar-2013 3.58 -2 7 -133

Volatilities % 1M 3M 6M 1A PeruArgentinian peso 6.00 9.00 12.50 19.00 Reference rate 1.50 0 0 -500Brazilian real 19.75 17.75 17.25 17.25 Sovereign bond Aug-2011 2.16 0 7 -475Chilean peso 16.00 14.75 15.00 15.00 Sovereign bond Aug-2017 5.39 3 6 -210Colombian peso 17.00 16.00 16.00 16.00 Sovereign bond Aug-2037 6.56 0 3 60Mexican peso 16.00 14.75 15.00 15.00

Global bondsNDF currency/US$ BRL 2040 3.94 6 16 -35Argentinian peso 3.92 4.01 4.15 4.47 CLP 2013 2.14 1 -12 26Brazilian real 1.84 1.87 1.91 2.00 COP 2033 6.85 6 16 0Chilean peso 547.92 548.13 548.70 551.50 PE 2033 6.21 0 5 -18Colombian peso 2,002.25 2,010.05 2,021.75 2,059.25Peruvian nuevo sol 2.85 2.85 2.86 2.89

Foward pointsArgentinian peso 0.04 0.13 0.27 0.59Brazilian real 0.01 0.04 0.08 0.17Chilean peso 0.04 0.25 0.82 3.62Colombian peso 2.50 10.30 22.00 59.50Peruvian nuevo sol 0.01 0.00 0.02 0.04Source: Bloomberg and BBVA Global Markets Research, S.A.



Strategies

Appendix 2Calendar of Economic Indicators Survey Prior Actual

Wednesday, May 19Brazil FGV Preview Inflation IGP-M 18-May 1.06% 0.50% 0.95%Colombia Industrial Production (YoY) MAR 4.50% 3.00% 6.40%

Retail Sales (YoY) MAR 6.00% 3.90% 9.30%

Thursday, May 20Brazil IBGE CPI IPCA-15 (MoM) MAY - - 0.48%

Friday, May 21Argentina Trade Balance APR - - $311M

Industrial Production YoY NSA APR - - 10.60%Economic Activity Indx MoM SA MAR - - 0.80%Economic Activity Indx YoY NSA MAR - - 6.00%Industrial Prod. s.a. (MoM) APR - - 0.10%


Markets & Clients Strategy

DirectorAntonio [email protected] +34 91 374 31 81

Global Fixed Income

DirectorLUIS ENRIQUE RODRIGUEZ, [email protected]+34 91 537 35 87

Global Exchange Rates

Chief StrategistPABLO [email protected] +34 91 374 38 64

Exchange Rates LatAm/MexicoChief StrategistMOISES [email protected] +5255 5621 9380


Global Interest Rates




Global Equity and Credit

Director ANA [email protected]+34 91 374 36 72

Equity LatAm

Chief AnalystRODRIGO [email protected] +52 55 5621 9701

Technical Analysis Alejandro [email protected]+52 55 5621 9975

Beverages, Consuption, Food and RetailFernando Olvera Espinosa de los Monteros [email protected]+52 55 5621 9804

Data MiningJuan Carlos Garcí[email protected] +52 55 5621 9704

MexicoConstruction/ Housing Francisco [email protected] +52 55 5621 9703

TMTsAndrés [email protected] +52 55 5621 9870

FinancialsErnesto [email protected] +52 55 5621 9702

Industrials/MiningPablo [email protected] +52 55 5621 9975

ChileForests, Mining and BanksChief AnalystHERNAN [email protected] +56 2 679 1127

Food & Retail Cristián [email protected] +56 2 679 1126

Electric Utilities, Transport and ITAlexi [email protected] +56 2 679 1726

PeruChief AnalystMining/SteelMIGUEL [email protected]

Construction/ IndustryDiana [email protected]

Credit LatAm

Chief AnalystMexicoEDGAR [email protected] +52 55 5621 9774


Global Markets Sales

ResponsableOscar Alvarez de la [email protected]+52 55 5621 9994

Equity Sales

Responsible Juan Carlos Rodríguez Garcí[email protected]+52 55 5621 9940

Network Sales Institutional Sales Sales TradingJosé Miguel Fonseca [email protected]+52 55 5621 9490

Victoria Mas [email protected]+52 55 5621 9871

Federico Alvarez [email protected]+52 55 5621 9170

Héctor García Díazhector.garcí[email protected]+52 55 5621 9173

José María de la Torre [email protected]+52 55 5621 1937

Julio García [email protected]+52 55 5621 9171

Jesús García Luna [email protected]+52 55 5621 9175

Isaac Martínez Villagó[email protected]+52 55 5621 9289

Gisela Flores Domí[email protected]+52 55 5621 9742

Itzel Pichardo [email protected]+52 55 5621 9674

Ana María Rivera [email protected]+52 55 5621 9176

Elsa Cadena Huitró[email protected]+52 55 5621 9443

Stock Market Information Systems

DirectorElba Padilla Gonzá[email protected]+52 55 5621 9408

Josefina Godinez [email protected]+52 55 5621 9581

Roberto González [email protected]+52 55 5621 9641


IMPORTANT DISCLOSURES

Analyst Certification

We, David Franco Segura, Moises Junca Acebedo, Rodrigo Ortega Salazar, Claudia Ceja Gonzalez, Antonio Bassols Quiroz,Hereby certify that the views expressed in this research report accurately reflect our personal views about the mentioned corporation(s) and its (their) securities. We also certify that we have not been, are not, and will not be receiving direct or indirect compensation in exchange for any specific recommendation in this report.

Rating, target price and price history information for the companies that are the subject of this report are available at www.bancomer.com.

Receipt of Compensation / Provision of Services current as of 5/19/10

Management or Co- Management of Public Offering. Within the past twelve months, BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer (“BBVA Bancomer”), and/or its affiliates, have participated as manager or co-manager in public offerings, and received compensation for these services, of the company(ies), which is(are) the subject of this report: Banco Interacciones, BNP, Bimbo, Cemex, Comision Federal de Electricidad, Corporación Interamericana de Inversiones, Daimler, Embotelladoras Arca, El Puerto de Liverpool, Ferrocarril Mexicano, Fonacot, GE Capital Bank, GMAC, Hipotecaria su Casita, ICA, Maxcom, Megacable, Nemak, NRF(Nissan), Paccar, Pemex, Posadas, Ruba, Telmex Internacional, Toyota, Urbi, VWLease.Investment Banking Compensation. Within the past twelve months, BBVA Bancomer, and/or its affiliates, have received compensation for investment banking, common representation and credit related services from the Company/ies, which is(are) the subject of this report: Acciona, Aeromexico, Alsea, América Móvil, Avicola Pilgrim´s Pride de Mexico, Axtel, Bancomext, Banco de Credito e Inversiones, Banorte, Cemex, Cencosud, Central Puerto, CIE, Cintra, Colbun, Comercial Mexicana, Comisión Federal de Electricidad, Compañía de Telecomunicaciones de Chile, Concesionaria Mexiquense, Consorcio Comex, Consultatio, Controladora de Farmacias, Copamex, Coppel, Corporacion Geo, Corporativo Arca, Corporación Moctezuma, Credito Inmobiliario, Daimler Chrysler de México, DIA, Dine, El puerto de Liverpool, El palacio de Hierro, Empresas Cablevisión, Endesa (Chile), Facileasing, Factoring Corporativo, Farmacias Benavides, FCC, Femsa, Ferrosur, GEO, Gruma, Grupo Alfa, Grupo Ara, Grupo Brescia, Grupo Bimbo, Grupo Carso, Grupo Casa Saba, Grupo Cementos de Chihuahua (GCC), GAP, Grupo Comercial Chedraui, Grupo Collado, Grupo Comercial Gomo, Grupo Dermet, Grupo Elektra, Grupo Famsa, Grupo Femsa, Grupo Financiero Inbursa, Grupo Scotiabank, Grupo Herdez, Grupo ICA, Grupo La Moderna, GMAC, Grupo Maseca, Grupo México, Grupo Posadas, Grupo R, Grupo Sanborns, Grupo TMM, Grupo Videomax, Grupo Xignux, Hilasal Mexicana, Homex, HSBC, Holcim (Apasco), Hylsamex, Imsa/Tarida/Ternium, Industrias Bachoco, Hipotecaria Casa Mexicana, Hipotecaria su Casita, Industrias Aluprint, Industrias CH, Industrias Peñoles, Inmobiliaria Ruba, Interceramic, Kansas City Southern de México, Kaupthing Bank, Lamosa, Liverpool, Mabe, Manufacturas Kaltex, Medica Sur, Megacable, Mexichem, Molinos Rio de la Plata, Molymet, Municipio de Aguascalientes, Nadro, Nafin, OHL, Nemak, NRF Mexico, Paccar, Pasa, Pemex, Petrotemex, Pimsa, Plavicom, Prolec GE, QQQ, Ruba, Sare, Sears, Siderar, Sigma, Simec, SPY, Scotia Bank Inverlat, Techint, Telefónica CTC, Telefonica de España, Teléfonos de México, Telint, Tenaris, Terra, Toyota, Urbi, Value, Volcan Cia Minera, VWLease.Expected Investment Banking and services Compensation. In the next three months, BBVA Bancomer, and/or any of its affiliates, expects to receive or intends to seek compensation for investment banking, common representation and credit related services from the company (ies) discussed in this report.

BBVA Bancomer acts as market maker/specialist in: MexDer Contrato de Futuros (Dólar de Estados Unidos de América (DEUA), TIIE de 28 días (TE28), Swap de TIIE, CETES de 91 días (CE91)), Bonos M, Bonos M3, Bonos M10, Indice de Precios y Cotizaciones de la BMV (IPC), Contrato de Opciones (IPC, Acciones América Móvil, Cemex, CPO, Femsa UBD, Gcarso A1, Telmex L).BBVA acts as market maker/specialist in Latibex: Alfa, AMX, Corporación Geo, Grupo Modelo, ICA, Sare, Telmex.

Ownership Positions

BBVA Bancomer, and/or its affiliates holds, directly or indirectly, at least 1 % of the equity capital of the following company/ies whose shares are open to negotiation in organized markets and which is(are) the subject of this report: BOLSA DE VALORES DE CARACAS, BOLSA, CAMARA DE RIESGO CENTRAL DE CONTRAPARTE DE COLOMBIA, CEMEX VENEZUELA, DECEVAL, GAP, GRUPO AEROPORTUARIO CENTRO NORTE, GRUPO SIMEC, GRUPO VIDEOVISA, PASA.BBVA Bancomer, and/or its affiliates, may hold from time to time, directly or indirectly, as of the end of the last quarter, at least 10% of its investment portfolio, or 10% of the amount issued, of the securities or underlying investments issued by the companies which are the subject of this report. AXTEL, NAFTRACS.

Other Disclosures

To the best of BBVA Bancomer´s knowledge, a Member of it´s Board, it´s CEO or Senior Manager holding a direct reporting position to BBVA Bancomer´s CEO holds a similar position in any of the following company/ies which is(are) the subject of this report: Alfa, Alsea, Amx, Asur, Bimbo, CMR, Dine, Femsa, GAP, Gmodelo, Grupo financiero Inbursa, Grupo Carso, Grupo Posadas, Hogar, Invex, Kof, Kuo, Liverpool, Maseca, Oma, Peñoles, Sanborns Hermanos, Sears Roebuck, Telecom, Telmex, Tenaris, Tlevisa, Urbi, Vitro.

Additional Information and Disclaimer

Ratings and Price TargetsAs of March 31, 2010, for the whole universe of companies which BBVA Bancomer, has under coverage there are 52% Buy ratings (including “Buy” and “Outperform”), 4% Neutral ratings and 44% Sell ratings (including “Sell” and “Underperform”). BBVA Bancomer or any of its affiliates has rendered Investment Banking services or participated as manager and/or co-manager in public offerings in 45% of the Buy ratings, 11% of the Neutral ratings and in 44% of the Sell ratings.

Ratings are set on a six-month or year-end basis against the relevant benchmark. BBVA Bancomer issues five equity recommendations: Buy: Upside potential of more than 15% vs. the market. Outperform: Upside potential of more than 5% vs. the market. Neutral (Hold): Stock is expected to perform in line with the market (+/-5%). Underperform: Expected downside of at least 5% vs. the market. Sell: Expected downside of at least 15% vs. the market.

Recommendations reflect the stock´s expected performance vs the market, within a specified period. This performance may be explained by the fundamental stock valuation method and other factors. The fundamental stock valuation method used by BBVA Bancomer, is based on a combination of one or more generally accepted financial analysis methodologies, which may include, multiples, discounted cash flows, sum of parts or any other methodology that applies to the particular case. Other factors include newsflows, benefit timing, M & A´s and market´s appetite in a given sector. Notwithstanding these factors can lead to a recommendation contrary to that indicated by the simple fundamental valuation results and its comparison with direct quotations.


This document and the information, opinions, estimates and recommendations expressed herein, have been prepared by BBVA Bancomer S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer (from now on “BBVA Bancomer”), to provide their or its customers with general information as of the date of the report and are subject to changes without prior notice. BBVA Bancomer is not liable for giving notice of such changes or for updating the contents hereof. This document and its contents do not constitute an offer, invitation or solicitation to purchase or subscribe to any securities or other instruments, or to undertake or divest investments. Neither shall this document nor its contents form the basis of any contract, commitment or decision of any kind.

The determination of a price target does not imply any warranty that it will be attained. For a discussion of the risks associated with the attainment of price targets, which depend on intrinsic and extrinsic factors that affect both the performance and trends prevailing in the market on which the recommended securities is traded and/or offered, please refer to our recently published documents, which are available via e-mail, contact our analysts or visit our internet site www.bancomer.com.

Investors who have access to this document should be aware that the securities, instruments or investments to which it refers may not be appropriate for them due to their specific investment goal, financial position or risk profile, for these have not been taken into account in the preparation of this report. Therefore, investors should make their own investment decisions considering the said circumstances and obtaining such specialized advice as may be necessary. Investors should note that the past performance of securities or instruments or the historical results of investments do not guarantee future performance. The market prices of securities or instruments or the results of investments could fluctuate against the interests of investors. investors should be aware that they could even face a loss of their investment.

The contents of this document are based upon information available to the public that has been obtained from sources considered to be reliable. However, such information has not been independently verified by BBVA Bancomer, and therefore no warranty, either express or implicit, is given regarding its accuracy, integrity or correctness. BBVA Bancomer, accepts no liability of any type for any direct or indirect losses arising from the use of the document or its contents.

Transactions in futures, options or high-yield securities can involve high risk and are not appropriate for every investor. Indeed, in the case of some investments, the potential losses may exceed the amount of the initial investment; in such circumstance, investors may be required to pay more money to support those losses. Thus, before undertaking any transaction with these instruments, investors should be aware of their characteristics, as well as the rights, liabilities and risks associated with these securities and their underlying investments. Investors should also be aware that secondary markets for the said instruments may be limited or may not exist.

BBVA Bancomer, BBVA Securities Inc., BBVA Brazil, BBVA Continental, BBVA Banco Frances, BBVA Chile or any affiliate of the BBVA Group, as well as their respective executives and employees, may have a position in any of the securities or instruments referred to, directly or indirectly, in this document, or in any other related thereto; they may trade for their own account or for third-party account in those securities, provide consulting or other services to the issuer of the aforementioned securities or instruments or to companies related thereto or to their shareholders, executives or employees, or may have interests or perform transactions in those securities or instruments or related investments before or after the publication of this report, to the extent permitted by the applicable law.

BBVA Bancomer, BBVA Securities Inc., BBVA Brazil, BBVA Continental, BBVA Banco Frances, BBVA Chile or any affiliate of the BBVA Group, its salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to its clients that reflect opinions that are contrary to the opinions expressed herein. Furthermore, BBVA Bancomer BBVA Securities Inc., BBVA Brazil, BBVA Continental, BBVA Banco Frances, BBVA Chile or any affiliate of the BBVA Group’s proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

No part of this document may be (i) copied, photocopied or duplicated by any other form or means (ii); redistributed or forwarded; or (iii) quoted, without the prior written consent of BBVA Bancomer. No part of this report may be copied, conveyed, distributed or furnished to any person or entity in any country (or persons or entities in the same) in which its distribution is prohibited by law. Failure to comply with these restrictions may breach the laws of the relevant jurisdiction.

This document is provided in the United Kingdom solely to those persons to whom it may be addressed according to the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 and it is not to be directly or indirectly delivered to or distributed among any other type of persons or entities. In particular, this document is only aimed at and can be delivered to the following persons or entities (i) those outside the United Kingdom (ii) those with expertise regarding investments as mentioned under Section 19(5) of Order 2001, (iii) high net-worth entities; and (iv) any other person or entity under Section 49(1) of Order 2001 to whom the contents hereof can be legally revealed.

This document is being distributed for BBVA BANCOMER in Singapore by Banco Bilbao Vizcaya Argentaria (BBVA), Singapore Branch purely as a resource and for general informational purposes only, and is intended for general circulation. Accordingly, this research document does not take into account the specific investment objectives, financial situation, or needs of any particular person and is exempted from the same by Regulation 34 of the Financial Advisers Regulations (“FAR”) (as required under Section 27 of the Financial Advisers Act (Cap. 110) of Singapore (“FAA”)).

Please note Banco Bilbao Vizcaya Argentaria (BBVA) is not an Authorised Deposit taking Institution within the meaning of the Banking Act 1959 nor is it regulated by the Australian Prudential Regulatory Authority (APRA).

The remuneration system concerning the analyst/s author/s of this report is based on multiple criteria, including the results obtained by BBVA Bancomer BBVA Securities Inc., BBVA Brazil, BBVA Continental, BBVA Banco Frances, BBVA Chile and by BBVA Group in the fiscal year, which, in turn, include the results generated by the investment banking business, common representation or credit related services; nevertheless, they do not receive any remuneration based on revenues from the mentioned areas or a specific transaction in investment banking, common representation or credit related services.

The information contained in this document should be taken only a general guide on matters that may be of interest. The application and impact of the laws may vary substantially depending on specific circumstances. Changes in regulations and the risks inherent in electronic communication may cause delays, omissions, or inaccuracy in the information contained in this site. Accordingly, the information contained in the site is supplied on the understanding that the authors and editors do not hereby intend to supply any form of consulting, legal, accounting or other advice. As such, it should not be considered a substitute for the direct advice provided by accounting and fiscal advisors or other competent consultants.

All images and texts and texts are the property of BBVA Bancomer and may not be downloaded from the Internet, distributed, stored, re-used, re-transmitted, modified or used in any way, except as specified in this document, without the express written consent of BBVA Bancomer. BBVA Bancomer reserves all intellectual property rights to the fullest extent of the law. None of the information contained herein may be interpreted as a concession by implication, exclusion or any other means, of any patent or brand of BBVA Bancomer or of any third party. Nothing established herein should be interpreted as a concession of any license or right under any BBVA Bancomer copyright.

BBVA Bancomer, as web as its executives and employees have adopted the Código de Conducta de Grupo Financiero BBVA Bancomer, which is available in our internet site www.bancomer.com.


BBVA Bancomer, BBVA and the entities of the BBVA Group, including BBVA Global Markets Research, are subject to BBVA Group Policy on Conduct in the Securities Markets. In each entity where the Group Conducts Businesses in the Security Markets, the Policy is supplemented with the Internal Standards of Conduct which, among other regulations, include rules to prevent and avoid conflicts of interests with the ratings given, including information barriers. The BBVA Group Code of Conduct for Security Market Operations is available for reference at the following web site: www.bbva.com / Corporate Governance / Conduct in the Securities Markets.BBVA Bancomer is regulated by the Comisión Nacional Bancaria y de Valores.

“Banco Bilbao Vizcaya Argentaria S.A. (CE number AFR194) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong”BBVA Bancomer, BBVA Brazil, BBVA Continental, BBVA Banco Frances, BBVA Chile as well as other entities in the FINRA (Financial Industry Regulatory Authority), are not subject to the rules of disclosure affecting such members.

This material is being distributed into the United States in reliance on an exemption from broker-dealer registration under Rule 15a-6 of the Rules under the Securities Exchange Act of 1934. Any trades in the securities discussed in this report must be effected through a U.S. registered broker/dealer as we are not authorized to accept any order to effect trades in any security discussed in this report within the U.S.

Documents

Vía de los Poblados s/n 28033 Madrid Tel. +34 91 374 3181 · 5/20/2010 · Vía de los Poblados s/n 28033 Madrid Tel. +34 91 374 3181 Dear client, I am writing to inform you that