SURA invests in overvalued toll highway operated by Aleatica, a company once accused of corruption

07/19/2022

Translated from Spanish

Aleatica – formerly OHL México – twice had to modify its financial statements for overvaluing its assets, by order of the National Banking and Securities Commission in Mexico. The company, which was accused of corruption during the presidency of Enrique Peña Nieto (2012-18), received investment from at least one Mexican pension fund (Afore SURA) for one of the assets in question, the Circuito Exterior Mexiquense (CEM). Despite Aleatica having to adjust the valuations of its toll highways, the trust in which Afore SURA invests pensioners’ savings did not update the valuation of CEM in accordance with the Commission’s instructions. Pensioners are left to absorb the cost of the decision to invest in an overvalued asset should it suffer a loss in value, as the pension fund can now charge a higher fee at the expense of retirees’ future benefits.

By Claudia Ocaranza

The CKD Mexico Infrastructure Trust, comprised of Afore SURA, XXI Banorte Afore, Afore Banamex, and Pensionissste, as well as the National Infrastructure Fund (Fonadin), invests pensioners’ savings in the overvalued infrastructure of Aleatica, a company known in 2015 as OHL México, which was accused of corruption that same year. In 2016 and 2021, already using its current name, the company was fined by the National Banking and Securities Commission in Mexico (CNBV) for questionable accounting practices.

Despite the CNBV sanctions and corrective action for Aleatica to amend its financial statements for 2019, 2020, and 2021, since its assets reflected an inflated amount to the tune of over 46 billion MXN, the Trust did not adjust the valuations reported for its assets for any of those years, including for the Circuito Exterior Mexiquense, the Aleatica project in which it invests.¹

Problems began in 2015 when the construction company OHL México was accused of corruption during the presidency of Enrique Peña Nieto for making payments in exchange for receiving public infrastructure concessions, a crisis that even reached its parent company, OHL Spain. In 2017, the company was accused a second time of attempting to finance the gubernatorial electoral campaign in the State of Mexico in exchange for receiving concessions for the Circuito Exterior Mexiquense and the Viaducto Bicentenario.² However, the companies did not receive any fine or sanction at the time.

In July 2018, the company changed its name to Aleatica, after being acquired by the Australian fund IFM following a split-up. With its new name and in an insufficiently disclosed transaction to the stock market, the CKD Mexico Infrastructure Trust — the tradable instrument in which the four Mexican pension funds invest — bought 3.5% of Circuito Exterior Mexiquense for 1,972 million MXN (approximately 102 million USD), as documented by Sin Embargo.³

This investment went to Organización de Proyectos de Infraestructura (OPI), a subsidiary of Aleatica, controller of Concesionaria Mexiquense (Conmex) and owner of CEM. It was also reported that the pension funds participating in the Trust were XXI Banorte Afore, Afore Banamex, Afore SURA, and Pensionissste, together with Fonadin.

In 2021, three years after that purchase, Aleatica, OPI, and, therefore, the CKD Mexico Infrastructure Trust reported overvalued assets. Their method for raising the value was through a concept called “guaranteed return,” used by Aleatica to justify the value that the assets would have in the future, according to documents consulted by Empower. In other words, pensioners’ savings are invested in assets that report an unsupported valuation.

This resulted both in a second CNBV sanction for Aleatica, OPI, and CEM for violating the Securities Market Law by publishing information that “induces an error” and in an order to correct their financial statements to reflect the assets’ true value. The first sanction, in 2016, when the company was still OHL México, was for the same reason.⁴ On that occasion, it was fined 61.2 million MXN and its directors were fined 10.2 million MXN.⁵

Meanwhile, for the second sanction, the CNBV requested the correction of the financial statements for 2019 and 2020 due to questionable accounting practices.

Among the infrastructure projects that Aleatica reported with inflated valuations are the CEM, the Viaducto Bicentenario from the State of Mexico, and the Autopista Urbana Norte in Mexico City.

Asetback from the financial regulator

In 2018, Aleatica reported a market capital — what the company is worth to investors — equivalent to 106,390,394,000 MXN.⁶ In February 2021, the CNBV once again ordered⁷ Aleatica and its subsidiaries to correct their 2019 financial statements and to publish the 2020 reports excluding future payments as present value, as reported by the company as a material event to the Mexican Stock Exchange (BMV).

In this document, Aleatica stated that the CNBV had requested that it report in its financial statements as intangible assets “the investment in infrastructure recoverable through future toll-road revenue and the portion of the intangible assets recoverable through future toll-road revenue.”⁸

In a freedom of information request submitted in April 2022 by a user of Mexico’s National Transparency Platform (PNT), the Commission marked as confidential the corrective action order for Aleatica, Concesionaria Mexiquense (CEM’s operator), and OPI.

Nonetheless, the company announced that it would stick to its original position, arguing that its calculations had been made according to what was reported in 2017, a year after the first CNBV sanction, to which the company filed a motion for dismissal in April 2021.⁹

On October 15, 2021, Aleatica revealed that the CNBV had issued fines “to executive officers for having authorized and disseminated the Company’s financial information for the fourth trimester of 2020 in a way that the CNBV considered inconsistent with its accepted accounting principles.”¹⁰

The valuation of the Circuito Exterior Mexiquense

Following the CNBV’s sanction, Aleatica reported compliance upon correcting its financial statements. Following the change, its 2018 market capital dropped to 60,102,550,000 MXN, which is approximately 46 billion MXN less than what the company originally claimed, as confirmed by Empower.¹¹ In 2019, its market capital was reported as 56,826,458,000 MXN.

According to Aleatica, the aforementioned change — equivalent to 56% of its reported market capital — does not adversely affect the company’s finances. However, it did not mention whether there was a possible impact on the savings of the Afore clients who invested in its assets.

Ultimately, Aleatica and OPI restated their 2019 and 2020 financial statements and the 2021 results were reported as 53,001,910,000 MXN, which no longer included the concept of a guaranteed future return. However, the Trust did not modify the reported valuations of its assets, including for CEM during the years in question.¹²

The concept of guaranteed return is explained by OHL México in its financial reports as the “the recognition that the excess of guaranteed return over actual profitability is made as the concessions or their distinct phases become operational, as appropriate for each concession, and/or when it is certain that the economic benefits will be received”.¹³

In the same section of its reports, the company states that the concept of guaranteed return applies to the Circuito Exterior Mexiquense, the Viaducto Bicentenario in the State of Mexico, and the Autopista Urbana Norte in Mexico City. In other words, the guaranteed return is the value that the asset could have in the future due to payments the Government would make for the project, which are reported as present value, explains attorney Paulo Díez Gargari, an expert in highway infrastructure who has brought this irregularity to the attention of Mexican authorities.

The Trust did not modify the Circuito’s valuation

Until June 2022, the CKD Mexico Infrastructure Trust had conducted five issuances of certificates, which are debt-like credit securities sold to investors on the stock market. The Copper Project, as the 3.5% portion of CEM was called, was the only project receiving investment during the fourth issuance. The Afores can decide in which issuances they do or do not participate.

In 2018, special technical committees were established for each issuance, where Afore representatives participate as long as they own more than 10% of each issuance’s certificates. SURA is the only one that appears in the fourth issuance,¹⁴ as verified by Empower.

Despite the CNBV’s orders to Aleatica, the CEM valuation reported by the Trust appears unchanged and even contradicts what OPI published in its corrected financial statements.

In the Trust’s 2019-20 annual report, only one project — the Copper Project — achieved valuation growth, in the amount of 2,539,573,000 MXN.¹⁵ This would mean that, if the figure represents the valuation of OPI’s 3.5% share, the entire valuation of OPI would be worth 72,559,228,000 MXN, or more than the entire valuation of Aleatica based on its corrected financial statements.

After the Commission ordered Aleatica and OPI to remove the concept of future returns that had elevated the assets’ valuations, OPI reported net assets for all of its projects worth 22,540,311,000 MXN for 2020.¹⁶ If it were assumed that 3.5% of that amount without the guaranteed return is equivalent to the CEM, the highway would be worth 788,000,000 pesos.

In other words, the actual valuation of the CEM is much lower than the overvalued amount that included the guaranteed return. Thus, the Trust should take into account the corrected figure. As of September 30, 2021, the Trust’s valuation of the Copper Project was 2,538,605,048 MXN,¹⁷ which varied slightly from 2019 and remains much higher than its actual value.

Impact on pensioners

The main effects of this scheme fall on pensioners, who place their trust and retirement savings in the hands of asset management companies. Notwithstanding, one Afore maintained its investment in a controversial asset despite its dubious valuation so as to be able to charge greater commissions.

“The impact falls on the pensioner. Today, if an asset is overvalued, it’s in the Afore’s interest since it can charge a premium based on a valuation that’s not real. When the valuation is adjusted and if there‘s a decrease in value, it generates less income, while the worker is the one who‘s ultimately affected. At the end of the day, the pesos belong to the worker and losses are directly reflected in the individual’s retirement savings,” explains Moises Perez Peñalosa, analyst, pension lecturer, and creator of the initiative “Yo Jubilado” to teach retired people about pensions.

The expert clarifies that neither the Afores nor the regulator, the National Commission of the Retirement Savings System (Consar), determine the valuations of the assets in which they invest.

“As an Afore, I assume that the trustee’s valuation is correct, that the pricing is correct, and that the issuer’s audit is correct,” he says.

In 2021, the independent appraiser was 414 Capital Inc., according to information reported to the stock market by the Trust. The company did not respond to an interview request from Empower.

A Consar spokesperson responded to Empower that “we regulate that they have an independent valuation and, at the same time, that the Afores must conduct a double check, but we do not have the power to ‘challenge’ the assets’ valuations. We have to review it, but that (the assets’ valuations) does not fall directly to us.”

Consar did not respond to a second inquiry as to whether it reviewed the valuation of the Circuito Exterior Mexiquense in which the Afore invests.

SURA, the only one that owns more than 10% of the certificates from the fourth issuance, declined to be interviewed. Afore SURA is part of SURA Asset Management Mexico. At the end of 2020, this Afore alone managed assets worth 695,819,000,000 MXN, an increase of 17.9% over 2019, for nearly 7 million clients. It has a 15% market share of Mexico’s Afore industry in terms of assets under management, ranking it as the fourth largest in the country.¹⁸

Pension funds on the Trust’s Technical Committee

Although SURA alone owns more than 10% of the Trust’s fourth issuance of certificates, all four pension funds comprise the Trust’s Technical Committee, which gives them knowledge of the assets receiving investment from each issuance and requires their approval of the certificates’ valuations.

This means that, regardless of whether any of the other three Afores own certificates from the CEM issuance, they definitely all voted in favor of the Trust investing in the CEM given the valuation at the time, explains Díez.

Citibanamex responded that, “as can be clearly corroborated from all of the public information about this type of instrument, Citibanamex Afore has no participation in Trust F/2893 of the Circuito Exterior Mexiquense.”

XXI Banorte Afore responded that it would not comment on the matter.

Pensionissste was not available for an interview as this story went to press.

OHL México’s share price

Prominent among the names of the proprietary members of the Trust’s Technical Committee, on behalf of the Afores, is Thiago Brando, representing Afore Banamex. Brando was involved in an opinion given by the consulting firm Rothschild México, in June 2017, when IFM — the Australian pension fund that now owns Aleatica — repurchased OHL éexico shares from investors.

Rothschild México endorsed OHL’s proposed share price as “fair.”¹⁹ The price was 27 MXN per share. But that price was less than the 40 MXN per share on OHL México’s books, according to Díez Gargari.

The price endorsed by Rothschild was calculated based on information provided by OHL to the consultant. This information did not include the guaranteed return.

Although Rothschild’s opinion was not signed by a partner of the company, in the June 12, 2017 minutes of the extraordinary meeting of OHL México’s board of directors, Daniel Nicolaievsky and Thiago Brando²⁰ appear as representatives of Rothschild México, according to documentation reviewed by Empower.

Since 2018, Brando has been listed as a Proprietary Member of Banamex/Siefore Banamex on the Technical Committee of the CKD Mexico Infrastructure Trust, through which 3.5% of CEM was purchased.

The problem with Brando’s participation, first in the valuation of the share price and later as a member of Afore Banamex, is that, according to Díez, in 2017 he endorsed the price per share without including the concept of future payments, which made it lower., Later, however, as a member of the Technical Committee of the CKD, year after year he approved the financial statements, including the asset valuations that did include the concept of future payments.

Brando responded that he was part of the committee that made the technical opinion but was not in charge. He also explained that the opinion is made on a price proposed by the company and that the fact that it is considered “fair” does not mean that it cannot be higher.

Aleatica’s infrastructure projects under AMLO

Aleatica currently has 20 concessions in six countries between Europe and Latin America. It has total infrastructure of 651 kilometers between urban highways and interstate corridors, as reported on its website. Over 70% of the highway kilometers it operates are in Mexico.

Among its best known projects are the Circuito Exterior Mexiquense, the Viaducto Bicentenario, and the Autopista Urbana Norte. For Concesionaria Mexiquense, a subsidiary of OHL éexico, it received a 30-year concession from the Government of the State of Mexico in 2003, which was later extended to 2051.

“OHL won everything,” said President Andrés Manuel López Obrador on November 5, 2021.²¹ That was not the first time Lopez Obrador had referred to OHL as one of former president Peña Nieto’s favorite concessionaires.

However, OHL, now Aleatica, is not entirely invisible during the current administration. In 2021, the term of the CEM concession was extended for a third time, until 2063. The Circuito will be a key connection for the Felipe Ángeles International Airport (AIFA), one of Lopez Obrador’s mega-projects. The company is responsible for building the “Link to AIFA” with an estimated investment of 3.9 billion MXN.²²

Since 2015, íiez Gargari has filed complaints against OHL Mexico and later Aleatica citing the company’s different irregularities, both for its behavior in the stock market and for how it operates certain highways. The company has, in turn, accused him of defamation.

The case of Viaducto Bicentenario

The most recent dispute centers on Viaducto Bicentenario. Díez has accused Aleatica and filed complaints about the fact that the federal Secretariat of Communications and Transportation (SCT) never granted a concession to Aleatica to operate the highway.

Aleatica claims in its financial reports that, since 2008, and for 30 years, it has a concession from the Government of the State of Mexico and the State Communications Secretariat for the subsidiary Viaducto Bicentenario. However, Díez alleges that, since it is a national asset, the only valid concession is that of the SCT.

On October 1, 2020, the SCT signed an agreement with the State of Mexico ratifying the highway concession,²³ but, according to Díez, “it has no validity whatsoever, since in Mexico not even the President can ratify the unratifiable: a state concession on a federal road.”

On September 30, 2020, Díez, together with citizens, legislators, and journalists, held a protest at the Viaducto Bicentenario. The Aleatica subsidiary operating the highway denounced him and, in November 2021, he was indicted “for the alleged crimes of attacking communication routes, outrage — for offending and despising the government of the State of Mexico, its police, and its governor —, provocation of a crime, excuse for a crime, and extortion,” as reported by the magazine Proceso.²⁴

“In order to pressure me, they denounced me in the State of Mexico and prosecuted the case, despite the fact that the Attorney General’s Office told them that it is a national asset and requires them to send the case to the Federation. Of course, the State of Mexico refused and the FGR filed a lawsuit before a federal judge, which remains ongoing,” explains Díez.

Aleatica responded for this article that “Infraiber’s lawyer, Paulo Díez Gargari, maintains a defamatory campaign through which he has disseminated and amplified false information about Aleatica through paid insertions, false accounts in social networks, publication of false research on the company’s capital, statements, and other conducts that seek to mislead public opinion. This is precisely why he has been denounced by federal authorities: both by the stock exchange regulator and by the public prosecutor’s office itself. And precisely for this reason a judge found him liable for moral damages.”

In addition to the confrontation with Díez Gargari, the infrastructure concessioned to Aleatica has also been the scene of fabricated crimes against the indigenous activist Kenia Hernández, who is accused of violent theft on the CEM. So far, justice has been absent in her case as she’s been charged with ten counts.²⁵

Both the CKD Mexico Infrastructure Trust and Aleatica must bring order and financial certainty to the valuation of assets in which Afores invest the savings of retired workers, as well as comply with the recommendations of the stock market regulator.

1 Balance sheet and financial results of the Fideicomiso Irrevocable de Emisión de Certificados Bursátiles No. F/2893, at the end of 2021. Accessed June 2022. www.bmv.com.mx/docs-pub/visor/visorXbrl.html?docins=../anexon/anexon_1184918_2893_2021_1.zip#/visorXbrl.

2 Ignacio Fariza, “El fantasma de OHL sacude la campaña del Estado de México tras nuevas acusaciones de corrupción”, El País, 9 May 2017. https://elpais.com/economia/2017/05/09/actualidad/1494355235_120444.htm l.

3 Daniela Barragán, “EPN le hizo a OHL un último favor: Le compró una parte del Circuito Mexiquense con dinero de afores”, Sin Embargo, 3 April 2019. www.sinembargo.mx/03-04-2019/3560305.

4 Sanction for OHL Mexico, CNBV, 15 March 2016, accessed June 2022. https://sanciones.cnbv.gob.mx/Detail/39510/0.

5 OHL Mexico Financial Report 2014 and 2015, Pgs. 9 and 11. https://share.mayfirst.org/s/2fnFS44z9E3kZZk

6 Aleatica Annual Report, 2018, Pg. 7. h ttps://inversionistasmx.aleatica.com/wp-content/uploads/2022/04/EF-Aleatica-Consolidado-2018_SM.pdf.

7 Resolution of administrative procedures, Aleatica, 13 October 2021. Accessed June 2022. ht tps://inversionistasmx.aleatica.com/resoluciones-de-procedimientos-administrativos.

8 Relevant Event, Aleatica, 25 February 2021. www.bmv.com.mx/docs-pub/eventemi/eventemi_1077193_1.pdf.

9 Relevant Event, Aleatica, Motion for dismissal against the CNBV’s measures, 9 April 2021. Accessed June 2022. w ww.bmv.com.mx/docs-pub/eventemi/eventemi_1087659_1.pdf.

10 Administrative procedure resolutions, Aleatica, 13 October 2021. Accessed June 2022. www.bmv.com.mx/docs-pub/eventemi/eventemi_1134133_1.pdf.

11 Aleatica Annual Report, 2020, Pg. 5. https://inversionistasmx.aleatica.com/wp-content/uploads/2022/04/EF-Consolidados-Aleatica-y-Sub-Dic-2020_SM_SM.pdf.

12 Balance sheet and financial results of the Fideicomiso Irrevocable de Emisión de Certificados Bursátiles No. F/2893, as of the end of 2021. Consulted on June 2022. www.bmv.com.mx/docs-pub/visor/visorXbrl.html?docins=../anexon/anexon_1184918_2893_2021_1.zip#/visorXbrl.

13 OHL Mexico financial statements 2014 and 2015. Pg. 23.

14 Minutes of the General Meeting of Holders of the Trust’s Tradable Certificates, Aleatica, 30 October 2018. Accessed June 2022. w ww.bmv.com.mx/docs-dig/corporativa/INFRACK/2018/874496-INFRACK-Acta_de_asamblea_de_tenedores_con_fecha_de_asamblea_del_30-10-2018.pdf.

15 Financial Statement of the Fideicomiso Irrevocable de Emisión de Certificados Bursátiles No. F/2893, as of 2019 and 2020. https://share.mayfirst.org/s/WJjCGR9Gt8xS48t

16 2020 Aleatica Annual Report, Pg. 24. https://inversionistasmx.aleatica.com/wp-content/uploads/2022/04/EF-Consolidados-Aleatica-y-Sub-Dic-2020_SM_SM.pdf.

17 Management Comments, Trust’s Assets. www.bmv.com.mx/docs-pub/visor/visorXbrl.html?docins=../fiduxbrl/fiduxbrl_1138307_2893_2021-03_1.zip#/visorXbrl.

18 SURA Annual Report, 2020. www.su ramexico.com/home/pdf/SURA_Asset_Management_Mexico_Informe_Anual_2020.pdf.

19 Rothschild. https://share.mayfirst.org/s/SWaJJTkHGBMWSyw

20 LinkedIn of Thiago Brando. Accessed February 2022. www.linkedin.com/in/thiagobrando/?originalSubdomain=mx.

21 “¡Cepillaron hasta a Slim!, dice AMLO sobre obra entregada a OHL en sexenio pasado”, Aristegui Noticias, 5 November 2021. https://aristeguinoticias.com/0511/mexico/cepillaron-hasta-a-slim-dice-amlo-sobre-obra-entregada-a-ohl-en-sexenio-pasado-enterate.

22 INFRACK 2021 Report. BMV. www.bmv.com.mx/docs-pub/visor/visorXbrl.html?docins=../fiduxbrl/fiduxbrl_1138307_2893_2021-03_1.zip#/visorXbrl.

23 “Gobierno ratifica concesión de Viaducto Bicentenario a pesar de polémica”, Forbes, 26 October 2020. www.forbes.com.mx/politica-gobierno-ratifica-concesion-de-viaducto-bicentenario-a-pesar-de-polemica.

24 Veneranda Mendoza, “Vinculan a proceso a Paulo Díez por toma simbólica del Viaducto Bicentenario”, Proceso, 11 November 2021. www.proceso.com.mx/nacional/estados/2021/11/11/vinculan-proceso-paulo-diez-por-toma-simbolica-del-viaducto-bicentenario-275675.html.

25 “Caso Kenia Hernández: suman nueve imputaciones penales contra la activista indígena”, Animal Político, 22 March 2022. www.animalpolitico.com/2022/03/kenia-hernandez-nueve-imputaciones-activista-indigena.