Report on México Business Outlook: Half Year Reflections and Expectations
by Seb Eskauriatza
University of Birmingham, PhD Candidate
Mexican Chamber of Commerce
This article aims to report on México Business Outlook 2015, hosted by Mayer Brown International LLP on 4th June 2015. The event is organised twice a year by the Mexican Chamber of Commerce as part of its work in promoting bilateral relationships between business communities in México and the United Kingdom (UK). México Business Outlook 2015 has a special importance this year given that 2015 is the ‘Official Dual Year between México and the United Kingdom’. This diplomatic initiative promotes México in the UK, and the UK in México, and it provides an exciting opportunity for each nation’s business and diplomatic communities to strengthen and deepen relationships and trade commitments.
This year’s México Business Outlook brought together business persons, diplomats, economists, politicians, academics and industry experts from finance, infrastructure and energy, banking and reinsurance. It was also open to Mexican Chamber of Commerce members and non-members. The collective aim was to reflect on achievements and challenges experienced in the first half of 2015. This then led on to discussions that focused on expectations and opportunities going forward.
A Warm Welcome
After a warm welcome by Graham Wedlake, Partner in the Finance Group at Mayer Brown International, Ambassador Diego Gomez-Pickering provided an official introduction.
Ambassador Gomez Pickering recalled that, despite slower growth in the Latin American region generally (see IMF Report here), México was bucking the trend and was experiencing a relatively favourable outlook with growth expected at around 3%. He further stated that impressive structural reforms under President Peña Nieto have had and would continue to have a positive effect for investment and growth. Reforms of the energy and telecommunications sectors, in particular, were generating a lot of interest for British investors. The Ambassador concluded by stating that the bilateral relationship between México and the UK was now closer than ever and that there was no better time to invest in México.
Half Year Reflections
Following the Ambassador’s introduction, a first panel of experts was moderated by Dr. Luis Duran, head of the Centre for Mexican Studies in the United Kingdom (UNAM). The panel included Rodrigo Aguilar from The Economist Intelligence Unit, and Helen Carpendale, CEO of Kidzania London.
In this discussion, Rodrigo Aguilar presented an analysis and evaluation of the Mexican governments structural reforms. According to Aguilar, an evaluation of the reforms can be disaggregated from the context in which they operate leading to relatively positive conclusions. Aguilar was keen to stress the potential for growth caused by lower electricity prices. He also highlighted new entrants such as AT&T and Virgin into the telecommunications sector. The structural reform of the state-owned energy company PEMEX was another significant reform process. Aguilar argued that this should be seen as a commitment by the Mexican government to modernisation in México as a whole. Finally, he concluded that there were signs that the banking sector was beginning to expand lending to the domestic corporate sector which, in the past, has sometimes struggled for funding.
Unfortunately, his overall optimism was tempered by the problem of corruption and the relatively weak adherence to the rule of law in some parts of Mexican society. In his view, these issues would necessarily impact on the effectiveness of the reforms but there was cause for principled optimism.
Helen Carpendale then provided a real-world example of a Mexican company that is winning plaudits around the world for its tremendous growth and success – Kidzania. A new member of the Mexican Chamber of Commerce, Kidzania’s success as an educational platform for the next generation spoke to the innovation and ambition of Mexican entrepreneurs. Helen Carpendale’s enthusiastic presentation provided an excellent example of the México-UK bilateral relationship in action. It was also clear evidence of the potential and opportunities for exporting Mexican ideas to foreign markets.
The first panel was followed by a Q&A session in which Dr. Luis Duran spoke effusively about new and exciting collaborations between Mexican and British higher education institutions. In particular, UNAM and King’s College, London are embarking on a new initiative under the auspices of the Centre for Mexican Studies. He stressed that greater collaboration between the UK and México on research and development would play an important role in fostering trust in respective business communities.
Baroness Jane Bonham-Carter, the Prime Minister’s Trade Envoy to México, was also able to participate in the discussion and add some encouraging details from the perspective of the UK government. She especially drew attention to the joint aim of Mexican and British governments to expand bilateral trade from $3.5bn to $7bn in 2015 as well as the positive role that United Kingdom Trade & Investment (UKTI) could play for potential investors.
Half Year Expectations
A brief break was followed by a panel moderated by the current Chairman of the Mexican Chamber of Commerce, and Partner at law firm Nader, Hayaux and Goebel, Yves Hayaux du Tilly. The aim of the panel was to present views on expectations and forecasts for the second half of 2015 based on personal experience and individual expertise of the panelists.
In the first place, Javier Serna, the Head of Global Credit Research at BBVA, explained that the bank’s evaluation for investment in México was broadly positive. On the macroeconomic side, he argued that the view from BBVA was that the decline of oil prices would be offset by other revenue streams. Mario Alberto González of ProMéxico was similarly positive about the outlook going forward. Although, he did express some concern about the way that the Mexican energy reform was skewed towards hydrocarbons to the relative exclusion of green energy investments. It was hoped that this could be remedied in the future as the structural reform process evolved.
Following these initial presentations, Michael Thirkettle, CEO of McBains Cooper drew attention to some difficulties experienced in the infrastructure sector in México in the first half of 2015. In particular, he was concerned that marquee projects attracting considerable attention (such as the new México airport) were not enough to sustain the industry as a whole. As such, he was hopeful that in the second half of 2015, the Mexican government would make good on their promises to announce a new range of projects which could stimulate further growth in the sector.
In the ensuing Q&A, the discussion tended to focus on the energy sector due to the sheer size of the potential deals involved. Robert Woodthorpe Browne MBE and Yves Hayaux du Tilly (Partner at Nader, Hayaux and Goebel), reflected on the strength of the insurance and reinsurance sectors through the financial crisis and now in the face of government spending cuts. They also drew attention to their respective efforts in bringing Mexican and British business together through their work with Liberal International and the Mexican Chamber of Commerce.
Michael Thirkettle provided a detailed description of how McBains Cooper used the good offices of ProMéxico to enter the Mexican market. He argued that in his experience, legal and political barriers to entry into the Mexican market were much lower than in other Latin American markets (using Brasil as a comparison). Finally, the Q&A reflected the principled optimism surrounding investment opportunities. Mario Alberto González summed up the mood by suggesting that it was the perfect time to get involved in México and that to linger on the sidelines was to risk missing out on significant opportunities.
As the day drew to a close, Lino Cattaruzzi, CEO of Google México, presented the Keynote Speech. In an energetic presentation full of visual examples and slides, Lino Cattaruzzi used the experience of Google México to describe the potential benefits of doing business in México. He highlighted the latest demographic trends which suggest that México was a country full of young people with increasing domestic demands for technological products. According to evidence based on consumer habits that were proving attractive for innovative Google products, he suggested that any company would be missing out on a very attractive market in failing to invest in México.
End of the Day
After a closing speech by Graham Wedlake, the cocktail reception provided a final opportunity to discuss matters in more detail and in a more intimate fashion. Lino Cattaruzzi and the other panelists all offered their time to discuss matters at greater length with attendees. There could be no doubt that once more the Mexican Chamber of Commerce had delivered a platform for a thorough, principled and evidence-based discussion on investment opportunities in México. Many thanks must go to Miléne Hayaux and Lorena Fortuño in organising the event as well as all who attended and contributed.