Expanding Mexico´s Knowledge of Financing AlternativesTue, 09/01/2015 - 15:26
Q: Which developments of the leasing market preceded the entry of Actinver into this business?
A: Actinver began its leasing operations four years ago after acquiring a family business dedicated to these transactions. We have been expanding our capacities ever since, making it one of the most important business units in the group. Leasing companies in Mexico were mainly independent companies that did not belong to any financial institution. Over the last 20 years, US companies like GE Capital, CIT, CHG, and CSI Leasing, were powerhouses for these types of solutions; they created them, and they were the most capable leasing service providers. Meanwhile, banks had problems getting accustomed to the business, but that began to change a couple of years back. In 2010, the Mexican public lease portfolio had an annual worth of MX$20 billion (US$1.33 billion). By 2015, that number almost reached MX$60 billion (US$4 billion). This exponential growth has not been seen with any other financial product in Mexico. That made banks start to get interested in that segment and although we have not seen the same growth as in the US, the market has developed quite interestingly.
Q: How has the leasing market matured since the introduction of your leasing products?
A: The leasing market in Mexico could currently be considered semi-mature, but it will reach its full potential within the next ten years. Culture has been the biggest barrier that has hindered our growth, since both businesspeople and the overall population still see leasing as an expense. There is a Mexican idiosyncrasy that goods need to be owned, but the country is finally beginning to understand that cars, for example, are not assets that create wealth. Companies have also taken this approach, as they used to evaluate leasing based on the infrastructure investments they had previously made, instead of the company’s capacity to generate revenue. However, the crisis has helped to shift this way of thinking into a more efficient cash flow approach. Leasing can be a useful tool to accelerate growth, but Mexico regretfully lacks that financial sophistication. Therefore, we must focus our efforts on SMEs, since they are the driving force of the country. If we can turn those companies into big ones, there will be more job creation and the pace of the economy’s growth will accelerate.
Q: What financial products does Actinver offer that are specifically focused for SMEs?
A: We provide credit and leasing products as primary drivers for these companies. Unfortunately, regular banks give their financial advisors monthly targets that they must reach, which creates a disparity between customer needs and the bank’s own personal interests. Conversely, our clients are extremely appreciative that Actinver takes the time to properly assess their financial capabilities and necessities. Furthermore, we do not call our establishments ‘branches’, instead opting to call them business units, since clients can evaluate any financial product they need, including stock market investments, credits, and leasing services.
Q: What are the biggest financial concerns in the automotive industry?
A: In terms of light vehicles, tax deduction has been the biggest restraint. Leasing used to be 100% tax deductible, but now that is only the case for vehicles of under MX$150,000 (US$10,000. Due to the low price range, it is no longer attractive enough and people lose interest. Perhaps if those numbers were to rise to MX$300,000 (US$20,000), the whole industry could benefit. Implementing a credit product with competitive rates becomes a prolific sales strategy for any OEM. That is precisely why so many of them have active participation, such as Volkswagen Leasing, Ford Credit, and Chrysler Financial. Running credits in the US costs the financial institution between 2-4% of the credit’s value in recuperation fees, while that rate can be up to 30% in Mexico. Given the high risks in repayment, banks do not lend money regularly and prefer to keep their credit card structures.
Q: What are your priorities for 2015, and how do you see the leasing market growing in Mexico?
A: One of our main priorities is strengthening our leasing unit with the necessary infrastructure, workforce, and expertise. Actinver’s leasing growth has been 35% over this last year, and we want to continue that expansion rhythm. If we want to develop the Mexican market at the same speed as the US market, then interest rates must drop significantly. In addition, taxes that are now applied to new cars are unaffordable, so there are still many things that can be done on a macro level that could stimulate the automotive market.