Financing Supply Chain to Compete GloballyFri, 09/01/2017 - 10:03
Q: How can Bancomext help the Mexican aftermarket become a more relevant global player?
A: For the automotive industry alone, we provided financing to over 220 companies. The bank is promoting financing for the lower end of the automotive supply chain, helping companies become competitive both nationally and globally. The extent of integration of Mexican companies in global manufacturing chains signals that any company that can be competitive domestically can compete in international markets.
The automotive sector is Mexico’s main revenue generator, such that the bank has developed specific strategies to support subsectors involved in export operations, developing a specialization in the aftermarket sector. We help develop full supply chains in the sector, from OEMs to Tier 4 companies. Developing manufacturing chains is our priority, as are logistics and transport companies that work with the sector. Since many aftermarket products are shipped overseas, we also provide financing for specialized terminals that handle automotive manufacturing at the ports in Lazaro Cardenas, Veracruz and Tuxpan, among others.
Q: After a successful 2016, what can we expect from the ProAuto program by the end of 2017?
A: The results of ProAuto have been very favorable. Since the bank joined forces with other institutions, mainly the Ministry of Economy, we have multiplied the number of companies that we support by five or six. The articulated coordination between the bank and other governmental entities is the reason the program has yielded so many benefits. In addition to ProAuto’s usual financing tools, we rely on our network of commercial banks, which allows us to reach more people. National and international banks located in Mexico are aware of the program’s risks and opportunities and decided to participate in the project nonetheless, showing great optimism among financial organisms. We work with more than 20 intermediaries and see potential to keep growing.
Bancomext identified a very particular need in the tooling industry. The Ministry of Economy and the bank believe it is an unusual niche, since many companies in this sector are not bankable. So, alongside the Ministry of Economy, we want to create financing structures that would support it. This is part of our mandate and, as a development bank, we are willing to participate in sectors that appeal less to commercial banks, due to their inherent level of risk.
Q: How is Bancomext expecting interest and exchange rates to affect its portfolio?
A: I would even venture to say that the current exchange rate represents an opportunity for the sector. The exchange rate in 2015 meant costs of production were 10 percent lower in Mexico than in the US. Therefore, the current exchange rate is pushing production costs in the country even lower than they already were. The upcoming inflation adjustment processes will impact overheads but we are currently enjoying lower costs of production. Regarding interest rates, we are dealing with a global phenomenon that is not restricted to the Mexican market. An significant part of our portfolio is in dollars, and interest rates continue to be competitive. The companies we are financing are prepared to face probable international turbulence. Prices will have to be adjusted but we are open to renegotiate credit awarded to any of the companies that work with us.
Q: What impact will decisions such as Ford reducing its investment in Mexico have on companies that form its supply chain?
A: Though Ford’s announcement generated some panic, it was made before the plant had advanced much beyond foundation laying, so other projects associated with this plant probably had not begun either. Furthermore, to be a player in the automotive industry, a company needs certifications that take several years to obtain. So even if an OEM moves locations, suppliers in Mexico would have secured these useful certifications to switch and supply other companies.