Manuel Montoya
Director
CLAUT
/
View from the Top

Growth Opportunities for Nuevo Leon and the Country

Fri, 09/01/2017 - 12:03

Q: What impact will Kia’s arrival have on Nuevo Leon and how will it help the cluster attract new members?

A: Before Kia, we did not have light-vehicle production in Nuevo Leon. Kia’s production represents new exports and a new opportunity for growth for Nuevo Leon. There are new companies establishing in the state and there is already one Korean company in the cluster. We are waiting for Kia’s production to ramp up. That will attract more companies and create more business. Some players were already in the state and now they are producing for Kia.

Q: What are the competitive advantages Nuevo Leon can offer to new Tier 1 and Tier 2 suppliers coming to the state?

A: Nuevo Leon has the advantage of a well-established industry that has been in place for more than 30 years. After NAFTA was signed, the first companies started to arrive and they were the ones that helped the region develop its strong local supplier network. These companies have also been responsible for training the local human capital, creating a skilled talent pool for all future investors. These factors have created confidence among new entrants, who know they do have a strong foundation to start their operations.

Q: How are local companies integrating into the automotive supply chain and what are the main areas of opportunity?

A: I think the main opportunity is in the Tier 2 level. Most Tier 1 companies have already invested in Mexico but there is still a lack of participants in the lowermost tiers of the production chain. We have a good supplier base of Tier 2 companies in Nuevo Leon — all local players — but they are mostly focused on commodities such as plastic injection, stamping and foundries. Nuevo Leon has good foundries, steel foundries mainly, but we lack other activities like die casting and aluminum injection. There are hardly any forging companies in the country, either for cold or hot forging. Strengthening the supplier base is an opportunity not only for Nuevo Leon but for the whole country. We still import many components from abroad, so this is a great opportunity for automotive players to explore.

Q: What challenges has the industry faced considering the incentives offered to Kia and other players by the past administration?

A: It is not a big issue because Nuevo Leon has changed its policies and it has given hardly any incentives to new companies. The case of Kia was very special. An OEM is an important player than can attract many more companies to the state. However, investors do not establish in Nuevo Leon because of incentives, they come to the state because they find good suppliers and a skilled talent pool compared to other regions of the country. The skilled people we have here are highly productive and a company looking for a quick start has to have good and prepared talent.

Q: How can the government help local companies grow and improve their operations?

A: I think the main priority here is to reduce the number of activities related to complying with the government’s regulations. Companies that export may recover the VAT, but the problem is that the paperwork companies have to do is too complicated, especially for SMEs. For larger companies, it is not that much of a problem because they can survive without that rebate. But for smaller players, a slow process can affect their cash flow. Regulations regarding imports and exports are also in constant flux, which is another problem for smaller players.

Q: What is your perception of the stance of US companies given the nationalistic rhetoric of President Trump?

A: The presence of US companies is very important in Nuevo Leon. They are the main foreign investors in the state. Companies are still investing in Nuevo Leon and the ones that made previous investments still remain. All we have are political speeches from President Trump and his administration. Companies from both sides of the border are interested in maintaining a good relationship between Mexico and the US because any changes in regulation would lead to negative effects for both parties.