New Dawn of Financial Sector Collaborations with AutomotiveTue, 09/01/2015 - 10:51
Q: How is the rise of the Mexican automotive industry changing its prominence in the portfolio of Bancomext?
A: Bancomext is involved in different sectors that were defined after the economic crisis of 2008. The three major North American automotive companies were extremely affected by this crisis and Bancomext was forced to enter the automotive sector, offering support to manufacturing plants, as well as suppliers. Nowadays, we have a more extensive client list including Tier 1, Tier 2, and Tier 3 automotive companies, and we are promoting the use of Mexican auto parts and components in vehicles manufactured in Mexico.
For 2015, we have an expected growth of above 40%, especially in the automotive sector. In comparison, the average commercial bank grows about 5%. Out of the MX$38 billion (US$2.85 billion) total investment in the automotive sector, Bancomext represents 33% between national companies and the only OEM with Mexican funding. This company received special support from Bancomext during a critical time, and now it has recovered enough to ask for a more comfortable credit. In the commercial banking sector, the two most important banks have an 18% and 9% share respectively. During 2014, we offered a total direct credit of MX$12.5 billion (US$940 million) and an economic flow of MX$17 billion (US$1.28 billion). The difference between Bancomext and the commercial banks is that we offer longer term credits of 10-15 years, compared to the six or seven years that the commercial banks offer.
Q: What are the foundations of the collaboration between Bancomext, Santander, and the automotive industry?
: ProAuto is the union of educational, governmental, and banking institutions that connect SMEs with foreign companies, and support suppliers with SME credits below MX$40 million (US$2.67 million). INA and AMIA provide the knowledge of the industry, ProMéxico offers insight in the best places to locate certain businesses while introducing SMEs to the automotive industry, and Bancomext provides the necessary funding along with Santander. Bancomext has enough resources to support SMEs throughout the country, but we only have branches in Mexico City, Guadalajara, and Monterrey. For this reason, Santander offers its geographical presence and resources in order to reach as many SMEs as possible. However, 100% of the credits are provided by Bancomext. OEMs that have contracts with Tier 1 companies from their home countries could get the same components from a Mexico-based supplier. However, due to a deficient financing program, most Mexican Tier 1, Tier 2, and Tier 3 companies cannot compete with the production levels of foreign companies. Bancomext is helping local companies to commit the necessary resources to any business that they contract. The negotiations began in 2013 with the joint efforts of Ministry of Economy (SE), ProMéxico, National Institute of Entrepreneurship (INADEM), INA, AMIA, and Bancomext, seeking to increase financing for national automotive SMEs. The final ProAuto agreement with Santander was presented before the Ministry of Finance and Public Credit (SHCP) in August 2014 in Queretaro.
Q: Does Bancomext have a way to make sure that the funding is used appropriately?
A: Santander makes an internal analysis of each company that determines how much credit will be offered, and then sends its conclusion to us for approval. After that, Bancomext revises the information and checks in periodically with the company. It is a win-win situation for Bancomext and Santander, as we both increase our customer line and we both get a share of the interests. The program started last November and, to this day, at least ten companies have received financial support from us. The strategy of our Director General, Enrique de la Madrid Cordero, is to establish agreements with ministries in every state. Bancomext also has regular meetings with all the automotive clusters, both individually and collectively.
Q: Aside from ProAuto, what other strategies is Bancomext implementing in the automotive industry?
A: Bancomext has three different credit strategies for the automotive sector. Direct credits of more than MX$40 million (US$2.67 million) to fund any kind of operation, factoring lines for OEMs than do not need a line of credit, and the ProAuto program for SMEs. The automotive industry is currently one of the most important sectors in the Mexican economy, and a large recipient of foreign direct investment. For this reason, Bancomext expects to increase its activities in the automotive sector by 50% in 2015.