Committing International Investment to MexicoTue, 08/15/2017 - 14:44
Q: How is Mexico positioned in Barclays’ global operations?
A: Historically, investment banks tend to place Mexico within their Latin America strategy; however, for Barclays it made more sense to include Mexico on the North American map due to the complementarity of the economies. We believe that, with or without NAFTA, Mexico’s business world is intertwined with North America, given the synergies between the three economies.
We are the most active bank in the issuance of Structured Equity Securities (CKDs) and we issued the first Investment Project Certificate (CerPI). We are also strong participants in government and private debt issuance. It is important that we send the message that Barclays is a strong bank, committed to Mexico.
Q: What do you see in the country that reinforces Barclays’ commitment to Mexico?
A: Bank strategies tend to be defined for the short-term; however, Barclays’ strategy is based on understanding a country in the long-term. We understand that Mexico will experience episodes of volatility and that there will be bumps along the way, but in terms of reforms and new initiatives the country is doing what needs to be done, and there is a solid platform to build and strengthen our markets and investment strategy. Barclays is one of the leading international investment banks with capital committed to our Mexican subsidiary, with a growing trend expected to continue.
Q: Beyond NAFTA, what is Mexico’s value proposition to the world?
A: Mexico has achieved a lot thanks to NAFTA, but also thanks to the bilateral and trilateral relationships of the North American bloc. For example, Canadian pension funds are investing in infrastructure and energy in Mexico, although it is not circumscribed in NAFTA. The most important CKD, which is estimated to total between US$2.5 and US$3 billion, is made up of Afores and a Canadian pension fund, which has nothing to do with NAFTA; it is related to the bilateral relationship between Mexico and Canada. NAFTA has been a keystone of the trilateral relationship, but the economies are so close and complementary that the relationship will continue regardless of what happens with NAFTA.
One positive achievement for Mexico is that it has signed bilateral agreements with different countries beyond NAFTA, which solidifies the Mexico’s position. We will continue to be one of the US and Canada’s most important economic partners, but at the same time we will continue to be very important trading partners for other countries.
Q: What opportunities and challenges might arise for financial institutions following the NAFTA renegotiation?
A: NAFTA brings stability to the region and if the renegotiation's result is positive the economic ties in the region will be reinforced. For the financial sector, having clarity is important in order to generate more investment. There are many aspects that go beyond a mere business perspective but which will play a central role in the renegotiation. Factors such as financial security, money laundering or areas where cooperation is needed will end up benefiting both countries. Between the financial entities of the three countries, we can work together to ensure the safety of our co-nationals and the integrity and stability of the financial sector.
Q: What challenges could hinder investment in the country?
A: Instability could play an important role. Regardless of the results of the Mexican elections of 2018, it is essential to maintain the basic principles of responsible macroeconomic management and to foster an environment of clarity, certainty and transparency. Investment toward Mexico has not only increased but also strengthened. In moments of strong volatility, foreign ownership of government bonds did not fall. These examples reflect the medium-term focus of investment, which has grown despite the many tasks that need to be tackled in terms of security, corruption and the rule of law.