Funding New Opportunities in MexicoThu, 02/23/2017 - 15:41
Q: Which economic sectors have the greatest potential for development in Mexico?
A: Thanks to the Energy Reform and to the investments secured through the governmental tenders, energy is among the best positioned. We expect billions of dollars of investment to flow into the sector over the next five to 10 years. Another interesting sector is business services, given the impressive growth of the domestic market and the demand that has generated, especially when compared to some European or emerging economies. At the macroeconomic level, Mexico is growing at around 2 percent, which for us is not high but at the global level is a healthy and respectable rate. This has fueled growth in domestic consumption of between 8 and 10 percent.
PC Capital specializes by sector and we have done business in the most interesting segments of the Mexican economy. In energy, for example, we have created a strategy for both our investment banking division and in private equity.
We also run a private equity fund that focuses on what we see as the three pillars for Mexico’s development. The first is financial services, which in Mexico has great potential as shown by the performance of large international banks in the country and the lack of penetration of financial services at the base of the pyramid. The second is education. Because the government does not have the budget to guarantee a quality education for the entire population, it has opened a great window of opportunity for the private sector. The third pillar is sustainability. The country is becoming more aware of environmental preservation, which is reflected in consumption trends.
Q: How do sustainability and the exploitation of hydrocarbons coexist in your portfolio?
A: Oil demand is huge worldwide and renewable energy has one drawback: its high costs. The world is not going to stop working without oil overnight, so there is a great opportunity in both sectors. Renewables will grow stronger as technology advances and generation costs fall. In the short and medium term, both will be complementary; that is, they will not compete with each other but will coexist. Still, the world’s mentality is shifting toward greater protection of the environment. A perfect example is the automotive industry. Not everyone can buy a 100 percent electric car, although they exist, but more and more people can buy a hybrid.
Q: What protocol does PC Capital follow when choosing its investments?
A: Mexico is a country where small and medium businesses prevail. We select those that have a robust management team, with a proven business model and that need additional capital to continue growing. The goal is to make the leap from small and medium enterprises to large companies that have access to other markets. Another important characteristic of our investments is that the quality of our partners is high, not only in business terms but also in ethical and moral terms, which allows us to create deeper relationships and partnerships that are also based on trust.
Q: How would you describe entrepreneurship in Mexico and how does PC Capital participate in this area?
A: Entrepreneurship in Mexico is experiencing great growth. The country has never had so much support from the public and private sectors to generate so many businesses. INADEM was born with several purposes: to help small businesses grow, to create an economic ecosystem in the sector and to fund projects.
PC Capital participates in this segment through several channels, including participation in business accelerators such as Endeavor. For entrepreneurs, we act as mentors but we also participate as investors helping businesses that are beyond the start-up stage, that are profitable, that are growing and that need another investor to keep injecting capital into their business to continue growing at accelerated rates.