Roberto Cabrera
Managing Partner at Industries and Markets
KPMG
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View from the Top

New Opportunities in a Changing Mexico

Wed, 02/21/2018 - 15:42

Q: What does Mexico offer to international investors interested in entering the country, given the US political climate?

A: Even though the environment is challenging, it is bringing us a historic opportunity to move out of the comfort zone we have been settled in for years. Several factors led us to this comfort zone. First, through NAFTA we took the risk of selling 80 percent of our exports to one country. Second, through the migration of 11 million Mexicans we assumed the idea that it was not Mexico’s responsibility to provide them opportunities. That comfort zone has also made us tolerate situations like bad administrations and corruption, so the current scenario is full of opportunities.

Q: How is Mexico positioned compared with emerging economies competing for the same markets?

A: Mexico is in a great position because it is a competitive economy. A KPMG study says that we are 12.5 percent cheaper and we have more effective corporate income tax rates than other economies. Plus, with or without a free trade agreement with the US and Canada, we are still neighbors of the most important economy and owners of a strategic logistical location. We have a very health macroeconomy and even though debt has grown, it is better than that in other countries. We also have great human capital with a lot of potential to keep improving. In addition, Mexico’s demographic is a bonus and domestic consumption is growing. That is why someone can come and invest in Mexico, not necessarily thinking about selling to the US. 

Q: What are the expectations for the Hecho en México program?

A: There are certain priorities the government should address to make Mexico more competitive. First, continue the fight against corruption because a country cannot be competitive with the corruption levels that exist in Mexico. Second, increasing public security is a must. In many other countries companies do not need to invest in security to protect their operations. Third, upgrade the local image. Mexico has a lot to brag about and our manual labor is very qualified, as we have seen in the aerospace industry. Universities are also improving their development of talent so promoting the brand Hecho en Mexico is a great idea. 

With this order of priorities, the main objective is to increase our macroeconomic levels by battling corruption and improving security. We are going in the right direction but at the wrong speed. The anticorruption law is a very good norm but it took years to approve and we are still discussing it. The US situation will pressure us to speed up our actions.

Q: On which countries and industries should the Mexican economy focus its efforts?

A: The first and simplest approach should be Latin America. According to our KPMG survey Senior Management Perspectives in Mexico 2017, top managers are considering investments in countries that economically are wellpositioned, such as Colombia, Peru, Chile and Argentina. There are also good opportunities in Central America. A second target should be Europe because of its economic potential and size. We have not given Europe the importance it deserves and it could be a great destination for Mexican products. Finally, a third target could be Asia. Countries such as China are complicated to do business with; however, the current situation is making China look at us.

Q: What changes are required for Mexican industry to compete efficiently on cost and quality in international markets?

A: Mexican companies have to realize that innovation has become a must in their activities. In the last two to three years, the market has experienced many changes and the only way to keep up is through innovation. If companies do not innovate they will not survive. The biggest goal for Mexican companies must be investing in technology and innovation to become economically sustainable.