The Report: Mexico 2019
In 2018 Mexico’s economy ranked second in Latin America and 15th in the world in terms of GDP, which totalled $1.22trn, according to the World Bank. In 2019 the newly elected President Andrés Manuel López Obrador has pushed ahead with efforts to meet his pledge to tackle corruption and implement austerity measures within the government, to reduce costs and curb excessive expenditures.
Country Profile
Strategically located between the Americas, Europe and Asia, Mexico is one of Latin America’s largest economies, second only to Brazil. Aided by its proximity to the US market, the county has established itself as an important manufacturing and export powerhouse, due in part to extensive oil, gas and mineral reserves; public and private universities; a young population; and a booming tourism industry. Winning the 2018 presidential elections on a populist, anti-corruption ticket, the priorities of the administration of President Andrés Manuel López Obrador are focused on reducing violence, as well as stemming the flow of Central American migrants and asylum seekers on their way to the US. The bright spot on the horizon remains the country’s tourism sector, which attracts millions of global travellers per year. This chapter contains interviews with Justin Trudeau, Prime Minister of Canada and; Ángel Gurría, Secretary-General, OECD.
Explore chapterEconomy
Analysts are expecting 2019 to be the fourth successive year of economic deceleration, with the IMF forecasting growth will fall to 1.6% in 2019 before accelerating modestly to 2-3% over the medium term. Some risks to growth include the continued slowdown of the US economy, to which Mexico’s fortunes are closely tied, and the rising uncertainty generated by global trade tensions. However, given the government’s commitment to maintain a conservative fiscal and monetary policy, and to keep private sector debt levels low, in addition to the substantial financial support provided by the IMF and central bank reserves, a full-blown financial or economic crisis is unlikely. This chapter contains interviews with Graciela Márquez Colín, Minister of Economy; and Eduardo Sojo Garza-Aldape, Director-General, National Laboratory of Public Policy at the Centre for Research and Teaching in Economics.
Explore chapterBanking
Chastened by a credit boom and bust during the first half of the 1990s, the authorities have reformed, liberalised and privatised the banking sector while ensuring strong regulatory oversight and, in turn, relatively conservative lending practices. This explains, in part, the small size of the sector as well as the low levels of financial inclusion across the country. While the banking sector serves large corporations and the middle class relatively well, many smaller – and particularly informal – businesses struggle to access credit, and almost half of the 125.9m-strong population that lives in poverty have limited access to financial services. The authorities’ efforts to boost financial inclusion and improve financial literacy are beginning to bear fruit, however, with bank accounts becoming more ubiquitous and consumer credit levels picking up. This chapter contains an interview with Alejandro Díaz de León, Governor, Banco de México; and Carlos Serrano, Chief Economist, BBVA México.
Explore chapterCapital Markets
After several years of innovation – notably the advent of new investment vehicles and the arrival of a second bourse – alongside the change in government at the end of 2018, the coming years are likely to be characterised by consolidation. Domestically, uncertainty around sectoral policies – specifically in energy, infrastructure and banking – of the administration of President Andrés Manuel López Obrador may introduce periodic volatility in the securities of those sectors. Despite the many strengths of Mexico’s capital markets, subdued economic activity and falling inflation open the possibility for the central bank to ease interest rates in 2020. This chapter contains an interview with José-Oriol Bosch Par, CEO, Mexican Stock Exchange.
Explore chapterInsurance
Although the sector’s medium-term growth is likely to be impeded by weak economic conditions, the Mexican Association of Insurance Companies forecast that total premium would rise by 3.4% in 2019, though downgrades have been made in subsequent forecasts. This is likely to weigh most heavily on the non-life segment due to the impact of fiscal austerity on government spending. The life segment, meanwhile, is expected to continue to perform well, but its expansion will still be constrained by the weaker labour market. In the longer term, economic recovery and increases in real wages are expected to gradually reduce poverty rates and broaden the potential market for both life and non-life plans. With insurance penetration still only around half the level of the more advanced Latin American countries, there is significant scope for growth in the years ahead. This chapter contains an interview with Mario Vela Berrondo, CEO, Prudential Insurance México.
Explore chapterEnergy & Utilities
Mexico’s energy and utilities sector has benefitted from increased openness and competition brought about by the 2013 energy reform. Although recent policy changes have sought to limit the involvement of foreign and private firms, there are still significant opportunities for investment, particularly as the national oil company struggles to reduce its debt. Although political risk and uncertainty are likely to deter investors, private firms are still expected to play an important role in assisting smaller local providers. As demand continues to rise, investment in upstream projects is aiming to solve the problem of dwindling crude oil and natural gas resources, and ensure the country possesses enough resources for the future. In addition, despite the new government cancelling clean energy auctions, private developments and deals in the renewables segment are moving forward, with multiple solar energy projects under way. This chapter contains an interview with Tania Ortiz, CEO, IEnova.
Explore chapterAutomotive & Aerospace
Over the last two decades Mexico has consolidated its position as the leading automotive exporter in Latin America and a major player in the industry worldwide. The country hosts production plants from nine major international automakers, manufacturing passenger vehicles, light and heavy tractors and trucks, in addition to plastic, aluminium and steel component. The country is also steadily emerging as an important regional and international player in the aerospace industry. Demand for commercial aircraft is expected to double globally by 2035, and it is well situated to leverage its position to increase domestic and foreign investment in the industry. Mexico has a specialised and skilled workforce and unparalleled access to the US market. Manufacturers are preparing for the Fourth Industrial Revolution by training workers in new design and production processes. This chapter contains interviews with Steffen Reiche, CEO, Volkswagen de México; and Daniel Parfait, President, Safran México.
Explore chapterIndustry & Mining
A number of factors bode well for Mexico’s industrial sector. Cheap labour costs, proximity to the US market and improving human resources have attracted global firms. The sector in Mexico is making gains in some strategically important areas, and strong performance in the mining, electronics and agri-business segments is driving overall growth. Even as protectionist measures and bilateral trade tensions dominate the headlines, Mexico is strategically positioned to support Chinese manufacturers looking to bypass US tariffs. A number of risks and uncertainties remain for several industrial segments, however. The shortage of oil and natural gas supply, the absence of a government-led policy and criminal activity along supply routes are causes for concern. Still, investors will likely see ample opportunities in Mexico’s strong ties to the global economy, especially the US and China. This chapter contains an interview with Francisco Cervantes, President, National Confederation of Industry Chambers.
Explore chapterHidalgo
With an economy traditionally based on mining, Hidalgo had lagged behind some of Mexico’s more prosperous and dynamic regions. However, the new administration has actively sought to foster growth in new sectors including renewable energy, sustainable transport, agro-industry, pharmaceuticals and chemicals; develop infrastructure; and create a more business-friendly regulatory framework. As a result of these efforts, it has recently recorded growth and foreign direct investment figures that exceed the national average. Hidalgo also has several advantages including close proximity to Mexico City and major road networks, a range of both new and well-established industries operating in the area, and a young and educated workforce. This chapter contains interviews with Omar Fayad Meneses, Governor of Hidalgo; José Luis Romo Cruz, Executive Secretary of Public Policy; Sergio Vargas Téllez, Secretary of Economic Development, State of Hidalgo; Camilo Serrano, General Manager for Mexico, Atlas Renewable Energy; and Cassiano De Stefano, CEO, Grupo Modelo.
Explore chapterSan Luis Potosí
In 2018 San Luis Potosí was the eighth-fastest growing state in the country. Key growth drivers for the state economy include the automotive, manufacturing, agriculture and tourism sectors. Traditional industries have continued their strong performance into 2019, while new sectors are emerging that are aimed at diversifying the state’s economic offer. Collaboration with other states, coupled with predictions for another strong year, means San Luis Potosí will likely continue to consolidate its position as one of Mexico’s most attractive and reliable states for investment. This chapter contains interviews with Juan Manuel Carreras López, Governor of San Luis Potosí; Gustavo Puente Orozco, Secretary of Economic Development, State of San Luis Potosí, Jaime Chalita Zarur, President for San Luis Potosí, Employers Union of the Mexican Republic; and Hermann Bohrer, President and CEO, BMW Group Plant San Luis Potosí.
Explore chapterICT
Despite significant progress in recent years, Mexico’s ICT sector faces certain challenges. While the 2013 reforms opened the market up to competition and investment, legislation still needs to be improved so that Mexico can fully take advantage of opportunities in the digital economy. GSMA recommends Mexico build more municipal-level antennae, lower annual spectrum fees and incentivise infrastructure development. However, the government’s efforts are primarily directed at improving mobile data and broadband internet coverage. In a show of confidence, foreign tech giants are expanding operations in Mexico. With demand for ICT services on the rise, Mexico holds exciting opportunities for foreign and local investors. If the government can keep up the reformist momentum, incentivise investment, and craft enabling laws and regulations, companies will be able to provide a more robust technology offering. This chapter contains an interview with Desmond Mullarkey, President, SAP México.
Explore chapterTransport & Logistics
Both the current and previous administrations have shown a commitment to updating and expanding the capacity of the transport system. Nevertheless the country is facing increasing overcapacity at its ports, rural roads remain unpaved and developers are struggling to find suitable locations for new warehouses. Certain segments face specific challenges, notably in terms of security concerns for road freight. With rising domestic consumption and a growing manufacturing sector, demand for Mexico’s transport network appears set to rise further over the medium and long term. Therefore, addressing these challenges and charting a clear policy path, one that combines public investment with policies designed to increased private sector involvement in transport, will be necessary for the ongoing growth of the sector. This chapter contains interviews with Aby Lijtszain Chernizky, Executive President, Grupo Traxión; and José Zozaya, CEO, Kansas City Southern México.
Explore chapterConstruction & Real Estate
The country’s potential in this area is highlighted by its rank of 49 out of 140 countries in terms of infrastructure in the “Global Competitiveness Report 2018” published by the World Economic Forum. Despite this, between 2017 and early 2019 the sector faltered due to a slowdown in civil engineering projects and uncertainty about Mexico’s trade relationship with the US. Although uncertainty clouds the outlook for the national economy, opportunities exist at the local level. State and local governments have helped boost infrastructure investment and industrial development, and the dynamism of these industrial hubs is likely to continue to spur demand. According to industry insiders, after 20 years of significant economic growth and major investments in new infrastructure and multi-use developments, Mexico’s real estate sector is resilient enough to weather short-term concerns and uncertainties. This chapter contains an interview with Fernando Romero, CEO, FR-EE.
Explore chapterEntrepreneurship + R&D
Mexico is considered to be at the leading edge of Latin America in terms of innovation in business modelling, with a mature tech sector installed in clusters across Mexico City, Monterrey and Guadalajara. Furthermore, it has a second tier of smaller cities housing start-ups that apply technology to a number of sectors, from automotive, aviation and banking, to renewable energy and urban mobility. However, the country’s investment in research and development (R&D) is below the global average. The private sector looks set to take the lead in R&D investment, with the current government announcing a 13.6% cut to the 2019 budget for science and technology. Moreover, a legislative proposal for a new federal science and technology law is being studied. It is hoped that the reform will change the way policies are designed and implemented. It is also intended to spur investment and secure investor confidence.
Explore chapterTourism
Over the past decade, Mexico’s tourism industry has shown steady expansion, growing every year since 2011 despite security concerns and travel warnings. The 41.4m tourists that visited Mexico in 2018 reflect a 5.5% increase from the number of visitors in 2017, when the government estimated 39m foreign tourists entered the country. Tourists are increasingly venturing out of the traditional tourist centres – Mexico City, the Mayan Riviera with Cancún as the star attraction, Riviera Nayarit with Puerto Vallarta and Los Cabos – to visit the up-and-coming destinations of Campeche, Yucatán and Oaxaca. Meanwhile, steadily increasing investment in popular resorts reflects the strength of Mexico’s beach tourism. Greater demand for business travel alongside niche alternatives such as ecotourism and cultural heritage visits also demonstrates the continued potential of the tourism industry. This chapter contains an interview with Miguel Torruco Marqués, Minister of Tourism.
Explore chapterAgriculture
Since 2013 Mexico has achieved significant agricultural export growth, reversing a trade deficit in agricultural products that almost reached $5bn in 2012. In the years ahead Mexico’s government will continue to support existing agricultural activity while also looking for new ways to address inequality between large-scale mechanised farms and small-scale family-run growers, as well as regional differences in agricultural growth. Agri-business firms in the north have demonstrated their ability to tap into export markets over the past decade, but many companies still require support in the form of irrigation infrastructure, technical assistance and trade agreements. Although President Andrés Manuel López Obrador will have the opportunity to implement these policies before his term in office ends in 2024, federal and state government agencies, alongside private firms, will need to consolidate and boost Mexico’s existing export sectors and help producers attract more international buyers.
Explore chapterHealth
Although the country is moving closer to achieving its ambitious goal of universal health insurance coverage for all Mexican citizens, some obstacles still remain. The public health sector will require greater investment to meet key objectives set out in the National Health Plan 2019-24, while the question of how to address the rural-urban divide remains. Neither of these problems will likely be helped through increased budget cuts at the national level. The pharmaceutical and medical devices industries remain potential bright spots as multinational companies move their practices to Mexico to avoid import duties. Meanwhile, efforts to boost the private insurance penetration rate presents an investment opportunity that could help strengthen the industry. This chapter contains an interview with Rodrigo Puga, Country Manager, Pfizer.
Explore chapterEducation
The move towards digitalisation and ongoing efforts to close the gap between urban and rural access to education could provide greater opportunities for Mexican youths. As part of the Fourth Transformation, President Andrés Manuel López Obrador (AMLO) redesigned the education reform that was introduced by the previous administration. Consequently, significant changes are expected to be introduced to the country’s education system. AMLO has promised to continue working towards universal access to quality, free education at all levels. Moreover, increased investment in STEM-related subjects and greater vocational training opportunities offer bright prospects for young graduates entering the job market. However, it is unclear how effectively AMLO’s reform will increase investment in education, and whether the challenges that face education quality will be addressed in urban and rural areas.
Explore chapterTax
In conjunction with Deloitte, this chapter explores the taxation system and Mexico’s efforts to build an investor-friendly environment. It also contains a viewpoint with Ricardo González Orta, Partner, Deloitte México.
Explore chapterLegal Framework
This chapter introduces the reader to the different aspects of the legal system in Mexico in partnership with Maillard, Cerbón, Canudas, Argumedo, Palma y Asociados; and Aguirre, Aguirre and Associates. It also contains a viewpoint with César Maillard Canudas, Managing Partner, Maillard, Cerbón, Canudas, Argumedo, Palma y Asociados.
Explore chapterThe Guide
This section includes information on hotels, government offices and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress code, business hours and electricity.
Explore chapterTable of Contents
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