Interview: Paulo Carreño King
How will the ongoing rollout of structural reforms incentivise foreign direct investment (FDI)?
PAULO CARREÑO KING: President Enrique Peña Nieto’s 13 structural reforms were implemented precisely to transform Mexico’s economy through increasing its productivity and competitiveness. More specifically, many of these reforms have allowed for the opening of new markets through private sector investment, making Mexico a more attractive destination for both domestic and international investors. This comes alongside the strengthening of the rule of law through initiatives such as the National Anti-Corruption System or the Transparency Law, both of which provide greater certainty for potential investors.
Although these reforms are intended to lay the groundwork for long-term growth, many of them are already bearing fruit. In the telecoms sector, for instance, the reforms have not only generated investment from leading international companies but have also resulted in a big drop in prices for consumers.
The energy reform in particular has been a magnet for new investment from all over of the world. Round 1.4 of the hydrocarbons licensing in December 2016 exceeded expectations and led to investments of around $34m and Pemex partnering with a private company to explore deepwater reserves in the Gulf of Mexico, with this project alone representing an additional $7.5bn. In summary, the reforms open up sectors to investment and competition while strengthening the internal market and the rule of law, incentivising FDI and putting Mexico on a more prominent global platform.
In what ways can Mexico diversify its export markets towards other regions, such as Asia?
CARREÑO KING: The main reason for the high concentration of exports to the US is the high demand for Mexican products from that market rather than an absence of opportunities for export in other markets. The Mexican economy is one of the most open in the world. It is subscribed to 12 treaties, which offer Mexico preferential access to 46 countries in Latin America, Europe and Asia. The country was an active promoter of the TPP, which would extend Mexico’s free trade access to the Pacific Basin, one of the regions with the highest growth in the world and one of the destinations experiencing the greatest increase in Mexican exports.
Because of this, it a priority for Mexico to engage with these markets, a process that is already well under way. The TPP negotiations have provided a good base for negotiations with countries in Asia-Pacific, the majority of which – apart from Japan – currently have no free trade agreement with Mexico. Aside from Asia, exports to markets in Africa are growing more quickly than Mexico’s traditional destinations, and the possibilities in South America are also evident, not just through the Pacific Alliance, but also bilaterally with key markets like Brazil and Argentina.
How can the Mexican manufacturing segment improve its international standing at a time of global economic uncertainty?
CARREÑO KING: Mexico is a manufacturing and export power thanks to its structural strengths and competitive advantages. While it is true that the current uncertainty impacts growth forecasts for the economy, it does not take away any of the country’s competitive advantages. Despite the challenges, Mexico will continue to receive FDI and sell its goods all around the world, particularly to the 46 countries with which it currently has a trade deal. Another key redeeming factor comes from its large and robust internal market. According to the National Institute of Statistics and Geography, between January and November 2016 the private consumption of goods and services grew by 3.4%, a figure much higher than the country’s annual growth. We should be confident that forging bonds with new markets and strengthening the internal markets will help develop the manufacturing industry.
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