Interview: Valentín Díez Morodo
How have Mexico’s structural reforms aided the internationalisation of local companies?
VALENTIN DÍEZ MORODO: For a long time Mexico was uncompetitive in its development of international trade. Implementing deep structural reforms allowed the country to establish a solid framework, giving Mexican companies the opportunity to develop their activities at a reduced cost. With the support of realistic public policies, those reforms could increase Mexico’s competitiveness. Furthermore, if Mexico wants to become a major international actor, it is important for public institutions to support national research and development projects, especially in automotive, aerospace and electronics, presenting significant growth potential in the years to come.
Therefore, Mexican companies will be able to use a wide export platform to get increased international exposure. In addition, several public institutions actively participate in promoting Mexican companies and products overseas, and developing new regional partnerships with the objective of increasing Mexican firms’ integration at a global scale. Indeed, Mexico already has some collaboration with Europe, Asia, Latin America, Africa and the Middle East. The country is looking to strengthen those bonds, and for this reason business councils are actively involved in extending international trade, and attracting foreign direct investment (FDI) and knowledge transfer to Mexico. The country has been on the right path to attracting more FDI since 2014, and 45 free trade agreements will certainly help Mexican companies grow internationally.
What opportunities do you see for Mexico to continue to pursue stable market growth?
DÍEZ: The Mexican market is expected to face new challenges considering the growing uncertainty caused by the new US government. Therefore, Mexico must ensure its market climbs higher in global value chains, invest in education and look for new opportunities overseas. Currently, 80% of Mexico’s exports go to the US, marking both a traditional, strong relationship with its northern neighbour and a heavy reliance on the US economy. While the North American Free Trade Agreement (NAFTA) is an important source of income for Mexico, representing a $580bn relationship, other agreements are underestimated, even though they represent a significant asset for Mexico’s trade diversification. Among the 45 free trade agreements, 11 are currently recording a deficit, which demonstrates that Mexico could better use its resources. However, it is necessary to keep working on its relationship with Canada and the US, as much of Mexico’s future depends on NAFTA’s possible renegotiation.
The Pacific Alliance constitutes another significant opportunity to build commercial relationships, such as with Chile, Peru and Colombia, where Mexico mainly exports cars and electrical appliances. The Pacific Alliance has been a reliable source of capital, as over $107m has been invested in Mexico through this agreement.
Furthermore, China, Japan and the Middle East are potential partners that Mexico must seriously consider. Mexico and China may find common interests, despite being low-cost production competitors. Mexico is currently looking to improve its infrastructure and exploit its oil reserves, where today there are 34 new oil companies participating in the exploration and production of oil gas. China could apply its expertise to both of these areas, and thereby increase its total FDI in Mexico.
Mexico’s agricultural sector has been a major source of exports this last year, with $29bn in export sales, and the country is working to diversity and looks for new markets to boost its agricultural exports.
It is crucial for the country to drive forward education reform, and increase investment in education and training, to ensure its workforce has the necessary skills to keep moving forward in the supply chain and work in higher-added-value production. This will allow companies to have a more flexible labour force that will be able to adapt production to the demand of each market.
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