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Report | The Report: Mexico 2018

Driven by an ongoing process of economic opening since the 1990s, Mexico has established a solid macroeconomic base. Structural reforms have improved the country’s trade flows, helped to soften the impact of a gradual slowdown in hydrocarbons production and exports, and enabled manufacturing-led economic diversification and regional integration.

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Chapter | Hidalgo from The Report: Mexico 2018

With a rich mining history, an unrivalled location both for exporters and companies serving the domestic market, and escaping relatively unscathed from the drug-trafficking violence that afflicts other parts of Mexico, Hidalgo has the tools to flourish, despite being one of the less developed states in the country. Hidalgo’s current government has looked to accelerate efforts to attract investment since taking office, launching a package of reforms designed to ensure that being next door to one of the world’s largest consumer markets is an asset for the state and its people. With plenty more investment in the pipeline, the task now facing Hidalgo’s government is to ensure that the benefits are felt across the state’s broader economy and remain localised. This chapter includes interviews with Omar Fayad Meneses, Governor of Hidalgo; José Luis Romo Cruz, Secretary of Economic Development, State of Hidalgo; Elías Massri Sasson, CEO, Giant Motors; and Mauricio Leyva Arboleda, CEO, Grupo Modelo.

Chapter | Nuevo León from The Report: Mexico 2018

Posting a GDP growth rate of 3.9% in the first half of 2017, Nuevo León outpaced the national economy, which grew at a rate of 2.5% over the same period. Despite a challenging year of slow growth in 2016, the manufacturing sector remained the main driver of the state’s economy in 2017. Though the US continues to be Nuevo León’s largest trading partner, the state has pushed to diversify its economy and ensure long-term growth by expanding beyond export-oriented industrial production. The state government actively supports mining and agricultural production, the construction of energy and transport infrastructure, and the enhancement of competitiveness and productivity through investment in research and development. Nuevo León’s reputable universities and its high level of formal sector employment are additional assets that should help the state prepare for the future. This chapter features interviews with Fernando Turner Dávila, Secretary of Economy and Labour, State of Nuevo León; and Omar Díaz, President, Neoris.

Chapter | Guanajuato from The Report: Mexico 2018

Economic expansion in the north-central state of Guanajuato outpaced that of the nation as a whole in 2017, registering GDP growth of 4.5%, compared with Mexico’s rate of 2.1%. In order to ensure long-term growth, the state is diversifying its economy by boosting the production of metals, food products and leather goods, while also pursuing innovation, partly by strengthening ties between local industrial companies and universities. The state is also expanding its trade ties in response to broader political dynamics, with both Mexico and the US appearing uncertain about the future of US-Mexico trade relations. Guanajuato still sends the majority of its exports to the US for now, but the state is working to expand its commercial ties.

Chapter | Automotive & Aerospace from The Report: Mexico 2018

While renegotiations of the North American Free Trade Alliance (NAFTA) have led to an environment of uncertainty for Mexican industry, the automotive sector remains solid and on track for further development driven by rising vehicle production, local sales and export demand. Mexico is home to 24 carmakers, with manufacturing facilities in 24 states, producing cars, light and heavy trucks and tractors, as well as component parts. In addition, with exports averaging a 15% annual growth rate over the past decade, Mexico is positioning itself as a global leader in the aerospace industry. While ongoing trade negotiations between Canada, the US and Mexico over the future of the NAFTA could potentially have an effect on manufacturing as a whole, major sector stakeholders remain committed to moving forward by strengthening supply chains and integrating production processes. The sector thus looks set to remain on track for further sustained investment. This chapter includes interviews with Mayra González Velasco, President and CEO, Nissan México; and Juan Carlos Corral Martin, President, AeroClúster de Querétaro.

Chapter | ICT from The Report: Mexico 2018

Mexico’s telecoms sector is the second largest in Latin America after Brazil in terms of subscriber numbers, contributing approximately 2.4% to GDP in the third quarter of 2017. Penetration of products and services, such as mobile phones, broadband internet and pay-TV, are also on the rise, having ranked well below the global average until 2015. The rollout of a 5G network demonstrates Mexico’s expanding wireless and mobile data market, though it may take some time before 5G can be effectively monetised in a segment with little room for new subscriber growth. Furthermore, Mexico’s IT services and software sector reported a compound annual growth rate of 12% between 2010 and 2016, with its market value estimated at $11.3bn in 2016. In addition, Mexico placed 13th out of 65 countries in terms of the best locations to provide IT, business process outsourcing and call centre services. The uncertainty surrounding a new North America Free Trade Agreement deal and the slowdown of investment in certain sectors is unlikely to have a significant impact on IT and telecoms; however, the outcome of the elections may lead to uncertainty until Obrador’s new administration’s investment plans are unveiled. This chapter features an interview with Sergio Rosengaus, CEO, KIO Networks.

Chapter | Banking from The Report: Mexico 2018

Mexico’s banking industry enjoys high capital adequacy ratios and is benefitting from robust profit margins. While some stakeholders have pointed to the sector’s conservative approach as a reason for the slow progress in increasing penetration levels, the sector is in fact expanding financial services to a broader share of the population. Relative to the size of the Mexican economy, the country’s banking sector remains fairly small, dominated by a handful of large international bank groups. Banking profits climbed by 31.5% in 2017 to reach $7.4bn, and domestic credit to the private sector, including banking and non-banking sectors, reached 34.2% as a percentage of GDP in September 2017. The sector has also been successful in implementing various Basel III regulations, with major banks adequately adhering to capital and liquidity requirements. This chapter features an interview with Alejandro Díaz de León Carrillo, Governor, Banco de México.