Entrepreneurs think that it is not a good time to invest

Transnational companies trust Mexico but national companies do not: Mexico investment sentiment
Transnational companies trust Mexico but national companies do not: Mexico investment sentiment

Entrepreneurs do not feel that the time is right to invest in Mexico, so the new government must propose productive solutions that generate certainty to boost economic growth, the private sector said.

The Center for Economic Studies of the Private Sector (CEESP) pointed out that it is difficult to think that the weakening of business confidence due to the cancellation of the New Airport (NAIM) and later due to concerns about a possible change of direction in energy policies and education has disappeared altogether.

It is likely that the anticipation of a decline in GDP growth, together with the environment of a weak rule of law, negatively affect the evolution of private investment despite the positive data for January. The business confidence indicator shows that business managers do not consider it a good time to invest.

CEESP specified that in the construction and commerce sectors, the indicator that reflects this perception has remained 94 consecutive months below the threshold of 50 points, while in the manufacturing sector accumulates 136 months.

In the Survey on the Expectations of Specialists in Private Sector Economics conducted by the Bank of Mexico in March, almost two thirds of the participating specialists considered it a bad time to invest.

International organizations have also indicated that the uncertainty about the policies implemented by the new government can be a negative factor in the behavior of private investment and growth.

Based on this perception, the World Bank recently downgraded its growth forecast for Mexico from 2.0 percent to 1.7 percent by 2019 and from 2.4 percent to 2.0 percent by 2020.

The International Monetary Fund (IMF) continued with the reduction of its growth estimate for 2019 from 2.1 percent to 1.6 percent. By 2020 he corrected his expectation of a 2.2 percent advance to 1.9 percent.

Despite the better performance of productive activity during the first month of the year, it is to be expected that the downward trend will continue, which strengthens the possibility that there will continue to be downward corrections in growth forecasts, which is a negative factor for the investment.

It is essential to strengthen an environment that stimulates its permanent progress, in order to achieve higher growth rates, as is the objective of the administration. .

The most recent result of the behavior of industrial production indicated that during February it grew 0.2 percent. However, compared to the same month last year it registered a decrease of 0.9 percent, which, although it was its fourth consecutive month with negative figures, the rate of decline has moderated.

There is no doubt that, given the mixed signs that show the conjunctural figures, to propose proactive solutions that contribute to the new government achieving its goals of growth and well-being is the propitious for the productive sectors to benefit from a business environment friendly to the public. productive investment.

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Mexico and Japan seek to encourage investments

The Ministry of Finance and Public Credit (SHCP) reported that Mexico and Japan established dialogue to promote investment between both countries, during a series of non-transactional meetings (in English, non-deal roadshows) in Japan with investors, rating agencies, banks, investment funds, and insurers.

"The main objective of these meetings was to present the new economic team and expose the lines of economic policy of the new government. In this way, a fruitful dialogue was established to encourage investment between both countries."

These meetings are held since January to engage in a dialogue with the main investors that participate in the issuance of bonds denominated in foreign currency of the federal government.

Mexico is a recurrent issuer in financial markets with greater liquidity internationally, for example, the US dollar market, the euro market, and the yen market highlighted Hacienda.

It said that the presence of Mexican debt instruments has allowed to build and strengthen a yield curve for yen issues in the so-called Samurai market.

Currently, the federal government's debt portfolio presents a low exchange rate risk, given that 77% of liabilities is domestic debt denominated in Mexican pesos.

On the other hand, only 23% of the liabilities are denominated in foreign currency, of which 1% is in yen.

The confidence of foreign investors in Mexico

So far in this administration, the federal government has made two successful issues in the markets of dollars and euros in which high rates of over-demand were reached (4 and 3.6 times the amounts issued, respectively).

The SHCP stressed that this reaffirms the confidence of foreign investors in Mexico and with these two issues, the federal government has managed to cover 100% of its amortizations denominated in foreign currency scheduled for 2019.

The rating agency JCR (Japan Credit Rating Agency) reaffirmed last week the sovereign rating in foreign currency in "A-" with "stable" perspective, which has remained unchanged since January 28, 2008.

On the other hand, the last review made by the rating agency R & I (Rating and Investment Information) was on April 25, 2018, where the sovereign rating in foreign currency was reaffirmed in "BBB +" with a "stable" perspective, which They have remained unchanged since December 26, 2013.

Mexico with great potential for medium and long-term growth

BlackRock, the largest investment management company in the world, considered that the economy of Mexico is its most important market and the one that has the most potential to do business with the countries of Latin America in the long and medium term.

According to The Mexico News, Samantha Ricciardi, general director of the Mexican office of BlackRock, revealed in an interview that the New York firm is clear about the outlook for the markets that are expanding, among which is Mexico, a nation that has medium-term potential.

"In Latin America, the company's investment fund has close to 170 million dollars, of which Mexico has 70 million dollars in assets, which makes it the largest region in all of Latin America."

BlackRock has not reduced or altered the rating it put on the country as did some risk rating agencies, so it exemplified with the acquisition they made last September, in which they paid 34 million dollars to manage the assets of Citibanamex.

"The $ 34 million investment is the largest BlackRock has made in 32 years of history."

The acquisition of Citibanamex represents 53 percent of Mexico's participation in the market, adding that, according to the Organization for Economic Cooperation and Development (OECD), Mexican people will retire with 26 percent of his last salary, which 'will have a very big social and political impact'.

"Having this chapter within BlackRock allows us to open more and more spaces to more women who are very prepared in the financial sector."

Six months ago, Juan Alberto Leautaud Sunderland, president of BlackRock Mexico Infrastructure, reported that the world's largest fund manager had an investment planned for the end of 2018 of 100 million dollars, which would complement the previous injection of 300 million dollars. of a Certificate of Investment Projects (Cerpi).

With information from The Mexico News, Revolution 3.0 and The Economist

Mexico has a high level for global investors

Alberto Ramos, president of the Mexican rating agency HR Ratings, explained that Mexico is still a country that has a good rating, "HRa-", which is a high level for global investors.

The executive recalled that they lowered the rating perspective on October 30 and was mainly due to possible government decisions that could impact the perception of foreigners in the country.

On that occasion, the company ratified the rating of the country's sovereign debt but modified the outlook from Stable to Negative. The reason was the immediate deterioration in the perception of investment and risk in the country, due to the consultation of the new airport in Mexico City.
The above pressured the exchange rate, a variable that could put upward pressure on the net debt of the country and the estimate for net debt at the end of last year.
"It should be clarified that even when we change our perspective, we ratify the rating of 'HR A- (G)' due to the responsible management of fiscal policy in recent years that allowed the investment of the debt trajectory as a percentage of GDP," they wrote. the specialists last October.
There is no established date to give his opinion since they are waiting to hear about the results that may be obtained from the new federal government policies. 

"Qualification is something long term, it should not be taken lightly."

The executive explained that a rating agency does not judge whether a company or country is good or bad, it only analyzes the level of risk that a domestic or foreign investor faces when investing their money in a company or country.

Attention to Pemex

Questioned about Petróleos Mexicanos (Pemex) Ramos explained that the rating is linked to the sovereign debt of the country and are corresponding, so what will reflect what happens with the note from the federal government.

He clarified that the federal government supports Pemex in an important way, although he would like to see more support, even though the signal is correct, the oil company is looking for a profitable company, a better company and generates more income for the country.

HR Rating is attentive to the business plans of Pemex, they want to know them thoroughly, the fine details, where they can really understand the strategy, technical details, not only know that it can migrate from deep fields to shallow waters.
"The government has barely 100 days, we have felt this long period, but we have to give the federal government the opportunity to see results in public finances and stability, which are important parts of the rating."

Finally, he spoke about the Mexican banking sector and highlighted the strength it has in general and the two challenges it faces.

In the midst of an environment where government decisions have created a lot of uncertainty among investors, transnational companies trust Mexico but not nationals, especially for the possible cancellation of Special Economic Zones.

With different shades and nuances, in general, the business sector has adjusted to the guidelines of the new government and has left aside the initial rejection that some groups had shown towards Andrés Manuel López Obrador, to openly express their decision to collaborate with the objective of making Mexico grow

In this sense and despite the criticisms that have caused some of the decisions that the federal government has taken, the transnational companies trust in Mexico and have no doubt of remaining in the country and even of increasing their investments.

But on the contrary, local businessmen have expressed concern about the cancellation of the Special Economic Zones (ZEE), since this represents the loss of investments and reduces the possibility of generating development and jobs in those areas.

In this kind of bipolarity, transnational companies have not changed their perception of the reality of the country, which they continue to consider as stable and attractive, as well as offering favorable conditions for developing large businesses.

Claudia Janez, president of the Executive Council of Global Companies (CEEG), confirmed this by ensuring that her union members share the enthusiasm of what it means to be in Mexico and therefore, the change of government is not a matter of concern in the least.

"We do not have a particular concern," said the executive, and assured that, on the contrary, "we are dedicated to continuing investing, fulfilling and working. We know how to do business and we trust the country."

Thus, the 51 large companies that make up the CEEG maintain their long-term plans and prepare strategies to increase their presence in the country, especially since they see no risks in the way the López Obrador government has acted so far.

"We have been very clear that as long as there is a clear rule of law, while investments are respected and there is legality to continue operating, we will continue here," emphasized Claudia Jañez.

The objectives of the global companies that operate in Mexico are very clear and transcend the conjuncture issues. "We are not for a particular concern, nor for a particular market or industry," the board said in a statement to Notimex.

"We are committed to continuing to generate jobs and attract investment and generate technology, and bring the best of the world to the country." That in spite of the possible cancellation of the EEZs, before which the transnational companies do not have a major objection in that.

"Global companies have a presence throughout the country and beyond what are called areas, is in our DNA to contribute to creating quality jobs, innovation and end the social and economic gap between different regions of the country," said Claudia Jañez.

But at the other extreme are the local national companies, which view with some misgivings the decisions taken by President Andrés Manuel López Obrador, especially with what may happen with the Special Economic Zones, which many say will be eliminated.

If this happens and AMLO decrees its end, the impact in certain regions of the country may be greater, as seen by entrepreneurs in Michoacán, who see with concern what can happen to the jobs and investments that were planned in the port of Lazaro Cardenas.

Agustín Arriaga Diez, president of the Business Coordinating Council of Michoacán, pointed out that this is not just an important loss for the Pacific coast area of this state, where the generation of 13,200 jobs and 4,000 jobs are projected for this year. 500 million dollars, but it will affect the entire country.

"At the outset, we would send a bad signal that in Mexico large projects are promoted or canceled based on perceptions and preferences of officials," said the business leader.

Given this scenario, where the scope, objectives, and impacts are different due to the size of the companies, the transnational companies trust Mexico but not the national ones, since they directly resent any change in market conditions and are those who suffer most if things get complicated in the local economic landscape.

US companies interest strong

Regardless of the economic or political context, companies of US origin installed in Mexico will continue to invest, said Jorge Luis Torres Aguilar, the new president of the American Chamber of Commerce of Mexico (AmCham).


In an interview, he announced that these firms will invest five billion dollars during the current year, an amount similar to that registered in 2018, due to factors such as privileged geographical position, stable economy, sound public finances, autonomous monetary policy, and ample bonus. demographic.


According to the president of FedEx Express in Mexico, to achieve this, the organization he heads will work in monthly meetings with the federal government in which concrete proposals will be made and intelligence information focused on improving the business climate will be made available.



Because 70% of Mexico's Gross Domestic Product depends on international trade and 80% of export products made in Mexico have as their final destination the country governed by Donald Trump, the approval of the Treaty between Mexico, the United States and Canada is a priority (T-MEC), considered the leader, who has been working for AmCham for more than 28 years.

He said that the organization in his charge participates in the coalition to ratify the T-MEC, composed of more than 300 business organizations, which lobbies in the US Congress that does not change what has already been agreed in order to get the agreement into effect. in January of 2020.


The new trade agreement deepens the relationship between countries by addressing the social, labor and environmental aspects, in addition to considering rules to support small and medium enterprises and fight corruption, which makes it more robust, so in Your opinion, should not have changed.

The new trade instrument will update Mexico's integration in North America based on a trade agenda that promotes the diversification of trade and investment, generating new opportunities and markets for domestic producers, service providers, exporters, and investors. allows us to advance in the path of inclusion and product innovation.



The management of Jorge Luis Torres will focus on five priorities:

Strengthen legality and security.

Promote conditions of certainty to investors.

Maintain an open and constructive dialogue with the authorities of the three levels on both sides of the border.

Greater involvement with decision makers in the United States.

Continue contributing to form a business community better prepared and better connected, adhering to the principles of legality and social responsibility.


He started his career at FedEx Express Mexico 28 years ago. He has been president for seven years. He holds a degree in Communication Sciences from the Universidad del Valle de México, a Master's degree in Quality from La Salle University, and an MBA from the Graduate School of Business Management, EGADE, from Tec.

via Agency

The Blackstone Group has secured $ 695 million (USD) of Mexican pension funds, Afores, for its first two local private equity funds, according to documents, which joins Black Rock and KKR & Co in the expansion in Mexico after regulatory changes.

Several of the world's leading private equity managers have raised billions of dollars from Mexican pension funds since new rules were enacted at the beginning of last year, according to documents sent to the Mexican Stock Exchange (BMV) and a document Not public reviewed by Reuters.

Regulators have authorized some funds to collect more over time

It was not immediately clear how much capital managers have managed to date in Mexico, including Discovery Capital Management, General Atlantic, Partners Group, Lexington Partners and HarborVest Partners.

Its arrival in the second largest economy in Latin America occurs after a regulatory change in January 2018 that allowed foreign private equity funds to take advantage of Afores assets for the first time.

The Afores, which manage more than 179 billion dollars, have more flexibility to invest their assets.

The full Chamber of Deputies is about to vote on another bill, proposed by Morena, which would grant even more flexibility to pension funds.

A Blackstone executive, Matthew Pedley, said in an interview that pension funds take advantage of the recent change in regulation to add exposure to international alternatives and diversify their portfolios.

Private equity funds could help Mexican pension funds distribute risk with international investments ranging from infrastructure to energy.

Luis Sayeg, general director of Investment Management of Citibanamex, which manages one of the main pension funds in the country, said that the new funds could benefit pensions.

"It is a new opportunity to diversify the portfolio to alternative assets, with probably attractive returns, which do not necessarily only exist in Mexico," said Sayeg.

The bill was praised by credit rating agency Fitch, but some critics have expressed concern over the fact that the government wants to take advantage of pensions to help finance projects of interest to the ruling party.

Foreign funds arrive

BlackRock was one of the first foreign fund managers to expand to Mexico with this type of product, raising $ 615 million for two funds, one of which will focus on infrastructure investments, according to a non-public document detailing the collection activity.

KKR & Co raised 683 million dollars for two funds, including one that will invest in private capital, expansion capital, real assets, as well as hedge funds for special situations and private credit funds, according to the document.

The new funds are listed in the BMV. Mexico is attractive to those looking to increase assets for long-term investments.

The country has the largest private pension fund system and one of the fastest growing in Latin America, and almost pleaded its size in seven years, according to a global analysis of pension fund assets by the consultancy Willis Towers Watson.

The investment of Mexican pension funds outside the country is still limited to 20% of total assets, while alternative investment, such as private capital, is also limited to 20%.

This gives them little room for diversification at a time when most other pension fund systems that are maturing are easing investment restrictions to help solve problems such as funding gaps and population aging.

Investing in new asset classes or geographies adds layers of complexity. This often requires more sophisticated investment processes, risk management and corporate governance practices.

Tonatiuh Rodríguez, executive director of one of Mexico's leading pension funds, Afore Azteca, said his investment committee had decided not to invest in private capital for now.

"The risk of these assets is a risk that has to be monitored in a different way," said Rodriguez. "The opportunity cost of not participating in this asset is not so great because the return we have on our investments in the public market, by definition, is more regulated, is good."

The regulation stipulates that private equity managers must invest at least 10 percent of the capital in Mexico and commit at least 2 percent as a joint venture with the pension funds.

Despite his aversion to risk, Rodriguez said that the fact that fund managers are large, well-known and with best practices minimizes the risk to Afores.

DHL Express will invest 30 million dollars in 2019

In order to consolidate its growth and commitment in the country, DHL Express Mexico announced a Mexico investment of 30 million dollars during 2019. These resources will be allocated to infrastructure, retail, security, technology, offices, and equipment for customers.

The investment plan started in 2012, added up to 2018 a total of 260 million dollars and with the investment of 2019 will increase to 290 million dollars.

In this regard, Antonio Arranz, CEO of DHL Express Mexico, mentioned that the company seeks:

"Actively respond to the logistical needs of our customers, adapting at all times to current purchasing trends. For this reason, we respond in this way, investing heavily and continuously in our infrastructure, technology, and fleet."

This year, the company expects growth in Mexico, since it is expected to generate around 500 new jobs during 2019.

The investments will focus on items such as fleet, gateways, hubs, stations, technology, air networks, training, and product development, among other key projects that will allow the company to grow.

Confidence in Mexico has not fallen: Xcaret Group

Next year the Xcaret Group will open its second hotel: La Casa de la Playa, to which a Mexico investment of 85 million dollars was allocated.

The "great confidence" that Xcaret Group has in Mexico and tourism made it possible for a $ 175 million investment to continue, despite the recent government transition, and they are even interested in participating in some way in the Train project Maya, said its vice president and founding partner, Carlos Constandse.

"It is a very big country and we have gone through many crises together and we have all stayed. Now we are not in crisis but in times of change. We all wanted a change and the change is taking place, possibly not as we would like, but it was necessary."

At a press conference to announce that in April (in the middle of Holy Week) will open its new adventure park (Xavage), which has required $ 78 million and is in the final stage of equipment, the director said he is convinced that his The group has the best tourism products in the country under the brand Xcaret, which last month moved away from the word Experiences, which accompanied it for 35 years.

In addition, next year they will open their second hotel: La Casa de la Playa, to which an investment of 85 million dollars was allocated and will have as official ambassador the conductor Alondra de la Parra. "We are at a fundamental moment for the group in its three business divisions (parks, hotels, and tours), and despite everything, we chose not to stop. Let's go forward with all the heart and desire. The results are clear: last year we had close to 4 million visitors to our facilities, which represented an increase of 19% compared to 2017, "he said. Regarding the liquidation process faced by the Tourism Promotion Council of Mexico (CPTM), he acknowledged that it was not a decision that could be seen coming and that, of course, is affecting, although the most important thing is that they are part of the group of work of the National Tourism Business Council (CNET) that enlists the creation of a new body together with the Ministry of Tourism.

"We are worried, but also very busy in addressing this gap that is generated in promoting the attractions. We are clear that, in the case of fairs, if you do not collaborate with the government it will be very difficult to give continuity to what was being done by the entire sector, "added Constandse.

In Grupo Xcaret each year they allocate 400 million pesos for promotional actions and they have 300 people dedicated to marketing issues.

Mayan train, an attraction

With regard to the Mayan Train, he considered that all the people and companies that live in the surrounding areas have to "get onto the project because it will generate a positive effect throughout the Mexican southeast and, eventually, could spread to other Mayan countries in Central America.

"It is a decision made by the federal government that we have to support to generate the required economic flow and be able to move forward. There are natural attractions that only have few places in the world and that we have to take advantage of."

The deputy governor of the Bank of Mexico (Banxico), Jonathan Heath, said that the country is far from losing its investment grade, but it is a good time for the government to start doing what is necessary for the economy to grow.

At an analysis table in the "Despierta con Loret" program, he highlighted that the rating agencies are measuring the growth capacity of Mexico in the medium and short terms, so they will analyze the next moves made by the Federal government.

He pointed out that as the country can grow, it can pay; but if it falls into a recession or does not grow as much, its ability to pay begins to decline, "then you are measuring the ability not to grow as much as you had thought."

This rating explained the deputy governor of the central bank, is like a "yellow card", where they will be observing how the chips move, but if the player behaves well, nothing will happen.

"I do not see the prospect of losing the investment grade rating because there would be three downward revisions in the case of Standard & Poor's and Fitch, and four in the case of Moody's, so we are very far from losing that degree of investment. "

The rating agencies are going to be examining Pemex and the government, and also their relationship, that is, "how much the Federal government will support Pemex at any given moment, will not let Pemex die alone, so that degree is something they're going to be watching and they're going to pay a lot of attention. "

In that sense, Heath said that it is still necessary to see more measures, since Pemex has a structural problem and the measures that are being seen are more circumstantial, for which structural measures would be necessary.

On the other hand, commented that indicators such as consumer confidence have been excellent, and show that López Obrador "is the president who comes to shake and change," and the population is happy with these changes.

While on the part of businessmen the reaction is mixed, so there is still time to lay the foundations for growth. "We are at a time when, with this yellow card, something must be done to just make this country begin to grow."

When responding to the question if they are calm in Banxico, he said it is difficult, "we are facing an economic slowdown, December data prove it, in January it is a fact that the IGAE is negative, then the first quarter we will grow very close to 0, it's worrying. "

However, he added that this growth is temporary and not necessarily structural, which is an important difference since there is still room for the government to start spending as it should be in the second half of the year. the economy could start to rise.

Then "we have to distinguish very well between what are short-term indicators, a very difficult and typical juncture at the beginning of the biennium, and what would be structural things, which are still in time to be fixed".

Regarding the issue of public spending, he added that this government has been clear and will not spend what it does not have, so it would look for how the programs would be adapted, but this government has stated that it does not want to spend with debt.

Another risk, he added, would be the fall of the oil platform, as happened the previous six years, where if GDP is measured without oil, growth would have exceeded 3.0 per cent, but the fact that it fell in a row the six years removed at least half a percentage point from the average annual growth.

Therefore, he pointed out, production should be increased, which has a higher added value and can be relatively easy to sell and sell well, compared to a refinery where it is not clear what profit or yield rate it is going to have.

Why does Mexico stand out for attracting investment?

Incentives, support and a solid economic environment make Mexico an attractive country for investments, said Miguel Torruco Marqués, Secretary of Tourism (Sectur).

During the International Tourism Fair (Fitur), in Madrid, Spain, he pointed out that Mexico is the 14th economy in the world. It is also ranked as the 13th country with the largest amount of international reserves.

Mexico is the most open economy in the world thanks to the 12 free trade agreements it has with 46 nations. Marqués said that thanks to the Trans-Pacific Economic Cooperation Agreement, the country gets access to 12 nations that represent 38% of the world's Gross Domestic Product (GDP).

He stressed that Mexico is a great export platform thanks to its strategic geographical location. According to the Benchmark Report study, published by the Confederation of Danish Industry, Mexico is the most competitive country in terms of cost and taxes. It has tax programs of immediate deduction and tax incentives that positively impact the tourism industry.

Finally, Torruco emphasized that legislative reforms have been carried out that are in the process of evolution and improvement, such as anti-corruption and financial.