Nordic investment in Mexico
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cannot replace direct accounting, tax or legal professional advice, or any other type of advice. Before making any decision
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Content table
Acknowledgements
Foreword
Introduction to Mexico
Tax and legal framework
Macro-economic analysis
Nordic investment in Mexico
CEO interviews
Conclusion
Contact information
Sectors
•Telecommunications
•Manufacturing
•Infrastructure & Logistics
•Automotive
•Healthcare
•Mining
•Retail
•Energy
Directory of Nordic companies
Finland
Iceland
Sweden
Norway
Denmark
PwC Mexico
Acknowledgements
4
Nordic investment in Mexico
Susanne Rumohr Hækkerup, Ambassador of Denmark in Mexico
Carlos Méndez, PwC Mexico
Anne Lammila, Ambassador of Finland in Mexico
Carlos Montemayor, PwC Mexico
Merethe Nergaard, Ambassador of Norway in Mexico
Carlos Morales Rozo, PwC Mexico
José Ignacio Madrazo, Ambassador of Mexico in Denmark
Cesar Lara, PwC Mexico
Norma Pensado Moreno, Ambassador of Mexico in Finland
Eduardo De La Pena, PwC Mexico
Ambassador of Mexico in Norway
Eduardo Reyes Bravo, PwC Mexico
Ambassador of Mexico in Sweden
Fredy Muñoz, PwC Mexico
Jörgen Persson, Ambassador of Sweden in Mexico
Gabriel Muñozcano, PwC Mexico
Ivar Gundersen, ABC Communications
Ivan Diáz-Bárreiro, PwC Mexico
Jakob Sjölander, Business Sweden
José Almodovar, PwC Mexico
Mayra Mateos, Business Sweden
José Antonio Quesada, PwC Mexico
Marit Hvithamar, Confederation of Danish Industy
Juan Luís Garcia, PwC Mexico
Tore Myhre, Confederation of Norwegian Enterprise
Luis Sánchez Gonzalez, PwC Mexico
Katarina Sætersdal, Confederation of Norwegian Enterprise
Marco Hernandez, PwC Mexico
Allan Leest, Embassy of Denmark in Mexico
Moises Cisneros, PwC Mexico
Jakob Tvede, Embassy of Denmark in Mexico
Norma Gascon, PwC Mexico
Marco Thomas Lund, Embassy of Denmark in Mexico
Tove Ulmanen, PwC Mexico
Kaisa Koivisto, Embassy of Finland in Mexico
Ulrika Andersson, PwC Mexico
Simen Ekblom, Embassy of Norway in Mexico
PwC Denmark
Adam Boltjes, Embassy of Sweden in Mexico
PwC Finland
Jakob Holthuis, Embassy of Sweden in Mexico
PwC Norway
Erna Takala, Finpro
PwC Sweden
Nina Jaakkola, Finpro
Nina Hamer, Traducciones Hamer
Alenica Staniewski, International Business Centre PwC Mexico
Anthony Armand, International Business Centre PwC Mexico
Interviews
Carlos Caicedo, Atlas Copco
Caroline Tissot, International Business Centre PwC Mexico
Søren Ustrup, Arla Food Ingredients
Lisamaria Markula, International Business Centre PwC Mexico
Raul Armenta, Autoliv
Margarida Costa, International Business Centre PwC Mexico
Jonny Torp, BWO
Maria Alejandra Urrea, International Business Centre PwC Mexico
Gustavo Godinez, DNV
Pia Maria Lustig, International Business Centre PwC Mexico
José Luis Serrato, Ericsson
Raehyun Im, International Business Centre PwC Mexico
Richardt Fangel, FL Smidth
Shravan Thampi, International Business Centre PwC Mexico
Rafael Llamas, Hiab Cargotec
Thibaut Buat, International Business Centre PwC Mexico
Adonaí Garcia, KWH Mirka
Walter Heredia, International Business Centre PwC Mexico
Alicia Bandala, KONE
Yan Zhang, International Business Centre PwC Mexico
Jens Peter Klausen, Lego
Per Hagen, INTSOK
Michael Hansen, Maersk Line
Sergio Rivas, INTSOK
Daniel Merlo, Maquet
Board and Directors 2013-2014, Nordic Chamber
of Commerce in Mexico
Leif Lindholm, Metso Minerals
Estrellita Fuentes, Nordic Chamber of Commerce in Mexico
José Antonio Martínez Palacios, Norsafe
Hanna Arnby, Nordic Chamber of Commerce in Mexico
Guillaume Lejeune, Stora Enso
Richard Scarborough, Norwegian Shipowners’ Association
Adrian Katzew, Vestas
Carlos Pérez-Cirera Langenscheidt , ProMexico
Sergio Gutierrez, WWL
Berta Rendón, PwC Mexico
Pedro Parenti, Yara
Morten Vaupel, Novo Nordisk
PwC Mexico
1
Foreword
2
Nordic investment in Mexico
Carlos Mendez
Territory Senior Partner
PwC Mexico
Nordic Desk within International Business Centre at PwC Mexico
was created in late 2012. Previously from 2010-2012 it was called
Scandinavian Desk and mostly focused on Swedish market. In
these years we have begun to work with the key players of the
Nordic community in Mexico, such as the Embassies and their
trade offices, the Nordic Chamber of Commerce and ProMexico.
With these co-operation partners we decided to make this
publication in order to promote our country in the Nordic
countries.
In the past decade the multilateral trade has greatly increased
in-between Mexico and Nordic countries: over 200% with
Denmark and Finland, over 120% with Norway and over 45% with
Sweden.
There are currently over 250 Nordic companies in Mexico and the
country offers a lot of opportunities for the Nordic companies
especially in automotive, energy, health, manufacturing, mining,
retail, telecoms and transportation and logistics sectors, which are
presented in this publication.
Mexico is becoming a centre of Nordic business in Latin America.
In recent years, many companies have chosen to invest in Mexico
and set up their regional offices, not only for its proximity with the
United Stated and the ease of trade, but also because the domestic
market is growing rapidly. Today, Mexico is considered to be one of
the most competitive countries in the world, belonging to the
so-called MINT group along with rapidly growing economies of
Indonesia, Nigeria and Turkey.
In 2013, the federal government passed two major and longstanding constitutional reforms on telecommunications and
energy, with the purpose of boosting competitiveness and growth
for these key economic sectors in Mexico.
Mexico has a great potential for accelerated economic growth. In
2012, Latin America’s second largest economy maintained a steady
growth of 3.9% supported by both external and internal demand.
In 2013, GDP was expected to grow 3.5%, but in reality the growth
was a mere 1.1 %.
However, the forecast for 2014 looks promising with the growth
rate expected to go back to 2012 numbers.
To conclude, I would like to point out that the publication “Nordic
investment in Mexico” is designed as an accessible tool for both
industry experts and for anyone interested in Mexico.
Our hope is that this publication will contribute to strengthening
co-operation between the Nordic countries and Mexico and will
attract new Nordic investment into Mexico.
PwC’s desire is to intensify the good relationship we have
established in recent years with the Nordic Embassies, the Nordic
Chamber of Commerce and ProMexico and to be a reference point
for the Nordic community in Mexico.
PwC Mexico
3
Susanne Rumohr Hækkerup
Ambassador of Denmark in Mexico
Det er ikke tilfældigt, at den danske regering har udvalgt det
mexicanske marked i sin ambitiøse vækstmarkedsstrategi fra 2013
som et af de markeder, danske virksomheder bør satse på. Mexico
har en befolkning på 115 mio. og omkring 25 mio. af dem med en
købekraft svarende til et dansk gennemsnitsindkomstniveau.
Landet er derfor et stadigt mere attraktivt marked. Den
mexicanske regering har desuden vedtaget en række
gennemgribende reformer, som kan bidrage positivt til landets
vækst. Mexico er i dag den 14. største økonomi i verden – med en
voksende befolkning og en stigende økonomisk vækst forventes
landet at vokse til den 5. største i 2050.
For produktionsvirksomheder er Mexico også et oplagt springbræt
for eksport. Landet har et af verdens største net af frihandelsaftaler
med adgang til 1,2 mia. forbrugere. I Nordamerika dækker NAFTA
et marked på 18,7 mia. USD. Mexico har nu overgået Kina og USA
hvad angår konkurrencedygtige produktionsomkostninger for
forbrugsvarer. Hvor mexicanske timelønninger for 10 år siden var
tre gange højere end i Kina, er de nu en femtedel lavere. Mexico er
samtidig et bevis på, at lave lønomkostninger ikke nødvendigvis er
ensbetydende med en mangel på kompetencer. Mexico uddanner
hvert år 110.000 ingeniører og fremstiller og eksporterer en række
sofistikerede produkter inden for bilindustri, medicinaludstyr,
mobiltelefoner, fladskærme og udstyr til luft- og rumfart.
Danske virksomheder ser i stigende grad ud til at have fået øje på
mulighederne på det mexicanske marked, hvor det danske brand
nyder en stor anseelse og associeres med innovation og
troværdighed. Danmark er med sine investeringer på 3.900
millioner kr. blandt EU’s største investorer i landet, og dansk
vareeksport er fordoblet siden 2007.
Mexicanske forbrugere er i stigende grad begyndt at stille krav til
de produkter, de køber, og producenter efterspørger i stigende grad
input, så de kan følge med forbrugernes stigende krav samt
effektivisere deres produktion og øge deres konkurrencedygtighed.
For danske virksomheder, der er stærke inden for kvalitet,
innovation og procesoptimering, er der derfor rigtig gode
muligheder for at afsætte produkter på det mexicanske marked.
Jeg håber, at denne publikation vil bidrage til at øge kendskabet til
de mange muligheder i Mexico.
4
Nordic investment in Mexico
Anne Lammila
Ambassador of Finland in Mexico
Tänä vuonna tulee kuluneeksi 50 vuotta siitä, kun Suomi ja
Meksiko avasivat suurlähetystönsä toistensa pääkaupungeissa.
Diplomaattisuhteet solmittiin jo aiemmin, vuonna 1949.
Maittemme väliset suhteet ovat hyvät, mutta kasvupotentiaalia on
paljon enempään. Parhaiten kahdenvälinen yhteistyö on toiminut
muutamilla teknisillä sektoreilla, erityisesti ympäristöalalla.
Suomella ja Meksikolla on ollut metsäalan yhteistyötä jo
1960-luvulta alkaen. Yhteistyö laajeni tällä vuosikymmenellä
oikeus- ja vesialoille. Myös kansainvälisillä foorumeilla, erityisesti
YK:ssa, maamme harjoittavat paljon yhteistyötä. Viimeisin
korkean tason vierailu oli toukokuussa 2013, kun Eurooppa- ja
ulkomaankauppaministeri Alexander Stubb vieraili Meksikossa
mukanaan laaja delegaatio suomalaisyrityksiä.
Suomen ja Meksikon välinen kauppa on kasvanut tasaisesti vuonna
2008 tapahtuneen notkahduksen jälkeen aina vuoteen 2013
saakka, jolloin Meksikosta suuntautunut tuonti laski 32 prosenttia
edellisvuoteen verrattuna. Kauppavaihtomme oli vuonna 2013
noin 415 miljoonaa euroa, mikä merkitsi noin prosentin laskua
vuoteen 2012 verrattuna. Vientimme oli 306 miljoona euroa ja
tuontimme 109 miljoonaa euroa, joten kauppataseen ylijäämä
Suomelle oli 197 miljoonaa euroa. Suomen kokonaisviennistä ja
-tuonnista Meksiko edustaa hieman alle puolta prosenttia.
Taloudellisessa kanssakäymisessä on paljon kehittämisen varaa,
sillä Meksikossa on erittäin ostovoimainen keski- ja yläluokka, ja
maan infrastruktuuria parannetaan nopeaa tahtia. Myös
käynnissä olevat taloudelliset uudistukset avaavat entistä
parempia tai kokonaan uusia liiketoimintamahdollisuuksia.
Meksikolla on valtava kasvupotentiaali, joka usein jää muiden
nousevien talouksien varjoon. Yksipuolinen,
turvallisuustilanteeseen keskittynyt uutisointi on osaltaan
vaikuttanut negatiivisesti eri toimijoiden halukkuuteen luoda
yhteyksiä Meksikoon. Useat kilpailija- ja verrokkimaamme ovat
kuitenkin lisänneet nopeaa tahtia panostustaan Meksikoon.
Kokonaisuutena EU-maat ovatkin Meksikon toiseksi suurin suorien
investointien lähde.
Meksikolla on monta vahvuutta. Se on Maailmanpankin mukaan
maailman 14. suurin kansantalous ja 11. suurin
ostovoimapariteetilla mitattuna. Se on Latinalaisen Amerikan
parhaimpia liiketoimintaympäristöjä heti pienempien avoimien
talouksien, Chilen, Perun ja Kolumbian jälkeen. Meksiko on
huomattavasti edellä useita muita kasvavia markkinoita kuten
BRIC-maita – ja jopa joitakin EU-maita kuten Italiaa ja
Luxemburgia. Meksiko on valtava, luonnonvaroiltaan rikas maa
strategisesti tärkeällä paikalla Pohjois- ja Etelä-Amerikan välissä.
Investointikohteena Meksiko on erittäin lupaava juuri
maantieteellisen sijaintinsa, suhteellisen koulutetun työvoimansa
ja monien vapaakauppasopimustensa vuoksi.
Meksikossa toimii tällä hetkellä 36 suomalaisyritysten
tytäryhtiötä, joista kolmellatoista on maassa yksi tai useampi
tuotantolaitos. Sen lisäksi noin 70 yrityksellä on Meksikossa
paikallinen edustaja. Suurimmat työnantajat ovat olleet Nokian
matkapuhelintehtaat Reynosassa, Luvatan tehdas Monterreyssa ja
KONEen tehdas Coahuilassa. Vuonna 2012 suorien suomalaisten
sijoitusten määrä Meksikoon oli Suomen Pankin tilastojen mukaan
noin 105 miljoonaa euroa. Suomen ja Meksikon välillä on
investointisuojasopimus ja kaksinkertaisen verotuksen estävä
sopimus. Kiinnostavimmat kaupalliset yhteistyösektorit Suomen ja
Meksikon välillä ovat ympäristö, puhdas teknologia, liikenne,
terveydenhuolto ja hyvinvointi, energia- ja kaivosteollisuus,
infrastruktuuri, off-shore -teollisuus, metsä- ja selluteknologiat
sekä tietoteknologia (ICT).
PwC Mexico
5
Merethe Nergaard
Ambassador of Norway in Mexico
Bare ett år etter at Norge fikk sin uavhengighet i 1905, besluttet
man å åpne den første norske ambassaden Mexico. 108 år senere
ser både Mexico og Norge ganske annerledes ut, og dette
reflekteres i hvordan vi forholder oss til hverandre.
I mange år var forbindelsene mellom Norge og Mexico svært
begrenset - til skipsanløp og «bacalao noruego». Dette har endret
seg de siste årene. Norge og Mexico utvikler stadig tettere bånd. At
Mexico i år gjenåpner sin ambassade i Oslo vitner tydelig om dette.
Både Mexico og Norge er viktige energinasjoner, og vi har en åpen
og god dialog om energispørsmål. Da Mexico i desember i fjor
vedtok en ny energireform, ble Norge fremhevet som et forbilde på
et land som hadde funnet en balansegang hvor offentlige og
private interesser sammen bidro til størst mulig verdiskapning, og
hvor oljeformuen kom hele befolkningen til gode. Når Mexico nå
skal modernisere sin egen energisektor, vil også private selskaper
spille en viktig rolle. Herunder norske selskaper, som med sin
erfaring fra Nordsjøen er verdensledende på teknologi og
kunnskap om oljeutvinning på store havdyp. Nøyaktig den
ekspertisen Mexico trenger for å utvikle sine oljefelter i
Mexicogolfen. Norske selskaper er allerede viktige
samarbeidspartnere for den meksikanske oljeindustrien, og en
rekke nye spennende muligheter er nå i ferd med å åpne seg!
At relasjonene mellom våre land styrkes, ser vi også i andre
næringer. Store norske selskaper som Yara, Det Norske Veritas,
Tomra, Elopak og Sapa, med flere, har de siste årene etablert seg i
Mexico. Samtidig ser vi en fremvekst av små og innovative norske
gründerforetak, innen sektorer som for eksempel IKT og grafisk
design.
Likevel er det ikke tvil om at næringslivssamarbeidet med Mexico
har et langt større potensiale enn vi så langt har sett. Mexico er en
fremvoksende økonomi, som det siste året har vist sterk vilje til
nødvendig omstilling. Landet har betydelige naturressurser,
kvalifisert arbeidskraft og en unik strategisk plassering. Rett
utenfor stuedøren, mot nord, ligger verdens største og viktigste
marked. Samtidig blir samarbeidet med andre latinamerikanske
land og med Asia stadig tettere, gjennom et utall av
frihandelsavtaler. Både Mexico og Norge har dratt god nytte av vår
EFTA-frihandelsavtale fra 2001. Vi håper å utvide denne avtalen
ytterligere.
President Enrique Peña Nieto og hans regjering arbeider nå hardt
for å virkeliggjøre Mexicos potensiale. Et iherdig reformarbeid skal
gjøre landet internasjonalt konkurransedyktig og attraktivt for
utenlandske investeringer. Og verden følger med. Det bør også
Norge gjøre. Ambassaden er derfor glad for at det nå settes økt
fokus på mulighetene Mexico kan tilby norsk næringsliv. Vi ser
frem til at flere av dere kommer hit, og vi bistår dere gjerne på
veien. Bienvenidos!
Jeg håper denne brosjyren bidrar til at norsk næringsliv fatter
interesse for Mexico.
Kontakt oss gjerne ved den norske ambassaden!
6
Nordic investment in Mexico
Jörgen Persson
Ambassador of Sweden in Mexico
Relationerna mellan Sverige och Mexiko sträcker sig långt tillbaka
i tiden. Redan 1850 invigdes ett svenskt konsulat i hamnstaden
Veracruz. Mycket har hänt sedan dess, inte minst vad gäller handel
och investeringar. Svenska storföretag etablerade sig tidigt och
idag finns kring 150 svenska eller Sverige-relaterade företag på
plats. Mexiko är Sveriges näst största handelspartner i
Latinamerika. Svenska direktinvesteringar i Mexiko uppgick
1999-2013 till nästan två miljarder USD vilket gjorde Sverige till
tolfte största investerare.
Mexiko är världens fjortonde största ekonomi och med 115
miljoner konsumenter tillhör landet den grupp större
medelinkomstländer som förväntas växa mest framöver. För
svenska företag finns stora möjligheter att dra nytta av en växande
inhemsk marknad, närhet till USA och landets öppna inställning
till frihandel. Tillväxtpotentialen är stor i de många sektorer där
svenska företag är konkurrenskraftiga som ITC, miljöteknologi,
transport, gruvnäring och hälsa. Det svenska intresset för Mexiko
manifesterades i höstas när statsminister Fredrik Reinfeldt och
handelsminister Ewa Björling tillsammans med en stor
företagsdelegation besökte landet.
Jag hoppas att denna broschyr ska väcka intresse för den
mexikanska marknaden. På plats finns ett engagerat lokalt team
som utöver ambassaden består av Business Swedens kontor samt
två handelskammare, en svensk och en nordisk. Kontakta oss
gärna!
PwC Mexico
7
Sergio Rivas
President of Nordic Chamber
of Commerce in Mexico
The Nordic Chamber of Commerce in Mexico was established in
2010 as a result of an initiative of Ambassadors and entrepreneurs
from Denmark, Finland, Norway and Sweden1 in order to generate
more business opportunities and to promote Nordic values,
including sustainability, transparency, democracy and zero
tolerance of corruption, among other values of importance for
business and for society as a whole.
One of its goals is to create a business platform promoting Nordic
business values and skills in new and clean technologies,
efficiency, productivity and more and better conditions for jobs.
At the end of 2013, NCCM membership totaled 73 companies, all
branch offices of companies in Nordic countries or enjoying a
strong and permanent commercial relationship between Mexico
and the country in question. That membership represents 27% of
total Nordic companies established in Mexico, as follows:
Country
Total companies
established
in Mexico
Belonging
to NCCM
Total (%)
Denmark
58
18
32
Finland
36
14
39
Norway
29
10
34
Sweden
150*
18
12
Mexico
Total
13
273
73
27%
*Includes representatives.
The 73 member companies are high-level representatives of the
most important companies in the four Nordic countries, working in
important, key clusters such as health, mining, transportation,
energy, clean tech and IT. Iconic companies and the most
traditional and representative Nordic businesses are very well
represented in our membership.
To increase that number, it is indispensable to provide useful
services to companies, i.e., networking, conferences, seminars,
business development support and so on. For 2014, the NCCM has
important challenges to meet, including organising some 12
high-level conferences involving the monthly Nordic Business
Breakfast, the Nordic Business Day (scheduled for November), the
Annual Convention, the Annual Kräftskiva (September) and the
Golf and Nordic Sports Day in May.
The main goal is to contribute to the creation and continuation of a
dynamic designed to promote business opportunities for both
sides, (i.e., foreign investment from Nordic countries to Mexico,
and from Mexico to Nordic countries), trade, entrepreneur
cooperation and networking. The challenges are imposing, but
with positive Viking business attitude we will continue to work
towards enhancing and increasing welfare in Mexico and in Nordic
countries.
8
Nordic investment in Mexico
Iceland has been included, but has no diplomatic representation
and not many business operations in Mexico.
1
PwC Mexico - Nordic Desk
When Nordic countries are looking for new markets, Mexico offers
great advantages not only due to its strategic geographical location,
young and skilled human resources, but also because it offers
macroeconomic and political stability and competitive prices.
Mexico is in fact one of the most competitive countries in the region
for international investment and it is the second largest economy in
Latin America and fourth largest on the continent. Furthermore, its
GDP is the 14th in the world, and 11th by purchasing power parity
(PPP) with an internal market of over 115 million consumers. With
growth in sectors such as automotive, energy, health and mining ie
sectors prominent in Nordic countries, there are a lot of
opportunities Mexico can offer for Nordic companies.
Objective of this publication is to promote Mexico as a destination
for Nordic investments, and support new Nordic initiatives
contributing to the strengthening of the Nordic - Mexican
commercial relations.
In co-operation with Nordic Embassies, Nordic Chamber and
ProMexico, Nordic Desk within International Business Centre at
PwC Mexico has supported the development of Nordic companies
in Mexico since late 2012.
Building on local expertise combined with the strength of a global
network, our team of bilingual professionals tailored to the specific
needs and challenges of your business.
Starting up your business
Laust Hjortkjær Hansen, Louisa Masoura, Pia Lustig, Lisamaria Markula (Clockwise from the top)
Your first step towards implementing your business model and meeting your
financial needs is having a clear and quantitative perspective of trends and
market opportunities.
• Market entry strategy
• Project feasibility studies
• Seeking partners and investors / target screening
• Strategic planning for mergers and acquisitions
• Capital raising / financing structures
• International tax and local contributions advice
• International trade advice (tariffs, customs, international treaties,
temporary import regimes)
• Business start-up procedures with government bodies
• Payroll, book keeping, treasury and tax outsourcing services
• Inventory management
• Compliance with local and international reporting standards
(NIF, IFRS, US GAAP)
Driving growth
Good management of growth and achieving organisational goals depend on
implementing the right structures for your company: effective internal control and
risk management is crucial for your business to thrive.
• Organic growth strategy
• Enhancement of the quality and safety of information systems
• Optimisation of internal control and operational efficiency
• Corporate Governance
• Risk monitoring and control
• Legal support in claims and lawsuits
• Fiscal optimisation of investments
• Human resource solutions (e.g. study of the organisational climate,
competencies assessment)
• Post-deal integration and valuations
• Arbitration, mediation, renegotiation and dispute resolution
Realising your value
Adapting your business to every circumstance, taking advantage of the best
opportunities and realising the value of your business.
• Corporate crisis advice (debt restructuring, refinancing)
• Cost reduction programmes
• Plan for succession and shareholders’ equity strategy
• Business reviews and performance improvement
• Sales process management advice
PwC Mexico
9
Carlos Pérez-Cirera
Langenscheidt
Trade Commissioner
for the Nordic countries
Almost 25 years ago, Mexico began its journey towards greater
economic openness with a strong focus on international trade
liberalisation and attracting investment.
Along the way, significant changes were made to the Foreign
Investment Law and free trade agreements signed with the world’s
leading economies. The country also achieved a solid and stable
macroeconomic environment that has brought certainty to
companies’ investment decisions.
Today, Mexico has an attractive business environment, legal
certainty, and the world’s largest network of free trade agreements,
widely developed economic sectors and an extremely competitive
cost profile. It is also progressing in terms of infrastructure to make
it a world-class logistics platform.
Mexico’s competitive advantages
Competitive labour costs
Mexico offers significant savings in labour costs. The level of annual
salaries in Mexico is below many European and Latin American
countries, including Brazil, and it is expected to sustain moderate
growth between 2011 and 2015.
Manufacturing costs
Mexico has a better manufacturing cost profile than many countries,
including Brazil, Poland and Taiwan Furthermore, consulting firms
such as Boston Consulting Group, AT Kearney, Alix Partners, KPMG
and PwC have recognised Mexico’s advantages for manufacturing
investment.
Facility of operation
The procedures and time required to open or close a business, or to
obtain a construction permit, are critical to success in international
business.
In Mexico, investors require only 6 procedures and 9 days to open a
business, and 10 procedures and 81 days to obtain a construction
permit. Moreover, only 1.8 days are required on average to close a
business in Mexico, and the recovery rate for creditors and
shareholders is 67.1%.
This is significantly better than countries such as India, Russia and
Brazil, among others.
Operation costs
There are several factors that affect operation costs and, therefore,
company profitability, such as taxes paid on profits, the number of
tax payments (which affects administrative costs) and insolvency
proceedings costs operations in Mexico lead to significant tax
savings compared to economies such as China, India and Brazil. In
terms of number of tax payments, Mexico requires only six payments
per year, which is much more favourable than the average in Latin
America and OECD countries. It is important to note that according
to Global Insight, in 2011 labour costs in Mexico were 35% lower
than Brazil and 87% below Canada.
Accesibility to large markets
Mexico has 12 free trade agreements (FTA) with 44 countries,
making it one of the most open countries to international trade, with
preferential access to more than 1.2 billion potential consumers and
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Nordic investment in Mexico
close to 63% of the world’s GDP. In addition, tariff restrictions on
import of goods in Mexico are lower than in countries such as China
and Brazil. This increases the profitability of companies established
in Mexico, which can access inputs and final products at competitive
prices. Mexico’s network of FTAs gives it a preferential access to the
US and European markets, compared to goods from other countries.
In addition, when using land transportation, Mexican goods have
tariff-free access to the United States, which is a clear advantage
over competitors from around the world.
On the other hand, exporting and importing procedures in Mexico
are few, with only five documents required to complete an export
procedure and four for import procedures. Mexico has an advantage
over many countries in terms of documents required to export.
Legal certainty for foreign investment
Executing Reciprocal Investment Promotion and Protection
Agreements (RIPPA) is part of the Mexican government’s strategy to
grant Mexican and foreign investors a legal framework that
strengthens the protection of foreign investment in Mexico and
Mexican investment abroad.
Generally, RIPPAs cover investment definition, scope, promotion
and admission, investment treatment, expropriation, transfers and
Investor-State/State-Investor dispute settlement.
Mexico’s monetary policy has enabled it to reach inflation levels
close to our main trade partners’. As evidence of this, in 2011 the
country closed with 3.8% inflation, according to INEGI.
Furthermore, WEF’s report places Mexico in 41st position out of 142
in terms of credit risk score.
Favourable exchange performance
In coming years, Mexico will have a better exchange performance in
real terms, compared to many of its competitors in international
markets.
Final remarks
Various factors make Mexico one of the best choices to locate
operations. The country will continue to progress in several areas:
infrastructure, legal certainty, deregulation, safety and commercial
openness, among others, to raise the competitive profile of its
business environment.
The road travelled and the goals set by the Mexican government and
society will make the country a major economic power by the
year 2040.
Companies that choose Mexico as their operations centre will
certainly exceed their medium- and long-term goals.
Mexico has signed 28 RIPPAs to date, the latest executed with
Singapore. Furthermore, some of Mexico’s FTAs have a chapter on
investment that resembles a RIPPA, such as those with the United
States, Canada, Chile, Colombia and Japan.
All this institutional framework provides legal certainty to
companies that decide to establish operations in Mexico.
Low transportation costs
Another advantage is Mexico’s closeness to the world’s main
consumer centres, which enables companies to be more responsive
to sudden changes in demand and reduces inventory costs.
Infrastructure
Mexico has 27,000 kilometres of railroads and 372,000 kilometres
of roads. It has various domestic distribution terminals that connect
to the main sea ports, enabling reduced costs and speedy arrival and
departure of goods.
In brief, Mexico has:
•76 airports (12 domestic and 64 international)
•68 deep sea and coastal ports and 49 coastal ports
•49 customs offices, of which 11 are inland
•3,152 kilometres of border with the United States and 1,149
kilometres with Guatemala and Belize, with a total of 63 border
crossings
Macroeconomic stability
According to the World Economic Forum’s (WEF) latest report on
Global Competitiveness, in terms of Macroeconomic Environment,
Mexico ranked 39th among 142 economies. Mexico has no solvency
issues: its public debt as a percentage of its GDP is below 45%, much
lower than countries such as Brazil, Poland and India. This is backed
by several fiscal measures adopted recently in Mexico, which
reinforce the sustainability of its public finances in the medium term
and the government’s ability to continue to promote improvements
to the country’s infrastructure.
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Introduction
to Mexico
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Nordic investment in Mexico
Mexico in general
Geography and climate
Mexico (officially the United Mexican States) with an area of 1,970,000 square kilometres (760,000
square miles) is the twelfth country in the world in size and occupies the southern part of North
America and part of Central America. It is the third-largest country in Latin America after Brazil and
Argentina. The greater part of the country is a highland plateau bordered on the east, west and south
by mountains. This plateau gradually rises to the south. The southern part of the plateau includes
Mexico City, the political, economic and population centre of the country, located at an altitude of
about 2,240 metres (7,500 feet), one of the highest cities in the world. Almost 50 percent of Mexico,
including the entire northern part of the country is arid or semiarid. Annual rainfall increases toward
the south where there are zones with the highest levels of rainfall in the world; the rainy season
usually runs from May to October, with very little rainfall during the rest of the year, except in the
coastal area near the Gulf of Mexico. Nevertheless, the climate varies widely, in part because of the
wide variation in altitudes in the country and the effect of the Pacific Ocean and the Gulf of Mexico on
the coastal areas.
Mexico City and many other regions in the central part of the country have a semitropical climate.
There are very few regions where it snows regularly in winter, aside from the higher mountains. Most
of the coastal regions have a humid, tropical climate. The Mexico City metropolitan area has an
average mean temperature of 17°C (63°F), with occasional lows of around 0°C (32°F) in December
and January and highs near 30°C (86°F) in April or May before the beginning of the rainy season.
History
For more than 300 years, Mexico was ruled as a tightly controlled colony of Spain. Independence in
1821 was followed by decades of struggle for political power and slow economic development, until
the 30 years of internal peace achieved under Porfirio Díaz around the end of the 19th century. During
that period, the great haciendas, huge areas of land used for cattle raising and farming, reached their
peak, although with little improvement in the economic condition of the great majority of the people.
The Mexican revolution of 1910 was followed by more than ten years of civil war, which almost
completely destroyed the agricultural economy of the country. Accordingly, although Mexican
cultural, social and political life reflects the cumulative development of more than 10 centuries since
the Spanish conquest and the earlier Aztec, Mayan and other civilisations, the economy of modern
Mexico is only some 90 years old, originating in the 1920s.
Political system
Mexico is now a federal democratic republic divided into 31 states and the Federal District (Mexico
City). The federal government has somewhat greater powers than its counterpart in the United States,
particularly in one area: the principal types of tax revenues are reserved to the federal government,
which distributes certain revenues to the states. The chief executive is the President, who is elected for
a period of six years and may not be re-elected. There is a bicameral legislature as well as a judicial
branch. The mayor of Mexico City is elected by popular vote for a single six year term. The Legislative
Assembly (formerly the Assembly of Representatives) of the Federal District is elected every three
years. This assembly is empowered to issue ordinances regarding the day-to-day administration of the
District. All the officials of the Federal District are appointed to office and may serve for more than
one term, although this is unusual. In view of the size and economic importance of the District, its
annual budget is considerably larger than that of any of the states. The state governments are headed
by popularly elected governors, who also serve for single six-year terms. The states have their own
legislatures and judicial systems.
Legal system
In general, legislation follows the pattern of codified law originally based on the Napoleonic Code,
with separate federal and state, civil and other codes, in addition to separate laws and decrees
covering specific subjects. Corporate law, as well as foreign investment, intellectual property
protection, and income and value-added tax laws, among others, are federally governed.
Population
The population of Mexico is estimated at approximately 115 million inhabitants, reflecting a net
annual increase in recent years of about 1.2 percent. Mexico is the most populous country in Latin
America after Brazil. The total population of the country has more than tripled since 1940.
There has been a substantial movement of people from rural areas to towns and larger cities. The
urban population is now considered to represent well over 70.3 percent of the total. Although the
average population density in the country as a whole is only about 53 inhabitants per square
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13
kilometre, that of the individual states of the republic varies widely, from about 13 inhabitants per
square kilometre in the southeastern state of Campeche to more than 5,954 per square kilometre in
the Federal District, consisting largely of the capital, Mexico City.
Mexico City and its surroundings continue to be the largest and most concentrated population centre,
with a disproportionate share of economic activity. However, some efforts have been made by both the
federal and local governments to decentralise industry and foster the growth of other regional
population and business centres.
Language
The national language of Mexico, understood and used by all but a very small number of indigenous
tribes in the interior, is Spanish, although local languages are also spoken by fairly large numbers of
the population in certain areas. English is also understood by many members of the business
community in the capital and larger cities, as well as in the areas bordering the United States.
Religion
Mexico enjoys full religious freedom. Roman Catholicism was for a long time the state religion.
However, the influence of the church has been greatly reduced since the separation of church and
state in the 1860s. A majority of the population still consider themselves active members of the Roman
Catholic Church.
Education
The Mexican federal and state governments provide universal free education through six years of
primary school and three years of secondary school, as well as preprimary. The federal government
also provides the funds for the three largest universities in Mexico City, which, however, operate as
autonomous entities. These universities have established preparatory schools that provide another
three years of education before the university level. Many state governments also finance schools and
universities. Students are charged small fees at the preparatory schools and universities. A large
number of private schools and colleges, as well as full-fledged private universities, some operated by
religious orders, have also been licensed by the Department of Education.
The tremendous increase in population has resulted in an enormous demand for new school facilities
at all levels. The federal government spends nearly 15 percent of its estimated expense budget to
satisfy the demand. Illiteracy has been reduced substantially in recent decades, but percent of the
population over 15 years of age is still classified as illiterate. Particularly in rural areas, many children
are still unable to attend school regularly.
Living standards
As in most developing countries, the distribution of wealth between different segments of the
population is uneven. The standard of living of those in upper- and middle-management positions is
more or less comparable to that of persons occupying similar positions in companies of comparable
size in the industrialised countries. However, the earnings of office, skilled, semiskilled, and unskilled
workers are considerably below those of their counterparts in the industrialised countries. One of
Mexico’s biggest problems is finding employment for its population. Government officials have
estimated that more than 1,000,000 new jobs should be provided each year. Unemployment and
underemployment are considerable and have increased in recent years, although no comprehensive
statistical information is available. The unskilled labour pool is very large in many parts of the
country, particularly outside Mexico City, where the labour force has proved to be easily trained for
semiskilled and skilled jobs. The in-bond processing plants near the U.S. border often achieve
productivity rates 20 to 30 percent higher than those of the United States.
Cultural and social life
Mexico City is considered the most important centre of Mexico’s very active cultural life, particularly
with regard to art, museums, theatres, musical organisations, book publishers, and libraries. Similar
facilities, although less numerous, are also available in the other principal cities and state capitals.
There has been an increasing trend toward participation in many types of sports, and facilities for
spectator sports are widespread. National tourism by automobile, bus and airline has become a major
part of the overall travel industry, particularly during school vacation periods. The many resorts on
the coastlines and in the interior, as well as Mexico’s numerous colonial cities and archeological sites,
are the preferred destinations. Foreign tourism has also been increasing, with Mexico becoming one
of the world’s preferred tourist destinations.
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Nordic investment in Mexico
Social security system
The Mexican Social Security Institute (IMSS) was established in 1942, and the social security system
is in effect in all industrial areas and agricultural zones throughout Mexico. In these areas the
employer’s statutory obligations related to occupational risks are covered by payments of social
security premiums. The Institute provides for employees’ and their dependents’ medical attention,
including hospitalisation and limited unemployment compensation in cases of illness and maternity,
occupational disease and accidents, in addition to disability and old-age pensions. A separate social
security system operates for employees of the government and its agencies.
Benefits
Sickness and disability
The Social Security Institute provides medical and hospital service throughout the country, alongside
private hospitals and many physicians in private practice. It maintains modern hospitals and clinics
providing medical attention to covered employees and provides free medicines, etc. prescribed by its
doctors. If employees are absent from work for more than three days as a result of a nonoccupational
illness, job-related accident or illness or maternity, the institute will pay 60 to 100 percent of their
regular salary during their absence. The employer is relieved of the obligation to pay the salary,
although in some cases, employers pay the difference. A guaranteed minimum salary is payable in the
case of a permanent disability, and benefits to heirs are provided in the case of death.
Pensions
Old-age pensions, as well as those for disability, have been increased in recent years. The pensions are
normally payable from age 65 if the person has paid social security premiums for the required
minimum of 1,250 weeks. Early retirement at reduced rates of pension can be taken from age of 60.
There are minimum guaranty pensions equal to monthly minimum salaries. Employees currently
qualify for one of two different pensions. Employees who began working after July 1, 1997 receive
their pension through AFORE; employees who started working before that date can receive their
pensions through AFORE or through the traditional system.
Retirement Savings System (SAR) and Old Age
In order to supplement retirement pensions under the regular social security system, which have been
deemed insufficient to provide adequate retirement benefits, a Retirement Savings System has been
established. The employer’s contribution per employee is 2 percent of salary, with a wage ceiling of 25
times the minimum wage for Mexico City. The Old Age system includes an additional contribution per
employee of 3.15 percent of salary. These employer contributions will be credited to individual
employees’ restricted interest-bearing bank accounts established specifically for that purpose. The
funds so accumulated over the years may be withdrawn, under certain rules, only upon retirement or
unemployment due to disability and are partially or totally exempt upon withdrawal, together with
any other retirement payments received from the employer, following the general rule for taxation of
pension payments (i.e., pensions are taxable only to the extent that they exceed nine times the
minimum wage). Employees may elect a company authorised to manage the fund (individual account)
for the Retirement Savings System(Administradora de Fondos para el Retiro—AFORE).
Housing
On May 1, 1972, the National Workers’ Housing Fund Institute (INFONAVIT) was inaugurated under
the terms of amendments to the Federal Labour Law and a law establishing the Institute.
Obligations of employers
The Mexican Constitution provides that all agricultural, industrial, mining, and other enterprises of
whatever nature are required to provide adequate housing for their employees; this obligation must be
met by means of contributions in the name of the individual employee. In accordance with the law,
employers are required to contribute 5 percent of the earnings of their employees to the institute,
calculated on the same basis as for social security purposes. Foreign employees of Mexican companies
working in Mexico are also entitled to the housing benefit.
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Wages and salaries
Minimum daily wages are established for separate regions of the country by a National Minimum
Wage Committee working through local committees made up of representatives of government,
organised labour and private industry. Formerly, new minimum wages were approved every year, but
in the past, as a result of the relatively high rate of inflation, minimum wages were sometimes
adjusted more than once a year. In recent years, annual increases have not exceeded the inflation rates
as measured by the National Consumer Price Index. The variation in wage rates in the different
regions has been considerably reduced, and only three different minimum rates are now in effect,
varying from a low of 54.47 pesos per day in some regions to 57.46 pesos per day in Mexico City and in
some regions near the U.S. border.
Fringe benefits
Collective labour contracts often provide for benefits over and above those stipulated by the federal
labour law and other legislation with regard to early retirement, number of holidays, length of
vacations, and a wide range of benefits on which employees pay no tax, such as contributions to
general savings funds. Many taxpayers provide coupons for meals and groceries, which under certain
conditions, are not taxable to the employees.
Paid holidays and vacations
The present law requires that a vacation of six working days be granted after the first year of service,
with an additional two days for each of the next three subsequent years, with an additional two days
for every five years of service after the fourth year. A premium of 25 percent of the regular salary must
also be paid during vacations. Nonunion employees are commonly granted a two week vacation
period.
Termination of employment
An employer in Mexico may dismiss an employee without liability other than the seniority premium
only if there is a cause for the dismissal. The Federal Labour Law lists specific kinds of conduct that
are cause for dismissal: use of false documentation to secure employment; dishonest or violent
behavior on the job; dishonest or violent behavior against coworkers that disrupts work discipline;
threatening, insulting, or abusing the employer or his or her family, unless provoked or acting in
self-defense; intentionally damaging the employer’s property; negligently causing serious damage to
the employer’s property; carelessly affecting work-place safety; immoral behavior in the workplace;
disclosure of trade secrets or confidential information; or commission of other acts of similar severity
to those described above.
An employee may appeal his or her discharge within two months of the dismissal at the Conciliation
and Arbitration Board, an administrative agency charged with resolving labour disputes. The
employer has the burden of demonstrating that the employee has engaged in the conduct described
above. If the employer fails to meet this burden, the employee can request either reinstatement to his
or her position, or a constitutional indemnification equivalent to three months’ full salary, including
premiums, bonuses, commissions,etc., and any fringe benefits. In order to avoid such reinstatement,
employers usually pay the severance compensation. The employee also has the right to receive back
pay with no offset for interim earnings.
The labour law specifies that at the date of termination of employment, the reasons for dismissal must
be presented to the employee in writing. It also provides that employees with more than 20 years’
service can be dismissed only for very serious reasons.
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Nordic investment in Mexico
Legal framework
Forms of business enterprise
The different forms of organisation of business entities in Mexico are regulated by the General Law of
Mercantile Companies (Ley General de Sociedades Mercantiles), the Commercial Code (Código de
Comercio) or the Civil Code (Código Civil). Some of these forms are summarised in the following table:
Principal forms of business enterprise
Stock corporation, stock corporation for the promotion of investment and stock corporation with variable capital.
(These are the forms most commonly used by domestic and foreign investors)
Limited liability company. (Used frequently)
General partnership. (Rarely used by foreign investors because of unlimited liability, unless they want to qualify as a
foreign partnership in the home country)
Partnership with limited and unlimited liability partners.
Civil partnership, i.e., of a noncommercial nature. (Used for non-profit entities and by professional practitioners)
Joint venture contract. This is not a legal entity but is treated as a separate entity for income tax purposes.
Branch of a foreign corporation.
Sole proprietorship. (A foreigner must qualify as a permanent resident “inmigrado” to be able to do business in this way)
(Used by charitable and other nonprofit organisations)
Non-income or income-earning representative office
Corporate law is federal in nature and applies throughout the country. Although civil law is a matter
of state law, the different state Civil Codes are practically identical as to the formation of entities of a
civil nature.
Stock Corporation
One of the most common way for domestic and foreign investors to operate in Mexico is through a
stock corporation (Sociedad Anónima—S.A.) formed under the General Law of Mercantile Companies
(Ley General de Sociedades Mercantiles). In this case, the corporate name selected is followed by the
initials S.A., which indicates that it is a stock corporation. A foreign-owned Mexican corporation is
subject to the laws relating to all local companies in general, as well as to the Foreign Investment Law.
Limited liability company
In most ways, the limited liability company (Sociedad de Responsabilidad Limitada—S. de R.L.) is
similar to a corporation in actual operation. However, as an organisation of individuals, its by-laws
can be drafted in such a way as to give it most of the characteristics of a partnership under the tax
laws of foreign countries, except for unlimited liability.
Partnership
The General Law of Mercantile Companies also provides for partnerships (Sociedades en Nombre
Colectivo), as well as for partnerships with limited and unlimited liability partners (Sociedades en
Comandita), but as a result of the unlimited liability of all or the general partners, as the case may be,
these forms are not common. These forms of business organisation have most of the attributes
associated with the US concept of a partnership because of the unlimited liability of the partners so
designated. Partnerships require at least two partners.
Civil partnership
Professional practitioners are usually organised as a civil partnership (Sociedad Civil—S.C.), which
resembles in many ways the limited liability partnership (S. de R.L.) mentioned above. The managing
partners have unlimited liability, while other partners’ liability is limited to the value of their
contributions (2704 Civil Code). This form is also used by some non-profit entities such as educational
establishments. By definition, these entities should not engage in commercial operations (any
activities involving commercial speculation). The transferability of rights, as well as the admission of
new partners, is subject to approval of all the partners.
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Joint venture contract
Under a joint venture contract (Asociación en Participación—A. en P.), a person grants an interest in
the profits and losses of a specific venture or business to others who provide property or services. Such
a contract has no legal personality, i.e., no separate legal entity is created, and operations are
conducted in the name of the active managing joint venturer (asociante). The asociante is the only
party with any direct liability to third parties. The silent partner (asociado) has no direct relationship
with third parties. The tax treatment applicable to the Asociación en Participación is essentially the
same treatment as regular corporations solely for tax purposes.
Branch of a foreign corporation
A foreign corporation can be registered to operate in Mexico, with full access to the local courts,
through a branch office (Sucursal de sociedad extranjera) after complying with certain formalities
and obtaining the approval of the Mexican government through the Department of the Economy.
Sole proprietorship
As in many Western countries, the sole proprietorship (comerciante/persona física) is a very popular
form of organisation for small businesses. However, the element of unlimited liability generally
inhibits the use of this form of organisation for large operations, particularly in view of the substantial
amount of severance pay that may accrue in favor of employees. Moreover, resident aliens may engage
in business activities only if their immigration status is that of permanent resident (inmigrado).
However, in some instances, it has been concluded that non/resident individuals with a taxable
permanent establishment might operate under the same principles as branches of foreign entities.
Nonprofit organisations
Charitable and other nonprofit organisations take the form of a civil association (Asociación Civil—
A.C.), whose charter prohibits the distribution of profits to its members.
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Nordic investment in Mexico
Tax System
The corporate taxes in Mexico are levied by the federal government. No corporate income taxes are
levied by local governments and the main federal taxes payable in Mexico are:
•Income tax
•Flat tax (repealed as from January 1st, 2014)
•Value added tax
•Social security and federal housing contributions (Employment taxes and contributions)
Local taxes include:
•Payroll taxes
•Tax on transfer of real estate (paid by the purchaser)
Corporate income tax
•Rate: 30%
•Certain deductions allowed (returns and discounts on sales, cost of sales, net expenses, investments,
i.e. depreciation or amortisation of fixed assets/deferred expenses)
•Deductible expenses must comply with several requirements, e.g. to be “strictly indispensable” for
the business activities of the taxpayer
•Corporate tax advance payments are calculated on current year’s revenues multiplied by a “profit
factor” determined on prior year’s figures (taxable income/total revenues)
•Tax Losses (NOL’s) are deductible over a ten year carry-forward period
•Transfer pricing – arm’s length / OECD compliant
VAT
Calculated on a monthly basis, at 16%, on a cash flow basis
•Taxable activities:
•Sale of goods
•Rendering of services
•Leasing of goods
•Import of goods and services
•Output VAT on cash receipts for goods or services, can be credited with input VAT paid to suppliers
of goods and services
•Credits or refunds for overpayments are available
Local taxes
•Most relevant state and local taxes in Mexico:
•payroll tax, with no limit
•annual property tax on cadastral value of property
•real estate transfer tax on appraised or fair market value
•Deductible for Mexican income tax purposes
•Tax rates depend on state where the employees or property are located
Social security contributions
Employers and employees are required to make contributions to the system, based on daily salary
caps, depending on area where the work is performed. Maximum Social Security contribution is
approximately US$ 9000, yearly, once the maximum salary cap is reached.
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Employees statutory profit sharing (“PTU”)
•Every entity with employees is required to distribute a portion of its annual profits amongst all of its
employees
•10% of entity’s taxable income, adjusted to eliminate inflation, apply straight line depreciation ,
eliminate NOL’s and to add dividend income
•All employees entitled (except directors, administrators and general managers)
•Not payable during the first year of operations and limited to one month’s remuneration in certain
activities such as real estate rentals and professional service firms.
•Tax year end matches calendar year (i.e. from January 1st to December 31st)
•In the following cases an irregular tax year exists:
•Incorporation: from the date of incorporation to December 31st
•Merger: from January 1st to the date of merger
•Split (spin-off): from January 1st to the date of split, applicable to entity created in spin-off or
when original entity disappears
•Liquidation: from January 1st to the date when the liquidation process begins
•The period from the beginning to the end of the liquidation is deemed to be a single fiscal period
Annual tax opinion
Certain taxpayers are required to obtain an annual tax compliance opinion issued by a certified public
accountant (CPA), known as the “dictamen fiscal” which must be filed together with audited financial
statements and detailed schedules, no later than June 15th of the following year. The dictamen fiscal
is signed by the CPA and normally states that no irregularities were observed or remain in respect
with the taxpayer’s compliance with its federal tax obligations in the prior fiscal year. Any unresolved
omissions or situations must be disclosed. This certification process became elective for most other
companies, but it is widely elected, because it provides shareholders and management a greater level
of comfort on the entity’s tax compliance.
Tax audits
•Tax authorities reviewing a taxpayer who has filed a dictamen fiscal for the year under review must
review, first, the working papers of the CPA issuing the tax opinion.
•If the authorities are satisfied with the information provided by the CPA, the procedure stops there;
otherwise, they will request the information directly from the company.
•Tax authorities may carry out tax inspections both at the taxpayer’s facilities and at the authority’s
offices. Tax audits should be concluded within the following 12 months after the audit was initiated.
This term may be suspended in some specific cases such as a strike.
Statute of limitation
The statute of limitation is five years as from the date the last annual tax return was filed. In some
cases, the statute of limitation is extended to ten years when the taxpayer is not registered in the
Taxpayer Registry or when has no accounting books or has not filed an annual tax return, when one
was required.
Federal Tax incentives
Mexico opened its doors to foreign investment, providing the following federal incentives up to 2014,
when most incentives were suspended, with only the following still available:
•Research and development (R&D)
Taxpayers involved in certain R&D projects are granted a cash subsidy to be yearly determined by the
tax authorities, based on a budget approved by the Mexican Congress.
A 100 percent deduction is allowed for investments in assets intended to produce renewable energy.
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Nordic investment in Mexico
•Employment incentives
Consisting of a credit equivalent to 100% of the income tax corresponding to the salary paid to
employees with certain disabilities and 25% extra deduction for salaries paid to employees over 65
years.
•FIDECINE
Taxpayers may apply a tax credit of the amount contributed to investments in Mexican motion picture
productions as well as in Mexican theatre production, against IT.
•Other incentives
•Zero rated VAT for exports
•VAT and import duties are waived on temporary import programmes to produce exports (IMMEX
– Maquiladora Regime) – 2014 Tax Reform restricted the qualification for these incentives
•Sectorial Relief Programme
The Sectorial Relief Programme provides preferential import tariff on goods intended for production,
regardless of the country of origin.
State and Local Incentives
Some state governments are willing to grant incentives to attract new industries, often in the form of:
•reduced prices or grants for land for industrial use
•reductions in property and payroll taxes for agreed periods of time
•development of infrastructure (roads, electrical power, water and sewage)
•Training centres or special programmes at state universities
To maximise the local incentive investments as well as to obtain legal certainty on the delivery of
those incentives, beyond any change in the government structure, an agreement or formal ruling
should be obtained from the local authorities and the review of certain legal documents is
recommended.
Tax amendments affecting Nordic companies doing business in Mexico
1.Within the new Income Tax Law:
•Introduction of a 10% dividend tax (reduced by the tax treaty).
•Elimination of most tax incentives.
•New restrictions on deductibility of related party payments.
•Restriction on deductibility of exempt salaries or benefits.
•Increases in tax rates for individuals and certain foreign tax payers from 30% to 35%.
2.New rules for maquiladoras.
3.Government Mining Royalties of 7.5% in general, plus 0.5% for precious metals, apply from 2014.
Flat tax (“IETU”) – repealed as from January 1st, 2014
•17.5%
•Cash flow basis (taxable cash income collected, less certain cash deductions)
•Taxable income:
•sale of goods
•independent services
•leasing of goods
•Royalties to related parties and the most interest are excluded
•Excess of expenses over income (multiplied by the flat tax rate) produce a credit available to carry
forward for 10 years
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Macro-economic
analysis
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Nordic investment in Mexico
Mexico in the world
Mexico is the first Latin American country to have joined the OECD in 1994, and it is also the first
country in the region to have assumed the Presidency of the G20 in 2012. Advocate of free trade at the
bilateral, (trans/sub) regional and multilateral levels, Mexico is the only OECD country to benefit from
free trade agreements with both the United States, Japan and the EU in addition to being a member of
the World Bank since 1945 and a key actor in the Inter-American Development Bank (IDB ).
Mexico signed an agreement with the European Union in 1997, which entered into force in 2000.
Since 2008, Mexico is one of 9 countries linked to the European Union through a strategic partnership
with regular consultations and summits realised every two years. As the first Hispanic country in the
world, Mexico has been very active in the multilateral forums (UN in particular), and Mexico received
increased visibility on the world stage with the organisation of the 16th Conference of Parties to the
UN Climate Convention in Cancun (COP 16). Anchored in North America via NAFTA, it is a member of
Forum for Asia-Pacific Economic Cooperation (APEC) since 1993. Mexico has strengthened its
participation in the integration process in Latin America especially in Central America through the
Mesoamerica Project (2008), and its entry as an observer to the Central American Integration System
(SICA). Mexico was among the promoters of the Community of Latin American and Caribbean States
(CELAC - 2011) and has been actively involved in the construction and development of Pacific Alliance
(2012-) without forgetting Mercosur in which Mexico is an observer.
It is not a member of the BRICS but it belongs to the “ MINT” countries (Mexico, Indonesia, Nigeria
and Turkey) whose economic development is closely monitored due to the positive growth trends.
Subsequently, Mexico is an emerging economy with a very promising future.
Mexico in Latin America
Mexico is the 2nd economy in Latin America and the 14th world economy with GDP of € 891.7 billion
in 2012 and 11th by purchasing power parity (PPP).
The average economic growth is around 3% over the past twenty years.
Mexico remains a two-speed economy:
•The country is very attractive for foreign investors and countries whose per capita income is one of
the most important in the region;
•It still has the characteristics of a developing country with high inequality ( between urban and
rural areas , between North and South in particular) with an important informal economy).
Mexican economy
Overview
Mexico has a mixed economy, with the government, its agencies and government owned or –
controlled companies dominant in the areas of public utilities and petroleum. Private enterprise is the
principal factor in manufacturing, mining, commerce, entertainment, and the service industries,
including construction and tourism. During the 80’s and 90’s, the government sold a number of its
holdings to private enterprises in what are classified as nonstrategic industries. Foreign investment is
found most frequently in the manufacturing, mining and financial sectors. The economy is fairly
broad-based and dedicated mainly to supplying the needs of the large and rapidly increasing
population. However, proximity to the United States also provides a large market for the export of
manufactured and semi-manufactured goods.
Inflation
Since 1973 Mexico, has had high rates of inflation with concurrent substantial devaluations of the
Mexican currency. However, as a result of the measures then agreed on by the federal government
and organised labour, farmers and private enterprise, inflation was brought down to approximately 9
percent in 1994. Although the 1994 devaluation resulted in inflation of 52 percent in 1995, in recent
years, the inflation rate dropped to one digit and may be considered comparable with Mexico’s
commercial partners (i.e. the USA and Canada). The inflation rate for 2013 was 3.97 percent and is
estimated to lie at levels close to the 3 percent target for most of 2014.
(worldbank.org) (http://www.oecd.org/)
2
PwC Mexico
23
Growth of the Mexican Economy
The Mexican economy has shown positive results in recent years (except in 2009, the year of global
crisis), even greater than those of its main Latin American competitor, Brazil. The Mexican economy
recovered from a severe drop generated by the 2008-2009 global financial crisis and the economy
experienced an average annual growth of 4.3 % between 2010 and 2012. More recently, weak
external demand led to stagnation in growth and prompted the Ministry of Finance to lower its
growth projection for 2013 to 1.8 %. The economy slowed abruptly in the first half of 2013, principally
due to the delayed effects of weak export demand spilling over to the rest of the economy, thereby
hurting consumer and investor confidence. As external conditions improve and government
expenditure is stepped up, growth should rebound in 2014 and 20152.
The expected GDP growth is forecasted at 3.4 % for 2014 according to the IMF. The economic health
of Mexico, however, depends on the strength of its sales abroad, particularly the United States. In the
recent years Mexico has received increased volumes of capital flows, which has enabled it to achieve
historically low levels of interest at the international markets (5.32 % for 30 years and 4.64% for 10
years in June 2013).
Financial situation of Mexico
Mexico has one of the best risk ratings in Latin America (EMBI +) and JP Morgan and other
international rating agencies have given it the classification “Investment grade” (Standard & Poor’s ,
Moody’s and Fitch) recognising the stability of its political institutions, the independence of the
Central Bank and the prudent macroeconomic policies pursued by the authorities in recent years
(including the requirement of a balanced budget and prudent management of the Bank) . The action
of the Central Bank is particularly noteworthy: policy inflation target (3% with + / -1 point) to limit
the rise of price at 4.4 % in 2010, economic recovery and rising food prices. Inflation displays a
remarkable stability - 4.09 % the end of June 2013, reflecting the tight monetary policy (the total
government deficit was 3,7% of GDP in 2012). The relative weight of external debt was reduced
gradually while the external credibility of the country was restored : the rating agencies have given
Mexico the investment grade since 2000. The Mexican government is the first Latin American
borrower in the international market. Given the quality of the policy mix, IMF renewed its confidence
in Mexico by giving the country, as a precaution, its 4th Flexible Credit Line in November 2012 for a
total of $ 73 billion for a period of two years.
However, the financial stability of Mexico has been affected by a decline in oil production, while oil
revenues still account for over one third of budget revenues and match 14.3 % of total exports in 2012.
Given the planned reduction in the future, Mexico has undertaken the first step with the recent energy
reform to reduce its dependence vis-à- vis oil revenue.
Fiscal and economic policies
Mexico has obvious economic advantages, and some of the industrial groups are competitive players
on the international scene with solid financial systems. Mexico benefits from a coherent governance,
and the severe problems caused by the repeated crises of the 1980s and 1994 led successive
governments to pursue prudent and consistent macroeconomic policies. It allowed the government to
undertake consolidation of public finances and have leeway, admittedly modest, for adopting
countercyclical measures as was the case in 2009. During his tenure (2006-2012) President Felipe
Calderón was able to achieve some structural reforms long overdue including pension reform in the
civil service, electoral reform, Pemex restructuring and redeployment of energy sector, etc. The
current President Enrique Peña Nieto, in power for more than a year, has already passed various
reforms, including labour, education, telecom, fiscal and energy.
24
Nordic investment in Mexico
Treaties and Agreements
Its political opening facilitated bilateral and multilateral agreements, strengthened its dynamic
economy, and over the years Mexico has become a regional market power. Its first steps in the field of
economic cooperation at the multilateral level date back to 1980 with the accession to the Treaty of
Montevideo establishing the Latin American Integration Association (LAIA ). Thereafter, Mexico
joined the GATT in 1986. In the wake of NAFTA in 1994, Mexico became a champion of bilateral
agreements. Decreasing the strong dependence of the Mexican economy vis-à- vis the its northern
neighbour remains a priority of the authorities. A strategy of trade diversification was implemented
which has already led to the signing of 12 free trade agreements with 44 countries. The free trade
agreement with the EU was signed in 1997 and entered into force in 2000. In January 2013, Mexico
informed the European Commission of its desire to modernise the FTA. The negotiations include
deepening existing provisions but also including new areas such as services, investment, public
procurement, trade rules. A Joint Working Group was formed to work on the modernisation of the
agreement3.
3
Agreement
Coverage
Date of signature
Entry into force
North American
Free Trade Agreement
Goods and services
December 17, 1992
January 1, 1994
Costa Rica - Mexico
Goods and services
April 5, 1994
January 1, 1995
Nicaragua - Mexico
Goods and services
December 18, 1997
July 1, 1998
Chile - Mexico
Goods and services
April 17, 1998
August 1, 1999
European Union - Mexico
Goods and services
December 8, 1997
July 1, 2000 (goods)
October 1, 2000 (services)
Israel - Mexico
Goods
April 10, 2000
July 1, 2000
Northern Triangle - Mexico
Goods and services
June 29, 2000
March 15, 2001;
June 1, 2001
EFTA - Mexico
Goods and services
November 27, 2000
July 1, 2001
Uruguay - Mexico
Goods and services
November 15, 2003
July 15, 2004
Japan - Mexico
Goods and services
September 17, 2004
April 1, 2005
Colombia - Mexico
Goods and services
June 13, 1994
January 1, 2011
Peru - Mexico
Goods and services
April 6, 2011
February 1, 2012
Central America - Mexico
Goods and services
November 22, 2011
Pending
(http://europa.eu/rapid/press-release_MEMO-13-915_en.htm)
PwC Mexico
25
Trade and trade balance
Trade in goods from Mexico rose 5.9 % in 2012, confirming the steady recovery started in 2010. With
370.9 billion dollars of exports and nearly 370.8 billion dollars in imports, Mexico remains the largest
trading power in Latin America. Most of the trade consists of manufactured goods (81.4 % of exports)
including cars, electrical and electronic goods, as Mexico is acting as an assembly platform for North
America. Trade patterns remain highly dependent of the U.S. economy, as the United States alone
receives 77.6 % of exports and 49.9 % of imports. The policy of trade diversification seeks to overcome
this dependence, and new initiatives like Pacific Alliance could further boost the recovery of the
Mexican foreign trade.
Mexican trade has evolved considerably since the signing of the free trade agreement with NAFTA and
the series of trade agreements that followed. Today more than 90 % of Mexican trade is governed by
free trade agreements. Consequence of this opening is that foreign trade accounts for 60% of GDP in
2012 compared to 27% in 1993. Since 1994, annual exports grew by 12.6 % in average, and imports
by 11.4 %. After a deteriorating trade deficit that peaked in 2008 with minus $ 17.5 billion, Mexico has
improved markedly since then with the trade balance recording a surplus of $ 163 million in 2012.
Mexico is the first country in Latin America with a total of more than 740 billion in trade, and the 12th
worldwide, with 2 % participation in global exports. Between 1993 and 2012, sales abroad increased
more than fivefold, thanks to the liberal trade policies. However, Mexico is very dependent on its oil
exports. The country is, according to the WTO, the 16th largest oil importing country in 2012. The
imports have increased considerably since the implementation of NAFTA and the weight of North
America in imports and exports remains very strong. However, since the late 1990s, this trend has
shifted in favour of Asian countries and, to a lesser extent, to European Union.
The Pacific Alliance Treaty
Two years after its official launch, the Pacific Alliance (including by 4 countries already interlinked
through trade agreements: Mexico, Colombia, Peru and Chile) has established itself as a modern
integration process with political and economic cooperation in a regional panorama marked by
various integration projects of the previous generation (MERCOSUR , CAN ). This integration has
raised the growing interests of many states. In its quest for regional leadership, Mexico has made
Pacific Alliance vector of its foreign policy in Latin America.
1. A dynamic and innovative regional process
Vast market of nearly 210 million consumers (36% of the population of Latin America and Caribbean - LAC) , the Pacific
Alliance appears to be a dynamic and significant from an economic point of view: its overall GDP between 2003 and 2012
increased by 115%. It consists of 35% of GDP in the LAC region (2,010 billion in 2012) and almost half of trade in goods in
the region with the rest of the world. It also hosts 37 % of the flows FDI in LAC. Based on a pragmatic method (limited
number of participants, the existence of prior commercial ties and weak institutionalisation ), 4 member states have been
able to infuse a positive dynamic that has lead to concrete results: free movement of goods and people, promotion of
foreign trade and tourism, many cooperation projects and active involvement of the private sector.
2. A myriad of opportunities for Mexico in its quest for regional leadership
Mexico’s participation in the Pacific Alliance meets its commercial diversification strategy. This regional commercial
power, bound by agreements with 3 other member states, has an interest to deepen its ties with them as they offer a
growing market. As the Pacific Alliance also seeks to strengthen relations with other Latin American and the Caribbean
states, Mexico is anxious to assume a regional leadership. The Alliance allows it to join with other countries favouring
economic liberalism and pose an ideological counterweight to the ALBA, the MERCOSUR countries which do not hesitate
to resort to protectionist measures including Argentina and Brazil.
3. Cali, a decisive summit
The 7th Summit in Cali (presidential meeting May 23, 2013 ) was a turning point in the history of this process, and the four
countries dealt with critical issues (geostrategic and economic ambitions ) for the development of the project:
participation of other states, under institutional, trade and integration, services and capital, cooperation projects and free
movement of people and export promotion.
26
Nordic investment in Mexico
Foreign Direct Investment
In terms of foreign direct investment, many agreements have been signed by Mexico. To attract
foreign investment is a major challenge for the country that wishes to remain a leader in this area in
Latin America. So far, 27 agreements for the reciprocal promotion and protection in investments have
been concluded. This makes Mexico a good place to invest and an ideal platform to export. The two
most important agreements are NAFTA and FTA with the European Union. Foreign investment in
Mexico focuses mainly around the border towns with the U.S and large industrial centres such as
Guadalajara, Queretaro, Monterrey and Puebla. The Yucatán peninsula attracts much foreign
investment in the tourism sector.
Mexico receives significant amounts of FDI. In 2012, it was the fourth FDI receiver in Latin America
after Brazil, Chile and Colombia. However, these figures do not reflect the wider trend which places
Mexico as the second largest FDI recipient country in Latin America (in 2011) and the expectations for
2014 seem positive. That would place Mexico among the top then in the world for the most attractive
countries in terms of FDI. The share of FDI from the European Union is, in turn, around 37 % of FDI
received by Mexico. Over the period of 2000-2012, FDI mostly came from the United States, followed
by Spain, the Netherlands , Canada, the United Kingdom and Switzerland.
Government incentives for foreign investment
In terms of economic development policies, one of the priorities for Mexico is to attract foreign direct
investment. The promotion of foreign investment in Mexico is conducted by the Ministry of Economy,
Development Bank (NAFINSA), the Bank for Export Promotion (BANCOMEXT) and the Secretaries of
the Economic Development in different states. The Mexican federal government and many states offer
incentives to foreign manufacturers.
Historical granting of government incentives
In the 1970s and 1980s Mexico gave large incentive packages for investment to attract foreign
manufacturers to respond to a high rate of unemployment in the country. These policies were initiated
to create manufacturing centres to the border and in the parts of the country where few jobs were
available. Significant packages were provided to major car, electronic and consumer goods
manufacturers. To ensure that these companies were successful in Mexico, packages were also offered
to their suppliers.
In the 1990s, the best incentives were offered to foreign businesses manufacturing in certain
geographical areas and belonging to certain industries. The electronics industry in Guadalajara,
Tijuana and Juarez was first developed by government incentives as was the case of the automotive
sector, which has migrated from the United States and Europe to Saltillo, Leon, Toluca and Puebla.
Training programmes to increase the skill level of workers, subsidised goods and real estate, were
offered. Thanks to the successful government policies, Mexico has reached its goal of becoming a
manufacturing platform for North America.
Industrial parks and free zones
The free zone is a limited geographical area benefiting from incentives including exemption from
customs duties and preferential tax and social treatment. Their goals are to:
•create jobs;
•strengthen the trade balance by supplying currency and an increase in exports;
•contribute to greater inter-industry integration (developed countries - developing countries) and
raise the international competitiveness of the domestic industry;
•elevate the competence of workers and promote the development and transfer of technologies;
•maintain the workforce on site and thus curb immigration.
In 2003, the first free zone of Mexico was created in the state of Nuevo León. Since then, over eighty
industrial parks have been opened. Several industrial parks have sprung up over the last decade
across the country, providing land for infrastructure construction and equipment. Land is generally
available with loans, and sometimes they are given or sold at discounted price in order to promote
construction of new plants.
Mexico’s accession to the North American Free Trade Agreement (NAFTA) changed the naming of free
zones, now divided into two categories: Processing zones (border areas); the free regions (border
regions).
PwC Mexico
27
The pattern is the same for both categories, the difference being that the zones are located along the
northern border, while the free areas include entire states (including Oaxaca, Chiapas, Quintana Roo,
Baja California, Baja California Sur, Sonora). The main industrial parks are located in Queretaro,
Toluca, Naucalpan San Andres Atoto, Puebla, Guadalajara and Monterrey.
Project financing
Once a foreign investor has decided to move to Mexico, it is important to know that there are
programmes and national organisations that support companies in funding.
Among these is PYME programme to support micro, small and medium enterprises, which is led by
the National Institute of Entrepreneurship (“Instituto Nacional del Emprendedor” INADEM) created
in December 2012 in collaboration with the government of Enrique Peña Nieto. To be eligible for
funding, projects must address one of the following objectives:
1.Strategic sector and regional development programmes:
•Development of the supplier;
•Regional competitiveness;
•Economic recovery;
•Economic recovery for the National Programme of the prevention of violence and social crime,
and the National Campaign against hunger;
•Support to Regulatory Improvement projects;
2.Business development programmes :
•Building and strengthening connections between the states;
•The creation and strengthening of business incubators and incubation networks;
•The realisation of events that promote strategic sectors , linkages and entrepreneurship;
•Awareness campaigns and workshops for culture and entrepreneurial skills ;
•Promote innovation initiatives ;
•Bonus for ingenuity, innovation and invention for entrepreneurs and small businesses;
3.Programmes for entrepreneurship and financing :
•Access to finance ;
•The development of the venture capital system;
4.Programmes for micro, small and medium enterprises:
•Capacity building;
•The development and acquisition of concessions;
•The integration of global production chains SMEs;
•The development of exportable products and services.
28
Nordic investment in Mexico
A second programme includes the funds to support research, development and innovation through
National Council for Science and Technology (“Consejo Nacional de Ciencia y Tecnología” CONACYT). CONACYT, an institution that regulates and supports excellence in the areas of science
and technology, also has the task of allocating funds for projects with innovation, which may
contribute to the development of the country. Among the types of resources available are:
1.Sector funds: organisations and entities of the federal government, in collaboration with
CONACYT, can allocate resources for scientific research and technology development in specific
sectors.
2.Mixed funds: they are a tool to support the development of science and technology and
municipalities. They must involve municipal, provincial and federal governments.
3.Institutional funds: CONACYT has launched many targeted funding to meet and support the needs
of the scientific community and technology. Among them are:
•Institutional Fund of CONACYT (HAY)
•Institutional Fund for Technology
•Regional Institutional Development Fund for Science, Technology and Innovation (FORDECYT)
•Institutional Fund for Science
•CIBIOGEM Fund
•IDEA Programme
4.International Fund: a fund for international cooperation for the promotion of scientific and
technological research, with common projects between Mexico and the EU.
5.Institutional support: a fund granted to support scientific research, technology development and
innovation, by individuals or entities in the public and private sector. The approval of the Director
General of CONACYT and the support of the Institutional Commission(IAC) are required.
6.Programmes to stimulate innovation: support programmes for businesses to invest in research,
technological development and innovation for the creation of new products, processes or services.
Today, in order to remain competitive, Mexican government still offers a set of incentive packages to
foreign investors. These incentives vary by location, sector, level of financial investment, types and
number of jobs created and the expected long-term benefits. PROMEXICO has a map of investments in
the country to illustrate the incentives offered by each state and facilitate the process of selecting the
geographical area. This investment map of Mexico4 offers information on competitive advantages,
infrastructure tenders, the human capital, demographic components, the presence of strategic
industries and industrial parks.
4
(http://mim.promexico.gob.mx/wb/mim/inicio)
PwC Mexico
29
Nordic investment
in Mexico
30
Nordic investment in Mexico
Bilateral relations and agreements
The most important agreement regulating commercial relations between Mexico and Nordic countries
is the Mexico-European Union Free-Trade Treaty (MEUFTT), which went into effect in July 2000.
Among its principal objectives are to promote the exchange of goods and services, liberalise
commerce, attract materials and technologies for Mexican companies, encourage direct investment
and increase opportunities and strategic alliances.
There is also the Agreement for Reciprocal Promotion and Protection of Investments (APPRI), which has
been in effect since July 2000 with Finland; September 2000 with Denmark; and July 2001 with Sweden.
The Mexico-Nordic juridical framework also includes an Economic Cooperation Agreement (1980
with Denmark; 1975 with Finland); a Double Taxation Treaty (1997 with Denmark; 1998 with
Finland; 1995 with Norway; 1993 with Sweden) and an Agreement for Scientific and Technical
Cooperation (1983 with Denmark; 1980 with Sweden) as well as Mexico-European Union Cultural
Agreement and Agricultural Agreement. Furthermore, a Memorandum of Understanding on
Cooperation between the Government of Sweden and the Government of the United Mexican States
on behalf of the National Council of Science and Technology was inaugurated in 2011. In 2013,
Sweden has also signed a Letter of Intent on cooperation in the Field of Health and Social Assistance
and a Memorandum of Understanding on Cooperation in Export Credits.
Nordic FDI
Nordic investment in Mexico has remained relatively stable during the time period from 2001 to 2013,
especially in the case of Finland and Norway, with Finnish FDI experiencing its peak in 2003 and
Norwegian one in 2009. Danish and Swedish FDI has experienced growth with Danish FDI peaking in
2001 and 2006 and Swedish one in 2004 and 2010.
Sweden continues to represent the biggest investment among the Nordic countries, with Denmark on
the second place, followed by Finland and Norway. This trend is evident in the number of companies
with Sweden having 150 companies and representatives in Mexico, Denmark 58, Finland 38 and
Norway 29 with the total of over 200 Nordic companies.
600
SWE
DK
NOR
FIN
400
200
0
-200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Secretaría de Economía.
Mexico-Denmark bilateral trade
•In 2012, Denmark was in 50th place in Mexico’s total commerce (40th as a supplier and 46th as a
purchaser). It was in 14th place among the countries of the European Union.
•Trade relations between Mexico and Denmark grew by 206% from 2002 to 2012, from $214 to $656
million dollars (md), for an average annual growth rate of 11.8%.
•Exports grew 414% from 2002 to 2012, from 37 to 190 md, for average annual growth of 17.8%. On
the other hand, imports increased by 163% in that same period, rising from 177 to 466 md in 2012
for an average annual growth rate of 10.1%.
•In 2012, overall trade between Mexico and Denmark grew 17% over 2011, according to Bank of
Mexico figures. In that same period, Mexican exports to Denmark showed growth of 65%, while
Mexican imports from Denmark rose by 5%.
•At the 2012 closing, Mexico showed a 276 md deficit in its balance of trade with Denmark.
PwC Mexico
31
Bilateral commerce Mexico - Denmark
millions of dollars
600
400
200
0
-200
-400
-600
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Exports from Mexico to Denmark
Imports from Denmark to Mexico
Commercial scale
Source: Banco de México.
Mexico - Denmark bilateral trade ratio (millions of dollars)
Reporting country: Mexico
Mexico - Denmark bilateral trade ratio (millions of dollars)
Reporting country: Denmark
Indicators
2010
2011
2012 Jan-Nov
Indicators
2010
2011
2012 Jan-Nov
Total trade
Annual variation
647
48%
559
-14%
608
18%*
Total trade
Annual variation
555
57%
517
-7%
534
14%*
Mexican exports
to Denmark
Annual variation
119
116
174
120
149
175
84%
-3%
74%*
Mexican exports
to Denmark
Annual variation
27%
24%
32%*
Mexican imports
from Denmark
Annual variation
528
443
434
435
368
359
42%
16%
5%*
Mexican imports
from Denmark
Annual variation
68%
15%
7%*
Balance of trade
-409
-327
-260
Balance of trade
-315
-219
-184
Source: Banco de México. *Variation from the same period in the preceding year.
Source: Global Trade Atlas. *Variation from the same period in the preceding year.
The principal products traded between Mexico and Denmark in 2012
Products exported
from Mexico to Denmark
% Part
Products imported
from Denmark to Mexico
% Part
Pumps for liquids; elevators for liquids
16%
Other toys; reduced scale models and simple models
11%
Turbojets, jet engines
and other turbines
16%
Medications
10%
Automatic data processing devices
15%
Smelting boxes; molds for metal, glass and plastic
6%
Centrifuges; liquid
and gas filtering devices
8%
Agglutinating preparations for molds
4%
Electric motors and generators
7%
Enzymes; enzyme preparations
4%
Other toys; reduced scale models
and simple models
7%
Machines designed to: wash dishes; fill, cap
or label containers; pack merchandise;
inject gas into beverages
4%
Hollow iron and steel pipes and profiles
6%
Automatic regulation or control instruments
4%
The rind of citrus fruits, melons
or watermelons
4%
Accessories and similar items for pipes
3%
TV sets; monitors and projectors
4%
Components for product manufacturing (item 9802)
3%
Vegetable juices and extracts;
pectin-containing material; thickeners
2%
Parts for electric motors, generators and converters
2%
Subtotal
85%
Subtotal
51%
Other products
15%
Other products
49%
Total
100%
Total
100%
Source: Global Trade Atlas.
32
Nordic investment in Mexico
•94% of Mexican exports to Denmark in 2012 were manufactured goods, principally submersible
pumps, turbojets and jet engines, memory units for computers and dryer filters. On the other hand,
99% of Mexican imports from Denmark consisted of manufactured goods, principally construction
toys, medications and boxes and plates for injection molding.
FDI
•In 2012, Denmark was the 12 largest investor in Mexico. Of European Union countries, it was in the
eighth place.
•From January 1999 to December 2012, Danish companies invested 1,761.7 million US dollars (md)
in Mexico. 37% of that investment went into the manufacturing industry, 21% to real estate
services, 18% to the trade sector and 11% to the transportation, postal and storage sector.
•The federal entities with the highest level of Danish investment are Nuevo León, The Federal District
and the State of Mexico.
•A total of 108.5 md of Danish investment was recorded in Mexico, mostly in the contraction sector.
•At the 2012 closing, there were 202 companies of Danish origin with investments in Mexico.
•The 500 largest companies in Mexico published by Expansión (2012 issue) include one Danish
company: ISS Facility Services, in 438th place.
Denmark’s FDI in Mexico (flow, millions of dollars)
300
millions of dollars
250
200
150
100
50
0
-50
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Secretaría de Economía.
PwC Mexico
33
Mexico-Finland bilateral trade
•In 2012, Finland was in 54th place in Mexico’s total trading partners (44th as a supplier and 59th as
a purchaser). It was in 16th place among the countries of the European Union.
•Trade relations between Mexico and Finland grew by 221% from 2002 to 2012, from $163 to $523
million dollars (md), for an average annual growth rate of 12.4%.
•Exports grew 733%, from 12 md in 2002 to 100 md in 2012, for annual average growth of 23.6%.
Imports grew 180% in that same period, from 151 to 423 md, for annual average growth of 10.9%.
•At the 2012 closing, Mexico showed a 323 md deficit in its balance of trade with Finland.
Bilateral commerce Mexico - Finland
millions of dollars
600
400
200
0
-200
-400
-600
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Exports from Mexico to Finland
Imports from Finland to Mexico
Commercial scale
Source: Banco de México.
Mexico - Finland bilateral trade ratio (millions of dollars)
Reporting country: Mexico
Mexico - Finland bilateral trade ratio (millions of dollars)
Reporting country: Finland
Indicators
2010
2011
2012 Jan-Nov*
Indicators
2010
2011
2012 Jan-Nov*
Total trade
Annual variation
438
-46%
478
9%
494
13%
Total trade
Annual variation
315
37%
350
11%
354
9%
Mexican exports
to Finland
Annual variation
64
74
95
79
125
96
-88%
15%
42%
Mexican exports
to Finland
Annual variation
-11%
58%
-15%
Mexican imports
from Finland
Annual variation
374
404
399
236
225
258
31%
8%
8%
Mexican imports
from Finland
Annual variation
67%
-4%
23%
Balance of trade
-310
-330
-303
Balance of trade
-157
-100
-162
Source: Banco de México. *Variation from the same period in the preceding year.
34
Nordic investment in Mexico
Source: Global Trade Atlas. *Variation from the same period in the preceding year.
•In 2012, 97% of Mexican exports to Finland were manufactured goods, principally automobiles
used in tourism, mobile phones and auto parts, particularly suspension shock absorbers, axles with
chain blocks and tractor body parts. Mexico also exported coffee and malt beer to Finland. On the
other hand, 99% of Mexican imports from Finland were manufactured goods, principally paper and
cardboard, construction machinery (such as hydraulic front loaders) and freight vehicles.
The principal products traded between Mexico and Finland in 2012
Products exported
from Mexico to Finland
% Part
Products imported by Mexico from Finland
% Part
Automobiles for use in tourism and other motor
vehicles
44%
Paper and cardboard coated on one or both sides
with kaolin
13%
Telephones, including mobile phones and
phones for other wireless networks
31%
Bulldozers, graders, mechanical shovels,
excavators, etc.
8%
Motor vehicle parts and accessories
4%
Freight transportation vehicles
6%
Enzymes; enzyme preparations
4%
Machines and devices for producing pasta or
paper finishing
5%
Coffee, including toasted and decaffeinated
3%
Other earthmoving machines and devices
5%
Malt beer
2%
Medications
4%
Other gauges; speedometers and tachometers
1%
Machines and devices with built-in functions
4%
Pipe accessories
1%
Electricity transformers
2%
Inner tubes - tires
1%
Centrifuges, including dryers
2%
Electrical batteries
1%
Flat, stainless steel laminated products
2%
Subtotal
92%
Subtotal
51%
Other products
8%
Other products
49%
Total
100%
Total
100%
Source: Global Trade Atlas.
FDI
•In 2012, Finland was in 30th place worldwide among investors in Mexico and 11th place among
countries of the European Union. Flows registered in that year totaled 4.2 md.
•From January 1999 to December 2012, Finnish companies invested 676.3 million US dollars (md) in
Mexico. 50% of that investment flowed into the manufacturing industry, followed by the business
support and waste management sector with 32% of the total and the trade sector with 18%.
•The federal entities with the highest level of Finnish investment are Nuevo León, Puebla and the
Federal District. In December 2012, there were 36 Finnish companies with investments in Mexico.
Finland’s FDI in Mexico (flow, millions of dollars)
140
120
millions of dollars
100
80
60
40
20
0
-20
-40
-60
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Secretaría de Economía.
PwC Mexico
35
Mexico-Norway bilateral trade
•In 2012, Norway was in 62th place in Mexico’s total commerce (68th as a supplier and 58th as a
purchaser).
•Trade relations between Mexico and Norway grew by 129% from 2002 to 2012, from $101 to $232
million dollars (md), for an average annual growth rate of 9%.
•Exports grew 724% from 2002 to 2012, from 8 to 66 md, for average annual growth of 23%. On the
other hand, imports increased by 78% in that same period, rising from 93 to 166 md in 2012 for an
average annual growth rate of 6%.
•At the 2012 closing, Mexico showed a 100 mdd deficit in its balance of trade with Norway.
•In 2011, 95% of Mexican exports to Norway were manufactured goods, mainly iron and steel pipes,
turboreactors and turbines. On the other hand, 73% of Mexican imports from Norway consisted of
manufactured goods, principally telephones& wireless networks and mireal and chemical
fertilizers.
The principal products traded between Mexico and Norway in 2011
Principal Mexican exports to Norway
% Part
Principal Mexican imports from Norway
% Part
Hollow iron and steel pipes and profiles,
with no welding
61%
Mineral and chemical fertilizers
19%
Turboreactors, turbopropulsion devices and
other turbines
6%
Petroleum gas and other gas hydrocarbons
14%
Malt beer
5%
Mineral and chemical fertilizers containing
nitrogen
13%
Coffee, including toasted and decaffeinated
4%
Dry, salt or pickled fish; smoked fish
11%
Wire, cable and other conductors
3%
Telephones, including cell phones and phones for
other wireless networks
Other
21%
Other
40%
Percentage of manufactured items
95%
Percentage of manufactured items
73%
Source: Global Trade Atlas.
FDI
•In 2012, Norway was in 37th place worldwide among investors in Mexico.
•From January 2001 to December 2011, Norwegian companies invested 60.3 million US dollars in
Mexico.
•From January to December 2011, Norwegian investment of 19.2 md flowed into the country
•Up to September 2012, there were 29 Norwegian companies with investments in Mexico.
Norway’s FDI in Mexico (flow, millions of dollars)
500
400
millions of dollars
300
200
100
0
-100
-200
2001
2002
Source: Secretaría de Economía.
36
Nordic investment in Mexico
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Mexico-Sweden bilateral trade ratio
•In 2011, Sweden was in 31st place in Mexico’s total trade (24th as a supplier and 59th as a
purchaser). Of European Union countries, it was in eighth place.
•Trade between Mexico and Sweden grew 46% from 2001 to 2011, from 843 dollars (md) to 1,235
md in 2011, for average annual growth of 3.9%.
•Exports grew 135%, from 37 md in 2001 to 87 md in 2011, for average annual growth of 8.9%.
•Imports grew 42% in that same period, from 806 md to 1,148 md, for average annual growth of 3.6%.
•At the 2011 closing, Mexico showed a 1,061 md deficit in its balance of trade with Sweden.
Bilateral commerce Mexico - Sweden
1,500
millions of dollars
1,000
500
0
-500
-1,000
-1,500
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Exports from Mexico to Sweden
Imports from Sweden to Mexico
Commercial scale
Source: Banco de México.
Mexico - Sweden bilateral trade ratio
Reporting country: Mexico
Mexico - Sweden bilateral trade ratio
Reporting country: Sweden
Indicators
2010
2011
2012 Jan-Oct*
Indicators
2010
2011
2012 Jan-Oct*
Total commerce
Annual variation
1,048
38%
1,235
18%
1,203
14%*
Total commerce
Annual variation
930
35%
997
7%
838
3%
Mexican exports
to Sweden
Annual variation
108
87
83
137
165
115
78%
-19%
7%
Mexican exports
to Sweden
Annual variation
34%
20%
-18%
Mexican imports
from Sweden
Annual variation
939
1,148
1,120
793
832
723
35%
22%
14%
Mexican imports
from Sweden
Annual variation
36%
5%
7%
Balance of trade
-831
-1,061
-1,037
Balance of trade
-657
-667
-608
Source: Banco de México. *Variation from the same period in the preceding year.
Source: Global Trade Atlas. *Variation from the same period in the preceding year.
PwC Mexico
37
•In 2011, 85% of Mexican exports to Sweden were manufactured goods, mainly turbojets and gas
turbines, parts for voice transmitters and receivers (including parts for mobile phones) and
autoparts. On the other hand, 99% of Mexican imports from Sweden consisted of manufactured
goods, principally parts for voice transmitters and receivers (including parts for mobile phones),
medications, vehicle chassis and earth- moving and excavating machines.
The principal products traded between Mexico and Sweden in 2011
Products exported from Mexito to Sweden
(4 digits)
% Part
Products imported by Mexico from Sweden
(4 digits)
% Part
Turbojets and other turbines
31%
Telephones, including mobile phones and phones
for other wireless networks
18%
Telephones, including mobile phones and
phones for other wireless networks
18%
Medications
12%
Coffee, including toasted and decaffeinated
14%
Chassis for motor vehicles
8%
Motor vehicle parts and accessories
6%
Other earthmoving machines and devices
6%
Malt beer
5%
Kraft paper and cardboard, uncoated
3%
Other iron and steel manufactured goods
3%
Bulldozers
2%
Automobiles for use in tourism
and other motor vehicles
2%
Parts for loading and construction machines
and devices
2%
Paper of the type used in toilet paper
2%
Nickel bars, profiles and wire
2%
Automatic data processing devices
1%
Aluminum strips and plates
2%
Mechanical machines and devices
with built-in functions
1%
Nondenatured ethylic alcohol
2%
Subtotal
83%
Subtotal
57%
Other products
17%
Other products
43%
Total
100%
Total
100%
Source: Global Trade Atlas.
38
Nordic investment in Mexico
FDI
•In 2011, Sweden was the 11th most important investor in Mexico among the countries of the
European Union. It was 22nd worldwide.
•From January 1999 to December 2011, Swedish companies invested 1,539.3 million US dollars (md)
in Mexico. 38% of that investment went to the manufacturing industry, 30% to real estate services
and 22% to the business advisory and waste management sector. Other important areas for Swedish
investment are trade and financial services. •The states with the highest concentration of Swedish investment are Jalisco and Nuevo León.
•From January to September 2012, Swedish investment of 138.4 md has flowed into the country,
mostly going to the manufacturing sector.
•Up to September 2012, there were 150 Swedish companies and representatives with investments in
Mexico.
Sweden’s FDI in Mexico (flow, millions of dollars)
500
400
millions of dollars
300
200
100
0
-100
-200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Secretaría de Economía.
•The 500 largest companies in Mexico published by Expansión (2012 issue) include the following
Swedish companies:
Position on the list
Company
Sector
Sales (mp)
130
Autoliv
Automotive and autoparts
14,900
228
ABB en México
Electrical equipment
6,220
252
SCA Consumidor
Consumer-products
5,370
286
AstraZeneca
Chemical pharmaceutical
4,192
311
Sandvik México
Machinery and equipment
3,420
338
SKF de México
Automotive and autoparts
2,649
485
Assa Abloy México
Blocks and padlocks
1,013
486
Grupo Securitas México
Professional services
1,012
Source: Global Trade Atlas.
PwC Mexico
39
CEO interviews
Denmark
40
Nordic investment in Mexico
Arla Foods Ingredients
Sector: Food ingredients
Foundation in Mexico: 2005
Number of employees: 10
Søren Ustrup
Length of time with Arla Foods Ingredients (total): 12.5 years
Length of time with Arla Foods Ingredients (Mexico): 1 year 4
months
Tell me more about the history of your company
in Mexico.
Basically, Arla Foods Ingredients has been selling products in
Mexico for around 20 years. Due to import regulations in Mexico,
it was becoming a bit difficult to maintain the existing business, so
that was why the company was set up to service customers in
Mexico and do all the importation, so that the customers wouldn’t
have to manage it. We had a good business and we could see
possibilities of developing it further.
Why did your company decide to invest
and to be present in Mexico?
Mexico is an important and interesting market when it comes to
milk-based ingredients. There is a huge population and there is a
shortage of milk products. Mexico depends on imports of dairy
products.
Are the results obtained in Mexico
those that were expected?
I would say so. I would say that we’ve had a good, profitable
business here in Mexico over the years. Maybe it has been a bit less
than expected, because of the competition from the United States
due to NAFTA. American products can go in to Mexico without any
import duty, and our products are subject to import duty in some
cases.
How has your company expanded in Mexico
since it arrived?
When we started, we only had an office and a warehouse in Leon.
Since then, we have opened the office we have in Mexico City.
Initially we were only working with the dairy industry and now we
are working with a number of different industries: infant
nutrition, health and sports nutrition, bakery producers, the
confectionary and ice cream industries. We haven’t always been
doing that.
Interview from March 2014.
PwC Mexico
41
What do you think about the transport system
and the infrastructure in Mexico?
I think it’s pretty good, but of course it could be better. Mexico City
is a city with huge problems due to heavy traffic. But I think in
general, there’s pretty good infrastructure in terms of highways
around the country. Some things are not so good.
Telecommunications and the internet are not always as good as
they are in other countries. For instance, we have to have two
internet providers, since sometimes one fails and we can’t work
without having access to the internet. That’s one thing. I think cell
phone coverage could be better. In Mexico City, it works okay, but
outside the city it’s not always so good.
How do you perceive the banking system
and the credit access in Mexico?
We have not really had a lot of requirements for credit access. We
have credit cards for the employees and there was no problem in
getting those. We have not been so happy with the banks we have
been using. For us at times, it’s been quite difficult to make
international money transfers to settle the invoices for the
different products we import from Arla Foods Ingredients factories
around the world.
There is not always transparency here and people and companies
are a bit more reluctant to offer credit facilities compared to a
number of other Latin American countries. It could definitely be
better. Maybe it is also because we have a relatively small
operation in Mexico, and therefore cannot always get a good
service level from the local banks.
What do you think about the Mexican tax system?
It’s very complicated and I think that Arla Foods Ingredients has
learned that it’s very important to get good advice and to have the
right accountants, to make sure that everything is within the
requirements of the tax authorities here. Otherwise you can run
into problems with the local authorities, since the Mexican
Corporate Tax regulations can be quite complex.
42
Nordic investment in Mexico
What do you think about the Mexican customs system?
We have had a lot of problems with imports. Customs clearance
can be very slow. Both the customs or the sanitary authorities can
sometimes create a lot of problems due to small details. Due to the
nature of our business we also have to pay VAT for some of the
products we import – and this VAT is then returned to us
approximately 6 months later. This creates an additional need for
local cash flow that maybe could be avoided if the rules were a bit
more straightforward.
However, there’s not a very high customs duty compared to a lot of
other developing countries. But still, when you are competing with
the US it’s not so nice that you have to pay 10% duty on a product
and they don’t pay any duty. So that’s of course not a good thing for
us. We hope that that all import duties eventually will be removed.
We are however operating within the dairy industry and
governments in most countries are very protective of that industry.
So Mexico is no exception, and even the European Union is
protecting the dairy industry by imposing customs duties on
imported products.
What do you think about local talent here in Mexico?
I think there are people here who are very skilled and very
dedicated. There’s of course also people who are not so skilled and
dedicated. I think it’s possible to find good, honest and dedicated
people and I think that’s the same as in most Latin American
countries.
How do you perceive security issues in Mexico?
Personally, I have not had any problems. The company had a
break-in once, and of course that is an issue, but I don’t see it as a
massive one. Maybe up north it’s a bigger problem than here, but I
don’t feel that it’s a problem in Mexico City and the places we go.
It’s of course not Denmark, Sweden, Norway or Finland in terms of
security but I think that compared to certain South American
countries, the average level of “regular” street crime actually
seems lower in Mexico.
How do you perceive the development of the market
in your sector?
I think there’s huge growth within the food ingredients business in
Mexico. I also think that for us particularly, it’s going to be
interesting in the next few years because there’re a lot of new laws
and changes within the health sector in Mexico so that there will
be taxes on unhealthy products. We have a lot of solutions that can
help Mexicans in eating more healthy products. So I think that it
looks pretty bright for us.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
I think the TPP could be a bit of a problem for us, if suddenly
products from New Zealand can come into Mexico without paying
any duty. Also, that we are a bit far from the market, don’t have any
production and we import everything can be a problem sometimes,
because it takes a while to react. But the population in Mexico is
growing and the purchasing power is growing. I see that as a huge
opportunity for us. Especially since people are becoming more
health conscious about what they are eating because Mexico does
have a problem with obesity and diabetes etc. That’s a huge
opportunity for us, because we have a lot of products that can help
solve those problems. What we see is that sometimes the
government makes decisions that are based on protecting, in our
case, dairy farmers. So sometimes you cannot make the best
possible yoghurt because they are protecting them. Legislation in
Mexico says that yoghurt has to look a certain way, which is not
actually the best composition. However, it helps the dairy farmers
in Mexico. I think it’s a social issue, because there are so many
small dairy farmers and they protect them because if suddenly
they can’t sell their product, they are going to have a huge social
problem. It goes against what they are trying to do when it comes
to health and nutrition and the solutions we provide are more
healthy than using regular milk in a yoghurt. Sounds strange, but
it is.
What do you think are the main differences in the
Mexican business culture compared to the Nordic one?
I think that you need to have much closer relationships with your
customers here. That has a big impact. In the Nordic countries, it is
much more about numbers and what products you are offering.
You need to be closer to your customers and gain their respect and
confidence here. I also think that sometimes things are a bit slower
moving in Mexico. Things take longer time. You have to
understand that this is the way the country operates. Then again, I
think that people are much more open here and are much more
friendly and open towards new people and foreigners. At least in
Denmark, I think we are much more closed off and reserved.
What kind of Nordic know-how could Mexico use more of?
It’s difficult to talk about, but I think that in the Nordic countries
there is total transparency. There isn’t here and it is a problem. I
think that once Mexico starts getting a better education system,
then people are also automatically going to become more educated
and these things are going to improve. Also, there are a lot of
problems like contamination and environmental issues that people
don’t really bother about, because they don’t know about it. Once
you solve the issue with education, then you can actually solve a lot
of problems. I think the tax systems are also easier to understand
in the Nordic countries. They are not as complicated as here.
Maybe to some extent, organisation is a know-how that Mexico
could use more, but I think everything has to do with education.
Within our specific industry, we have been working with dairy
ingredients for 50 years, so of course we have a lot of know-how
that people don’t have in Mexico.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
I think that we are now recognised among some of the larger food
companies in Mexico as being a very qualified supplier of the
solutions that we are offering. I think that’s the biggest success.
One of the factors in achieving it is actually being present here and
having worked with the country for 15-20 years. Having local
presence makes it a lot easier. So I think that’s one of the biggest
success stories actually.
PwC Mexico
43
Arla Foods Ingredients is a global leader in natural whey ingredients
for nutritious food products, ranging from bakery, beverage, dairy
and ice cream products to clinical, infant and sports nutrition, and
their trademark is the quality they provide to their customers in every
aspect of their offering.
What has been your biggest challenge
and how did you overcome it?
In my time here, we have had a lot of issues with accounting and
tax. Things are working okay now, because we found people who
we trust and who are capable of doing things correctly.
Understanding the Mexican systems and laws and complying with
those has been one of the biggest challenges.
What main advice would you give to companies
or people who want to invest in Mexico?
I think it’s extremely important to find people you can trust here
and the right partners to assist you. Also, give it a bit of time,
because things are bit slower here in Mexico. You have to be patient
and you can’t make something happen in one day. I think that’s
probably some of the best advice I can give.
In the end, in one sentence, Mexico for you means…?
It depends on my mood. It’s challenging and interesting. Those are
probably some of the words I could use. But it also has great
potential. It’s difficult for me to use one phrase. 44
Nordic investment in Mexico
FL Smidth
Sector: Mining and construction
Foundation in Mexico: 1963
Number of employees: 270
Sales Revenue: US$50-100 million
Richardt Fangel
Length of time with FL Smidth (total): 33 years
Length of time with FL Smidth (Mexico): 25 years
Nordic Chamber of Commerce: President, 2013
When was your company founded in Mexico
and how many employees does it have?
FL Smidth was founded in 1963. But actually, sales to Mexico go
back to the 1930s, mainly in the cement industry and later in the
mining industry.
I am also the Nordic Chamber of Commerce president for 2013.
The Chamber was formed in 2010 by almost 50 Nordic companies.
We have about 70 members in the Chamber and in total there are
more than 250 Nordic companies in Mexico. That number is
growing and we are trying to grow the Chamber as well.
Tell me more about the history of your company
in Mexico.
There are about 35 cement plants in Mexico and FL Smidth has
actually participated in the design and manufacturing of 22 of
those. In the mining industry, FL Smidth has equipment installed
in more than 50 of the 300 industrial mines in Mexico. It is a
growing business for us and if you take the Penesquito plant, which
is the second biggest mine in Mexico and processes 130,000 tons
per day, 80-90% of that equipment is designed and supplied by FL
Smidth.
Why did your company decide to invest
and to be present in Mexico?
In the 1930s, we could see more and more plants coming up and
we decided to go in as a company. The company started up in 1963
and from 1967, we started manufacturing in Mexico based on
engineering out of Denmark and now engineering is out of India.
We still manufacture almost 50 years later. From 1982 to 2002, we
had our own workshop in Mexico. The manufacturing facility lost
its strategic importance when Mexico opened up and we could
import and also one of our major customers expanded outside
Mexico. So we sold it off to a vendor to General Electric and it
doubled the number of employees. Of course, we would like to
have that plant back again, looking at the growing mining industry
in Mexico.
Are the results obtained in Mexico
those that were expected?
Yes, because we could see the cement business growing, although
it has stagnated since 2008. But the mining industry is still
growing and there are a lot of opportunities.
Interview from November 2013.
PwC Mexico
45
How has your company expanded in Mexico
since it arrived?
FL Smidth made a lot of acquisitions over the last 20 years, but
most growth in Mexico was organic and came with new products,
as the acquisitions offered a lot of new products.
In relation to the Nordic Chamber of Commerce, Nordic Embassies
have a limited role in helping newcomers and solving specific
problems. There was a need for helping established companies, so
the Nordic Ambassadors asked us to form the Nordic Chamber of
Commerce. As a Chamber, we could expand that service and lobby
government without needing to put a specific country or company
name on it, allowing us to discuss issues more openly.
What do you think about the transport system
and the infrastructure in Mexico?
I’ve been here for 25 years and at least I can see development. If
you take infrastructure as a whole, over the last 6 years there was
record construction of good quality highways linking the country
together. Then if you go to cities, you have another issue. There is a
lack of expanding public transport, especially in cities like Mexico
City. Yes, Mexico City has expanded the metro system a lot, but it’s
overcrowded. Also, it’s a pity that, for instance, there hasn’t been
anything done for railroads for 50 years. We now have news from
the President that they are going to once again expand railroads
for cargo transport. It’s improving, but there’s still a lot to do.
How do you perceive the banking system
and the credit access in Mexico?
When I came here in the past, the banks where publicly owned.
They were privatised back in 1991-1992 and when the first one
came in, they were looking for short-term profit. They were stock
brokers buying banks and they didn’t have any clue about banking.
Today, 80% of the banking system is foreign-owned by bankers
and tremendous progress has been made. But there is still even
more to be done. From a company point of view, it’s working quite
well and banking via the internet or bank stations works well.
What do you think about the Mexican tax system?
It’s quite complicated. This is the only country I have been in where
they audit the tax declaration. In other countries, it’s the board of
directors that is responsible for signing the tax declaration, but
here it’s the audit companies. From next year, hopefully that will
end, but still it’s good for foreign companies to have that audit,
because you get a review of the complicated tax structure. Having
VAT based on cash flow makes sense in a country like Mexico, but
we are not used to that in Europe and it creates a lot of extra work
to trace it. But they are doing something about it to try and
simplify it.
From the Nordic Chamber of Commerce, we wrote to the
legislative authorities about the reforms and they listened and
changed the bill before it was voted on in congress. So they are
always listening. Sometimes the laws come out and when you find
out what is behind it, you can change it before it comes into force.
46
Nordic investment in Mexico
What do you think about the Mexican customs system?
It has improved a lot and from the government side, they have
been rotating positions in order to reduce corruption. But of course
there is still a lot to do. There’re still times when it will take us 24
hours to cross the border with merchandise from the US, for
instance. It’s slow and in the fiscal declarations, you have to line up
all your import and export during the year, which is resource
consuming. We know that if you don’t, you may not be able to
control import-export, especially import. You can, for example,
make a Chinese product into a US product by triangulation and
that means the control system must reflect such creativity. Maybe
that procedure is fair from a Mexican point of view, but it is not
from a Nordic point of view. But it is getting more flexible.
What do you think about local talent here in Mexico?
There is a lot of young talent, but in some cases, for instance back
in the 1990s, Mexico focused a lot on educating, but there were no
jobs. So then the talent left the country. If you focus on talent
creation and specialised talents, then you must also ensure that
the jobs are there. In the car industry, right now they’re investing 6
billion dollars in new plants and they wouldn’t do that if they
couldn’t get talented workers, because they have highly
automatised work phases and there is the same thing with the
aerospace cluster in Queretaro.
How do you perceive security issues in Mexico?
That’s a good one. Outside of Mexico, there’s the perception that
you get from the headlines. You know that the media earn from
selling bad news. What I think is that Mexico as a country should
counterbalance the media with real information. Not to disguise it,
but to get real information abroad about what is happening in
Mexico. As FL Smidth, we work with 300 mines. The executives of
the mines get to the mine by flying, so our people fly as well. They
live there locally and they don’t want the mine to be closed down
because of safety. But we do business all over Mexico and if our
customers don’t do business there, then we don’t either.
How do you perceive the development of the market
in your sector?
Let’s take mining and cement. There will be enormous demand for
cement in the future, but the thing lacking is financing. The
housing need is there and the infrastructure need is there. It all
depends on the inflow of money to the government and that
depends on energy reform to finance that. In mining, the industry
is new for foreign companies. It was opened up back in 1993.
Before that, all mining exploration was reserved for Mexican
investments. Today, there are about 800 exploration projects in
Mexico of which 600 come from Canada and in 2012 there were
investments of up to 7 billion dollars in the mining industry.
Maybe we will have a drop in 2014, not because the mining
industry in Mexico is not attractive, but because of China and
India. But still, China has to urbanise maybe up to 300 million
people in the next 10 to 20 years. As long as China and India
continue growing, Mexico has a bright future in mining. The
mining processes demand a lot of water, so you have to work with
that due to lack of water in mining regions. Another thing that was
like a blow to the mining industry was the new royalty taxation,
which went up to 7.5%. So now Mexico is less competitive
compared to other mining countries.
What do you think are the main differences in the
Mexican business culture compared to the Nordic one?
FLSmidth is a world leader in design and manufacturing of
equipment and services for the cement and mining industry.
FLSmidth supplies from single machinery to complete cement plants
and mineral processing facilities including services before, during
and after construction. FLSmidth has been servicing the industry
since 1882.
What kind of Nordic know-how could Mexico use more of?
What main advice would you give to companies
or people who want to invest in Mexico?
Nordic countries have a long tradition and have always had open
economies and have been exposed to different cultures for a long
time. Whereas Mexico is a very young country as an international
player and still you have a lot of these traditions where you do
business among friends. That culture is slowly being phased out,
but of course it takes a generation, especially when it comes to
government entities. In Nordic countries, we have been used to
competing more on transparency, technology and pricing. In
Nordic companies with subsidiaries in Mexico, the subsidiaries are
quite different from Mexican companies. They start learning from
the Nordic countries.
Decision making, Nordic management style and transparency in
what you do and say with business partners, suppliers and
government entities. It is a tremendous job to get that into an
organisation’s culture and it takes time.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
Building up more than 60% of the whole cement industry in
Mexico was one of our great successes. Doing things locally and
being able to communicate and understand the cultural issues with
the customers and communicating in Spanish contributed to that.
Also, if you come to Mexico and sell very expensive equipment for
10 to 20million dollars and you don’t have any aftermarket
services to support it, then you’re lost. So you need to have a
structure here, and we did that with cement and now we are doing
that with minerals. That’s why, for instance we have this mining
cluster in Zacatecas. In 2011, it was the first place in Mexico where
all major mining companies, suppliers and universities started
together to create a cluster for mining. That set standards for
safety, new mining careers and also aftermarket services. So that
has been quite successful and the Mining Cluster now have 40
projects for the mining industry for new service centres and
manufacturing facilities.
Mexico is a 3-step rocket. You have the Mexican market, you
have the North American free trade agreements with 300
million people up north, and then Mexico has about 45 free
trade agreements with the rest of the world and especially with
Latin America. When you talk about manufacturing cost,
Mexico is actually 10-20% more expensive than China, but in
China the price is rising fast and if your market is in the
Americas, you have the logistics cost from China.
In the end, in one sentence, Mexico for you means…?
Opportunities.
What has been your biggest challenge
and how did you overcome it?
Back in 1982, when everything stopped for a year and a half. How
did we overcome that? In Mexico there are always solutions, you
just have to find them. Instead of talking to one person, you talk to
three, four or five decision makers. For instance, back in 1983 we
eventually had a meeting with the General Director of the Central
Bank to settle a debt repayment scheme to Denmark. How do you
get to talk to the General Manager of the Central Bank? Via
contacts. Take the cash crisis of 1994 which created opportunities,
because suddenly we were very competitive for exports out of
Mexico. We had the infrastructure that we had used for the
Mexican industry and a year later we had great success with
exports. After the cash crisis in 1994 the economy has been very
stable and so since then it has been easier to do business.
PwC Mexico
47
LEGO Group
Sector: Toys
Foundation in Mexico: 2008
Number of employees: 2,500
Jens Peter Clausen
Senior Vice President,
Americas Manufacturing
Length of time with LEGO Group (total): 13 years
Length of time with LEGO Group (Mexico): 2 years
When was LEGO Group founded in Mexico
and how many employees does it have?
Already in 1994 we opened our sales office in Mexico City. In 2008
our operations in Monterrey started. Currently we have 3 entities
in Mexico: the sales office, the production facilities and our
foundation which supports children in developing their creative
and learning skills. At our production facilities we mould, process
and pack the LEGO products and transport them to our
distribution centre in Dallas, Texas. A staff of 2,500 people are
employed at the production facilities.
What is the history of LEGO Group in Mexico?
Before 2008 we sourced from a third party company in Mexico.
So why did LEGO Group decide to invest and be present
here in Mexico, is that part of the global strategy?
Yes, the LEGO Group has made a strategic choice to manufacture
close to our core markets. Since 2008, operations in Monterrey
have been serving mainly the North American market. In Europe
we have 3 factories serving mainly the European markets, and this
year we start the building of a factory in China to serve the
growing Asian markets.
Are the results obtained in Mexico
those that were expected?
Yes, I would even say that our expectations were exceeded. Some
imagine that quality or productivity will decrease but that has not
been the case for us. Our operations in Mexico are living up 100%
to the very high standards of the LEGO Group. I think it is thanks
to the level of education for Mexican engineers. We have easy
access to well educated people in Monterrey, Nuevo Leon.
48
Nordic investment in Mexico
Interview from November 2013.
How has LEGO Group expanded in Mexico
since it arrived?
We started out by leasing a building in an industrial park.
However, we soon came to the conclusion that it was a better idea
to build our own facilities. Later we have bought more land and we
are right now building a new, 45,000 square meter packing facility
which will open in 2014. We have been expanding almost every
year since 2008, and the total investments amount to USD 520
million.
What do you think about the transport system
and infrastructure in Mexico?
We are very close to the US border where we send main
transportation of goods. From that point of view, I think it’s
working very well. We don’t have any disturbances getting our
goods from the plant to our distribution centre. We know how long
it takes and we know all the regulations. From a public transport
point of view, I think there’s still great opportunities in Mexico.
The infrastructure is working quite okay, considering Monterrey is
a city of 5 million people.
How do you perceive the banking
and credit access in Mexico?
LEGO is a very healthy company since we are self-financing. We do
not need to borrow money from the banks and we don’t have any
problems with credibility. We are typically working with certain
international banks and we don’t have any issues with the banking
system. I think Mexican banks are able to help any good access
company who wants help, if they have a good business case and in
the north there is a lot of money available for investment.
And what do you think about the local talent
here in Mexico?
We are a very fortunate company because we are working for a
great brand. We have challenges once in a while and it takes a little
bit longer to find the right attitude that fits with the company
culture, because the Mexican culture and the LEGO culture are
very different. More traditional bureaucracies operate here in
Mexico and in The LEGO Group we have a more flat organisation
with less focus on who’s the boss. So far, we have been very lucky
to find the right candidates.
How do you perceive the development of the market
in your sector?
The toy business is a stagnant market. However the LEGO brand is
extremely strong and we continue to gain market share.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
We expect our sales in Mexico to continue growing in the coming
years. We know that some Mexicans are not that familiar with
LEGO products and their benefits to the development of their
children. What we see in markets where we have been active for
many years is that parents – or even grandparents – who played
with LEGO bricks when they were young love to buy LEGO toys for
their children or grandchildren. We expect that this will also be
the case eventually in Mexico.
What do you think are the main differences in the
Mexican business culture compared to the Nordic one?
The Mexican culture is more relationship-oriented. In my home
country of Denmark, you talk about business and the task and after
doing all the work, you can go out and enjoy a dinner. You do the
opposite here. In Mexico you’ll enjoy dinner, get to know each
other and then you can do business when you trust each other. So
it’s a very different dynamic.
What kind of Nordic know-how could Mexico use more of?
There is huge opportunity for Mexico to do much more in the
energy sector. Cooling is a big challenge, because there’s a lot of
energy you have to use for electricity. If I had to wish for
something, I would copy some of the school system for technical
skills. That could be really useful for companies.
What has been LEGO Group’s biggest success in Mexico
and what were the key factors to achieving it?
The key success was to grow from 75 people to 300 employees in
the first year. The growth has been fast and we are still
maintaining our very high standards and targets. We also have one
of the highest employee satisfaction rates in the LEGO Group.
PwC Mexico
49
The LEGO Group is a family owned business based in Billund,
Denmark. The owner is Kjeld Kirk Kristiansen – his three children are
co‑owners. Sales increased from DKK 23,095 million in 2012 to DKK
25,382 million in 2013. The operating profit margin in 2013 was
33%. The company employed 13,869 people across the globe by the
end of 2013 – approximately 2,500 of them in Mexico. In 2013 we
had capacity investments of DKK 2,600 million. In less than 10 years
we have grown our revenue by 400%. LEGO products are sold in more
than 130 countries all over the world. The toy industry is driven very
much by the announcement of new products; in the case of the LEGO
Group, new products account for more than 60% of this year’s sales.
So what has been your biggest challenge here
and how did you overcome it?
Something we can export from the Nordic countries is support for
our waste management. We have had to develop our own system,
using our staff in Europe, and have really high requirements. It has
also been a huge challenge for us to make sure that everything is
compliant. Everything from the tera-programmes and the CET-pets
has to be transparent.
What is the main advice you would give to the companies
that want to invest in Mexico?
My experience is that Mexico is a great place to do business. You
just need to be aware of and accept differences between countries
and between cultures. In any country you move into you need to
familiarise yourself with the systems and the way people work
best. That of course also goes for Mexico.
In the end, Mexico for you means…
Smiling people living in the moment.
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Nordic investment in Mexico
Maersk Line
Sector: Logistics
Foundation in Mexico: 1994
Number of employees: 100
Michael Hansen
Length of time with Maersk (total): 15 years
Length of time with Maersk (Mexico): 1.5 years
Tell me more about the history of your company
in Mexico.
As a transport provider, you want to be in a market the size of this.
Mexico is the 11th largest economy in the world and there are
sizeable imports and exports here. So it was quite natural for us to
come here, as we were expanding Maersk Line globally. For many
years it was governed out of the US. In the early 1990s, we had an
agency down here so we didn’t have our own representation. But in
1994, we established our own representation. With the size of this
market, it was quite obvious that we needed to be here in a strong
way and that turned out to be the right decision. We are proud
about being part of Mexican transport.
How has your company expanded in Mexico
since it arrived?
We initially came in with very few staff who we took over from the
previous agency. Then in 1999, we purchased Sealand, which was
the largest American container shipping line, and they had a
strong presence here in Mexico. Doing that gave us a leap forward
in participation and since then we have continued on a path of
strong growth. Today, we are probably third largest shipping line
in Mexico. We have a footprint in all the largest ports and
particularly important was our move to Lázaro Cárdenas eight
years ago. We were the first shipping line to take a leap of faith and
go in to Lázaro Cárdenas, which at that time was not a very
developed container port. Historically, all the shipments on the
Pacific side came from Manzanillo. Lázaro Cardenas has since
evolved to be a significant port and that solidified our presence in
Mexico.
Are the results obtained in Mexico
those that were expected?
It’s a mixed bag. If you look at 2013 in isolation, then the answer is
no. The year has been much weaker than any of us anticipated. We
started out with the 3.9% GDP growth in 2012 and we thought
we’d do it one more time, but that has been far from the case. We
certainly had hoped for more in terms of international
transactions, be it import or export. That being said, we’re here for
the long haul, so I’m not too worried about it. I’m pretty sure the
Mexican economy, and therefore also the import and export
business, will bounce back. Certainly, with the size of the economy
and the demographic shift of people moving up to the middle class,
the more we will have to transport.
Interview from December 2013.
PwC Mexico
51
What do you think about the transport system
and the infrastructure in Mexico?
Mexico is actually a lot better than the other Latin American
countries. There’s no other country in Latin America where you
have such solid rail infrastructure, which is very similar to the
infrastructure in the US. A lot of our movements from Lázaro
Cárdenas to Mexico City and from Lázaro Cardenas to Monterrey
are moved on train. Secondly, the road infrastructure is actually
quite good. So it’s relatively easy for us to transport our containers
around the country and we typically deliver to the largest cities.
We take a container from China and it goes to Mexico City. It
doesn’t go to Manzanillo or Lázaro Cárdenas. We typically deliver
at the final destination, which is not the norm for Latin America.
We have just seen a significant investment in Manzanillo, where
the Filipino group ICTSI built a new terminal and we expect, based
on indications from the government, that there will be a licitation
for a new port in Veracruz. I think with the National
Infrastructure Plan, there is all the will in the world to further
improve the system, but our starting point is not that bad at all.
How do you perceive the banking system
and credit access in Mexico?
I don’t know much about it, so I would not like to speculate. We
actually don’t use the credit system here. If we need to, we draw on
credit from our mother company.
What do you think about the Mexican tax system?
From an aggregated level, I think the fiscal reform this year has
been very important. Is it enough? No, it’s not. Too few people are
paying tax and it’s interesting for me to see, from a cultural view,
the resistance from the higher income groups to supporting the
lower income groups by paying higher marginal taxes. But overall,
the fiscal and energy reforms are super important. You can make
all the infrastructure plans in the world, but you will have no
money to pay for it without the energy and tax reforms. I also think
it’s a frustrating system to deal with and I don’t see a lot of
willingness to engage in positive dialogue.
What do you think about the Mexican customs system?
I don’t think it’s that bad, but it’s relative. It’s not like Nordic
customs system, of course, but it’s a lot better than the Brazilian
one. We need to be a lot more efficient in our transactions. There is
still too much bureaucracy and paperwork and it’s too slow as a
consequence. But I do see a willingness from their side to engage in
dialogue to try to find a solution. We cannot blame it on customs if
Mexico is not competitive.
What do you think about local talent here in Mexico?
I think it’s fantastic. It’s very easy to find good talent, when you
have a population of 115 million and there is a large group of well
educated young people. We have an average age in this office of 35
or 36. In my management team, the average age is about the same.
That’s testimony to the quality of these people, who we have taken
in young and taken through our own training program. They are
committed and smart and in general they’re willing to explore
other parts of the world that you know can further develop them. A
lot of the people that I have in the leadership team have experience
from China, Denmark and overseas postings. One of the keys to the
success of our business is the group of people here.
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Nordic investment in Mexico
How do you perceive security issues in Mexico?
It’s better than what people think. In relation to personal security,
when we have new people in town they are always concerned.
However, the city is a lot safer than its reputation. Then there’s the
impact on business and that’s where it becomes more tricky. The
opportunity cost of security issues is significant. My impression is
that a lot of companies stay clear of Mexico, because they are
concerned about the safety of staff, equipment and so on. Also,
businesses here have to take precautions. When you move
containers from A to B, you have to put them under guard, have
convoys and GPS and you have to pay for security. That’s money
that doesn’t provide any value and it’s a dampener on economic
development.
How do you perceive the development of the market
in your sector?
I think we’re in a sweet spot in Mexico. The Pacific Alliance will be
particularly important and we see a lot of interest in that. I think
that political factors are generally in place to support our activities.
Also, I think our location and the demographic composition of
Mexico supports the transport sector moving forward. We largely
import and export consumer goods. The growth in buying power
will generate more transport business. In relation to the auto
industry, we see a lot of triangulation. You import parts for a car
from China and re-export it to the US, typically. That’s good news
for us, because it’s both an increase in imports and exports.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
I think that dependency on the US economy is a significant threat.
All the maquilas on the border depend on the US. So that
dependence is a threat to the economy as a whole and also for us. I
think a weakness is infrastructure, which can still be further
developed and security is definitely an issue. Also, the majority of
people in the country live in low socio-economic groups and they
are not going to be elevated by themselves. There has to be some
political initiative to accelerate that and the boost has to go way
beyond the fiscal reform we saw this year.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
There’s a lot more face-to-face and connecting emotionally with
the customer than there is in the Nordic countries. In Denmark,
you sit down and do business whether you like the other guy or
not. Here, you have to work a lot more on social engagement in
terms of dinners, lunches and talking about everything else but
business. The focus is on developing trust for them to put their
business in your hands. You need a certain level of patience in
generating business and a lot of business opportunities never
materialise. But, there’s a lot more optimism here. When you talk
to an entrepreneur here, you see the optimism and drive that’s
behind that and I don’t think you necessarily see that in Northern
Europe. We are a bit more risk averse in the Nordic countries.
What kind of Nordic know-how could Mexico use more of?
The stereotypical answer is focused on waste renewal. In Sweden,
they are very focused on that and they could certainly learn that
here, where the recycling system leaves room for improvement.
There’s also the infrastructure we have in the Nordic countries.
But, in the Nordic countries, how many people are living there
compared to the people living in this city? You have to be careful
about that comparison. Then there’s renewable energy. The sun
shines 300 days a year in Mexico City and we are not using it. If
Mexicans had the environmental consciousness that the Swedes
have, the effect would be so much stronger here and the need is so
much greater here.
Maersk Group has four core businesses which include Maersk Line,
APM Terminals, Maersk Oil and Maersk Drilling. Through these
companies and several others, the group employs roughly 89,000
people, and generated 47 billion US dollars in revenue in 2013.
As a group, our business success is built on a number of strengths: our
size and global reach, our financial strength, our talented employees,
our time-honoured values, our approach to sustainability and our
drive to innovate. Combined, these strengths form a unique platform
for our continued success and future growth.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
We have leveraged the Maersk Line brand and combined the global
reach with a localisation in terms of interaction with our
customers. I guess it is an example of what we refer to as “glocal”!
What has been your biggest challenge
and how did you overcome it?
Security is an issue that you constantly have in business. You have
to safeguard the business in the ports that are the most infested by
criminal groups. The tax system is continuously a challenge for us
and it is a volatile economy because it is so dependent on the US.
So we’ve had some massive swings and this year has been
disappointing, and going back to 2009, we took a hit like
everybody else did.
What main advice would you give to companies
or people who want to invest in Mexico?
They should come and make an informed decision. I see too many
companies who base their business decisions on stereotypes and
press headlines. I would have liked to see these companies come
here to evaluate it themselves. For start-up companies, there’s
actually a lot of subsidies and help to be had, particularly if you are
willing to invest in certain states. The government acknowledges
that starting up here is a bit tricky and they are willing to assist you
along the way. Talk to the governments, embassies and to people
like PwC and then make your decision that is founded on
something empirical and not based on prejudice.
In the end, in one sentence, Mexico for you means…?
Joy and happiness. That’s what it brings to me personally. You are
in a beautiful country surrounded by happy, helpful people who
want to do a good job.
PwC Mexico
53
Novo Nordisk
Sector: Pharmaceutical
Foundation in Mexico: 2004
Number of employees: 160
Morten Vaupel
Length of time with Novo Nordisk (total): 17 years
Length of time with Novo Nordisk (Mexico): 2 years
Tell me more about the history of your company
in Mexico.
Novo Nordisk has had 90 years as a company, but only 10 here.
Previously, we worked through some local companies and sold
insulin with a local company. Then 10 years ago we decided to
establish our own company here. We established ourselves in
Cuernavaca for a couple of years and moved up to Mexico a couple
of years later. It was a bit of a turbulent time. It has not been easy
to start up here in Mexico. But the last four or five years have been
very stable and our expectation is that we will grow 15 to 20% per
year over the next many years.
Why did your company decide to invest
and to be present in Mexico?
There were many reasons. Firstly, we should be here in a major
market like Mexico. Secondly, we work mainly within diabetes and
diabetes is a huge challenge here. Mexico has among the highest
prevalence of diabetes and so the market here is very big. With our
medication, we can offer to take part in solving the diabetes
problem and make sure that people live normal lives with diabetes.
How has your company expanded in Mexico
since it arrived?
In the last 5 years, there was an attempt to invest in a lot of people
and it didn’t fly. They changed the strategy and now we have been
growing over the last couple of years at the same 15 to 20% rate in
terms of sales and the plan is to continue to grow in this
sustainable way.
Are the results obtained in Mexico
those that were expected?
For the first couple of years we were here, we had expectations that
we could get better results more quickly. However, over the last
five or six years, it’s been stable in terms of both growth and
revenue.
What do you think about the transport system
and the infrastructure in Mexico?
From a company perspective, we work with some distributors who
handle the insulin that needs to be in a cold chamber and that’s
handled well. We have good suppliers and I don’t see any issues in
getting them to deliver what we expect. From a private
perspective, I think we all fight with the queues and the roads, but
that’s just an annoyance.
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Nordic investment in Mexico
Interview from December 2013.
How do you perceive the banking system
and credit access in Mexico?
Besides being quite expensive, the relatively high rates are
probably an indicator of currency risk and investment in the
competition. At the end of the day, you can get what you need but it
costs a bit more. Typically, big companies like us would get most of
what we need internationally.
What do you think about the Mexican tax system?
It just changed and I’m not sure of all the new elements. As I
understand, it’s making it a bit more complicated and what you can
hope is that they use the extra income in a sensible way. I think we
are forced to see how it develops. Compared to my own country,
Denmark, the company tax rate is a little bit higher here, but the
personal tax rate is substantially lower. You also don’t have the
same VAT rates and taxes on housing and cars. So the tax burden is
substantially less than it is in the Nordic countries. The bottom line
is that I don’t think it prevents doing good business.
What do you think about the Mexican customs system?
When you come from a Scandinavian country, the system here is a
bit more bureaucratic and administratively tough. But I think it’s
improving and we don’t have too many issues with our products
getting in. As a pharmaceutical company, we are highly regulated
by COFEPRIS and it has improved the way it has been working. Are
there still issues? Yes, I’m sure there are issues in all countries but I
think it’s becoming one of the most efficient and one of the least
troublesome systems in Latin America.
What do you think about local talent here in Mexico?
We have been able to find a lot of local talent. I think it’s
everywhere in the world and you have to find the right fit between
the people, the organisation and the culture. We have found a lot
of local talent and mixed it up a bit with international people,
which I think creates a good atmosphere. The international aspect
sets the bar a bit higher for all of us and I think that’s a way to
make sure we perform.
How do you perceive security issues in Mexico?
Personally, I’m careful in Mexico and you have to take general
precautions. When you do that, you can move around the city and
the country in a calm way. We’ve had no problems at all in the time
we’ve been here, but it’s a bit more complicated in the northern
part of the country. That’s what I hear and see when I’m up there.
But it’s highly exaggerated in the international press and it does
not in any way prevent doing good business here.
How do you perceive the development of the market
in your sector?
The market as a whole is stagnant and that’s not so much a
Mexican thing, but a thing about the industry getting fewer and
fewer new products and more and more generic products. I think
that takes value from the industry or at least it keeps it flat. For us
in Novo Nordisk, we don’t have that challenge and we still have a
lot of new products. We are launching a new product every year.
We are in the diabetes market, which is growing and I think
unfortunately it’s not very well controlled. There are a lot of
diabetics, which the government is very much aware of. I think the
government is doing a lot of good things to tackle the diabetes
problem, but we want to take part in solving diabetes by doing
more than just offering our products. We want to take part in the
dialogue on diabetes, make innovation forums and awareness
campaigns and co-operate with authorities. Diabetes is a very
complex issue and it takes more than just delivering the product.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
Our strengths are that we are a very focused diabetes company
with a strong portfolio of products. Our opportunity, and maybe
even our weakness, is that we are still a small player so of course
don’t have the same voice in the market as our competitors. But
that’s where we have a good opportunity to grow. I’m not so
concerned about regulatory or macro-economic threats. It’s a
stable environment right now, and I think the government
understands that it cannot prohibit good developments with
international companies. The wish is always that you can get out to
as many people as possible with new products, because they are
better than the old ones. Getting IMSS and ISSSTE to understand
that these new products have a huge impact has been a challenge.
As an external coming in, you need to figure out how to handle
those issues.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
There are three typical Nordic words that are openness, directness
and flat hierarchy. The Mexican business culture is more closed,
which is not so transparent and you typically have a more
authoritarian management style and a culture that is not very
direct in the way that they talk. But then I think that the Mexican
culture has a lot of warmness and its people have a lot of
dedication and loyalty. If you treat people well, they like being in a
Scandinavian company and they like being in a company with a
human touch.
What kind of Nordic know-how could Mexico use more of?
I think it comes back to those three issues I described. There could
be more openness in communication and management and more
transparency in the way authorities deal with issues. I think that’s
one thing. The other thing is directness. I think it’s healthy for a
system to have clarity and that is something that directness comes
from. It’s good for people to see clearly where they stand and for
organisations to have clarity. In terms of authoritarian style, I
think it’s healthy for organisations to involve people in taking
responsibility, which develops them and provides them with a
PwC Mexico
55
Novo Nordisk is a global healthcare company with 90 years of
innovation and leadership in diabetes care. The company also has
leading positions within haemophilia care, growth hormone therapy
and hormone replacement therapy. Headquartered in Denmark,
Novo Nordisk employs approximately 38,000 employees in 75
countries, and markets its products in more than 180 countries.
sense of being able to be the masters of their own lives. I think
those are the elements that the Nordics can bring to Mexican
culture.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
I think we’ve had a number of achievements in the last couple of
years. Since I came, I put another 50% of people in the company
and made sure to create credibility and the belief that we could
grow. That we delivered and is a good achievement. The other
thing is the launch of the Tresiba product. I believe that, under the
conditions, it’s probably the best launch in the world of insulin and
it is the best launch we’ve ever done of a product in Mexico.
What has been your biggest challenge
and how did you overcome it?
We still haven’t overcome our issue with access. We are working on
it and getting closer, but we are not there yet.
What main advice would you give to companies
or people who want to invest in Mexico?
You need patience and understanding of the local conditions. I’m
happy that I’m a Dane and have a good connection with the
headquarters around the world. But I’m also very conscious about
being the only Dane in the management team and the rest are
Mexican. I think local understanding is very important and the
best companies are not all Mexicans or all foreigners, but where
you have the best of both worlds.
In the end, in one sentence, Mexico for you means…?
Opportunity.
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Nordic investment in Mexico
Vestas
Sector: Wind energy
First wind project in Mexico: 1994
Number of employees: More than 70
Adrian Katzew
Length of time with Vestas (total): 4 years
Length of time with Vestas (Mexico): 4 years
Tell me more about the history of your company
in Mexico.
The history of Vestas in Mexico goes back quite some time. We sold
the first equipment to CFE to generate power from wind-energy. In
1994, the very first wind project was here with Vestas technology. I
was hired in 2010 to come to Mexico and open the office.
We first started with a fairly large project called Oaxaca Uno. Since
then, there have been a number of different projects in the Oaxaca
region, which is known for its very strong wind. But we are also
very proud to be the manufacturer that has taken wind power
outside of Oaxaca, into states such as Chiapas, Jalisco, Tamulipas
and Baja California.
Why did your company decide to invest
and to be present in Mexico?
There is a demand for our products, and that is driven by the
government support of sustainability. That demand is also driven
by the economic growth of Mexico and is supported by the robust
macro-economic environment that allows projects to be financed. Are the results obtained in Mexico
those that were expected?
They are beyond those that were expected. We’ve been able to
build an organisation that has been very agile and we have been
able to create new opportunities that were not necessarily
anticipated. The market and culture in Mexico has allowed us to
be creative and identify projects relatively early.
How has your company expanded in Mexico since it arrived? The
expansion has had several variables. This is an organisation that
has grown from the day that I arrived by myself to having more
than 70 people. We have a localised operation and that has allowed
us to be very competitive in the local market. From Mexico, we
don’t only manage the Mexican market but also the Central
American and Caribbean markets, where we have a number of
projects. We are very proud of the fact that many projects today are
a result of close collaboration with our customers.
What do you think about the transport system
and the infrastructure in Mexico?
For us, it is crucial in the sense that we transport very heavy
equipment. So far, it has been a very effective environment. We
have found ports that have outstanding quality. Actually, we have
been the first wind manufacturer to use a number of ports in
Mexico and always with positive results. We also import heavy
Interview from October 2013.
PwC Mexico
57
equipment by train, and that has worked out very well for us since
it is a very competitive means of transport, and we also use the
highways quite heavily. There are many areas where I’ve come up
with lessons that we’ve gained through experience, but transport
is not one of those.
How do you perceive the banking system
and credit access in Mexico?
Luckily enough or unluckily enough, who knows, Mexico went
through the Tequila crisis in about 1994 and that left many lessons
for the whole economy. With a very conservative banking system
and a very strong central bank and regulatory authority, Mexico is
probably one of the healthiest economies we find in terms of
financing. We see very good practices from the banking
community.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
The first one is the policy commitment and the second one is the
competitiveness of the wind resources. The policy commitment
towards sustainability and the economic growth is very important
for a sector like ours, where there needs to be economic growth for
continued investment.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
What do you think about the Mexican tax system?
There are some practical differences, and there are some more
subtle differences. For example, the Nordics tend to have a very
clear time schedule. In Mexico, we tend to be in the office all the
time. I’m not saying that’s positive, it’s just the way it is. In
Denmark, and in Europe as a whole, they tend to take long
holidays and in Mexico there is next to no holidays.
What do you think about the Mexican customs system?
Something that is important in Mexico is to build personal
relationships at the same time that you build business
relationships. If you go to a meeting in Mexico and you get straight
to the point, that’s not seen as an appropriate way to initiate a
relationship.
The Mexican tax system is being reformed as we speak. I think
there is a little bit of adjusting going on for everybody. We are
pleased that the rules are transparent and we therefore know what
to expect.
We have other markets, wind farms in the Caribbean mainly,
where it takes us a long time to clear customs, but I have never
come across a similar case in Mexico so far.
What do you think about local talent here in Mexico?
I think that there are industries that certainly have a deep pool of
talent. In our case, building large electrical projects is one of those
areas that is opening up as we speak.. In Mexico, where the private
sector has been relatively small, there is the opportunity to develop
talent.
How do you perceive security issues in Mexico?
We perceive Mexico City to be a very safe place with very minor
incidents, if any. Our operations in southern Mexico have also been
without any incidents. In places like Oaxaca, Chiapas and in
northern Mexico, by having sound security practices in our
projects, there have been no incidents.
Could you tell us more about the development of your
sector in Mexico? What is your main area of activity?
We are the largest manufacturer in the world of wind power
equipment and also we build and maintain wind farms. We are
also very actively involved in policy discussions here in Mexico.
The main driver at the moment is that the country has committed
to have 35% of power in 2024 come from clean sources. The rate of
activity that we have seen so far, while it has been positive, is far
from the trend to get to that number. We need to accelerate the
demand and as part of the reform discussions, there is very open
dialogue about how that might take place.
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Nordic investment in Mexico
Can Nordic values such as sustainability be seen
in your company? How?
For sure. In Mexico, you would be surprised about the number of
large corporates that have a commitment and actively engage with
sustainability and are thinking about relevant investments. We
have our own customers like Femsa, who is the biggest bottler of
Coca Cola in the world, who is buying clean power. Or CEMEX,
who also buys power from wind farms and works on sustainability
in the construction sector. Bimbo, one of the largest bread makers
in the world also buys their power from a wind farm.
The fact that our product resolves a true need for power with
environmental attributes is a double win. You can do what you
used to do, but now you can do it cleanly and more competitively.
The way the regulatory system is designed in Mexico for clean
energy makes the proposal for clean energy power very robust.
What kind of Nordic know-how could Mexico use more of?
We bring a lot of Nordic know-how to the table in terms of policy
discussion on sustainable energy. For example, we have organised
a seminar with CFE to talk about how Denmark has moved
forward with its clean power targets and how it has integrated that
in to the power system. For me, it is very surprising to see the
Ecobici (bicycle system in Mexico City), where now you are seeing
bicycles that are used on a short- term basis. People are starting to
use more bicycles. So what will the future of the city look like?
Hopefully it will look similar to some of the Nordic cities with
much more mass transit, many more people on bicycles and many
more people living closer to their jobs.
What has been your biggest success in Mexico and which
were the key factors to achieving it?
I think that we have succeeded in several areas. We’ve succeeded
commercially and we have built very strong relationships with our
customers. I think it’s worth emphasising what I said before, that
in the business environment in Mexico building those personal ties
is very important. If people try to come to Mexico with a different
mindset, and believe that they need to get right to business, that
can be an obstacle. With our customers, we have succeeded in
building those relationships of trust. I think the other huge success
is being able to build our own organisation here, with more than
50 people and being able to achieve operational excellence with a
local team.
Vestas is the only global energy company dedicated exclusively to
wind energy, as shown by their superior cost-effective wind
technologies, products and services.
What has been your biggest challenge
and how did you overcome it?
The biggest challenge for us is the very significant competition.
The largest manufacturers of the world are here trying to compete
with us. We are very proud about the market share that we have
achieved, but every single project means big competition. We
believe that the fact that we are local, as opposed to our
competitors, makes a very big difference.
What main advice would you give to companies
or people who want to invest in Mexico?
It’s difficult to give one piece of advice, but what I would
recommend is to take Mexico seriously in the sense that there is a
lot of noise in the international media about a lack of security.
Mexico is a very diverse place. In terms of security, for example,
what you find in the north is very different to what you find in the
centre and the south. With the financial system, the economy
growing , the size of the country and the fact that we are next door
to what is still the largest economy in the world, it is a market that
should be taken seriously.
In the end, in one sentence, Mexico for you means…?
For me personally, it is my home. For me professionally, it means a
big opportunity for growth.
PwC Mexico
59
CEO interviews
Finland
60
Nordic investment in Mexico
HIAB Cargotec
Sector: Construction
Foundation in Mexico: 1976
Number of employees: 80
Sales revenue: US$38 million per year
Rafael Llamas
Length of time with Hiab Cargotec (total): 20 years
Length of time with Hiab Cargotec (Mexico): 20 years
When was your company founded in Mexico
and how many employees does it have?
It was founded here in January 1976 as a joint venture with a
Mexican company for the manufacture of cranes. We still have the
Mexican partner as a member of the company. I was working for
the Mexican group before I joined Hiab Cargotec.
Tell me more about the history of your company
in Mexico.
When this company was established in Mexico, all the local
manufacturers were protected by the Mexican government. So if
you produced something in Mexico, then the border was closed
and similar products could not be imported. Following the
government regulations, we decided to manufacture cranes in
Mexico. We looked for the best crane available in the market at the
time and we found that the Swedish Hiab crane was the best. So
Hiab started with 46% of the venture and the other company
(CIPSA) with 25% Mr. Daniel Signoret with 18% and Mr. Rolf
Andersson with 11%. After some years, Rolf Andersson became
our chairman.
Why did your company decide to invest
and to be present in Mexico?
The size of the market was good and with that ongoing protection,
the market was going to be just for us.
Are the results obtained in Mexico
those that were expected?
Yes, the results were very good.
How has your company expanded in Mexico
since it arrived?
When we started producing the cranes, we kept the market for
ourselves, but the market was too small. In 1993, the government
decided to open the borders and we started competing. But the
main reason we closed and sold the factory was because of a lot of
technological developments. The crane had very few modifications
for the previous 20 years. In the 1990s, a lot of new designs and
technology started to appear and manufacturing in Mexico
became more expensive, so we decided to begin importing
everything. 1994 was when we really started competing in an open
market. That was when I joined the company as Managing
Director.
Interview from February 2014.
PwC Mexico
61
What do you think about the transport system
and the infrastructure in Mexico?
The transport system today is better than in the past, no question
about it. In our case, the main problems are that there are not
enough roads, communication is still not good in many areas and
the railroad, which is one of the key transport modes in Mexico, is
not supported well. Right now, the new law is pushing Kansas
Pacific with Ferromex to transport from one line to another line
with a lot of obstacles. The Mexican government doesn’t
understand the role of the railroads in the Mexican economy. Also,
the security on some roads is not very good.
How do you perceive the banking system
and credit access in Mexico?
The banks in Mexico are really very bad for financing companies.
It’s good that we have never used finance from any bank. About
five or six years ago, when the peso was pretty much established, a
lot of leasing companies appeared in Mexico. We help our
customers get finance through leasing companies, not through
banks. For us, the banks in Mexico are just to keep our money and
process payroll and so on.
We have a system where we pay 90 days after goods are shipped,
which means that we have 60 days to pay after arrival because
everything is shipped by sea. Then we have 60 days to pay the
factories. That means that the only way we can sell is to have
inventory. We have a large inventory and we pay that with our
profits. So we are a very healthy company, thanks to that.
What do you think about the Mexican tax system?
The tax system was not bad in the last administration. With this
new administration, I assume that it is becoming a headache. We
still don’t understand it. I don’t know what the government was
thinking when they launched this new tax system. It’s not clear
and it lacks knowledge about how the economy works. The country
is supported by business and you shouldn’t kill the business that is
going to pay.
What do you think about the Mexican customs system?
Customs works very well in Mexico, as long as they don’t change
things. For instance, if they are going to attack the maquiladoras,
which they are doing right now, I hope it’s going to be solved. But
customs for us is very fast and we don’t have any problem.
What do you think about local talent here in Mexico?
Today, Mexican workers are the best qualified in the world.
However, finding people in Mexico is very, very hard. I’ve been
looking for people since I’ve worked with this company and it’s my
main challenge. We don’t have too much turnover, but we need to
get more people. As an example, last week we interviewed a couple
of salesmen and engineers and we said yes. When they were about
to sign the contracts, they never appeared. That happens to us
frequently, and not just to us. I was the president of the
construction association and my colleagues in companies like
Caterpillar and Atlas Copco suffer from the same thing.
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Nordic investment in Mexico
How do you perceive security issues in Mexico?
Well we suffered a couple of assaults two years ago. They stole the
trucks with the brand new cranes we were going to deliver, and
one disappeared completely. After that, we installed a device with
a GPS that you can use to follow where the truck is. We have
branches in different cities and we haven’t had any other problems.
It is different in different areas. For instance, in some areas like
Michoacan, you cannot travel to many places and the economy has
collapsed in some areas.
How do you perceive the development
of the market in your sector?
In relation to selling our truck-mounted cranes that do many
different jobs, the industry is growing. But of course, many cranes
are for specific applications, the main ones being for electricity and
the oil industry. Last year was very bad, because the economy
collapsed in Mexico in almost all sectors and this year is starting
very slowly. However, the general industry, especially the car
manufacturing industry, is doing very well. We sold some big
cranes for the ports in Manzanillo, for instance, and that terminal
is almost finished. We have also sold (a lot of) equipment to APMT
(Maersk) for the new Lázaro Cárdenas port. So those two ports
show that the transportation sector is growing.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
My main concern is that the government will make more
regulations. We expect and hope that with the new energy reform,
a lot of foreign companies will come to Mexico to invest. Foreign
companies, believe it or not, have more power than Mexican
companies in Mexico. Foreign companies will request that things
be clearer. So we feel that this year is going to be slow, but next
year has to be very good, if the investments appear on time and the
regulations will allow it. We expect good investments in fields such
as the oil industry and electricity. Of course, the general industries
are growing because the workers are very well qualified and the
final product that we deliver to clients is first class. As soon as you
build your team, the teams in Mexico are very good. The problem
is to find very good people.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
The big difference is that the way of doing business in Mexico is
more flexible. For the Nordics, everything is clear. In Mexico, the
way we handle everything is different. We don’t know exactly how
things are, so to do business properly and to have happy customers,
you have to be flexible. For the Nordic cultures, flexibility is
something strange.
What kind of Nordic know-how could Mexico use more of?
When we talk about flexibility, sometimes we confuse flexibility
with irresponsibility. Something that we have learned about the
Nordic countries is that everything has to be on time. Time is very
important. You can be flexible, but everything has to be on time.
Taking care of the people is also important. In my opinion, that is
the best part of the Nordic know-how.
What has been your biggest success in Mexico and which
were the key factors to achieving it?
We represent Hiab and Kalmar in Mexico, which are among other
companies part of the Finnish Cargotec group.
Hiab invented the articulated truck mounted cranes and forklifts,
Moffett auto transportable which are market leaders in Mexico and
the world.
Kalmar is the largest manufacturer of equipment for ports and
Forklift Trucks for industry in general, as well as Terminal Tractors.
We are the number one in our business in Mexico. The reason is
that we take care of our customers. In Hiab Cargotec México, we
created a department 10 years ago that is called the customer
satisfaction department. That means that the department has to
solve all requests that customers make, including complaints. But
the idea is to avoid those claims, so you have to be a couple of steps
ahead. You have to call the customer before they call you. That is
our philosophy and that is why customers prefer us.
What has been your biggest challenge
and how did you overcome it?
The biggest challenge is with our main customer, CFE , for whom
we create new equipment, designs and applications. To sell these
concepts to these people is very hard. The norms that they use to
buy equipment are very old. Also, knowing how to reach the
operators and the users, besides the administrative staff, is a
challenge.
What main advice would you give to companies or people
who want to invest in Mexico?
You have to look for key people with the local know-how at the
beginning, which will solve other problems. That’s one of the
reasons why we established the Nordic Chamber of Commerce. If a
new company is coming to Mexico, talk to us. It’s free, which is
important. This year, according to our expectations, we are going
to have a Nordic Business Day. Those who are interested in
investing, buying, selling or anything, should come here and we
will try to make appointments. Don’t come without talking to
anybody and start from zero. Of course you will make some
mistakes, but my advice is to ask people who know the market.
In the end, in one sentence, Mexico for you means…?
Everything. It’s a wonderful, big country with a lot of challenges.
We have the economy, we have the land, we have the resources and
Mexico, in my opinion, is one of the best countries to invest in.
PwC Mexico
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KONE
Sector: Industrial construction
Foundation in Mexico: 1985
Number of employees: 421
Alicia Bandala
Length of time with KONE (total): 3.5 years
Length of time with KONE (Mexico): 3.5 years
When was your company founded in Mexico
and how many employees does it have?
It started operations in 1980, but it was another company, Sabien,
that had a factory in Mexico City. KONE acquired that company in
1985. KONE had a bigger presence in the world than in Mexico. So
little by little, the Sabien brand that had a good reputation locally
was diminished and KONE began to grow in customer’s mind.
After years KONE installed a manufacturing facility in Torreón to
supply mainly the US and Canada.
Why did your company decide to invest
and to be present
in Mexico?
Mexico grew very fast, more over Mexico City and as one the most
important emerging economies our company decided to invest in
Mexico. There are statistics that indicate that in some years, 70%
of the population will be living in a city. The world’s mega trend
implies a need for elevators and escalators to move people
vertically. There is another megatrend that speaks about aging in
the population. As people get older the cities need to have facilities
to transport the elderly comfortably and safely.
Are the results obtained in Mexico
those that were expected?
Yes absolutely. For years our company has been doing great. In the
past, our name was not known and we were a minor player. Then,
with the effort of all the team in Mexico, KONE began to grow to a
level where we are one of the major players in the country and that
is very respectable. Now my challenge is to maintain or improve
that trend.
How has your company expanded in Mexico
since it arrived?
We have been growing our operations in Mexico City and we also
have branches in other main cities, for instance in Monterrey,
Guadalajara, Cancun and Acapulco. We also have service points
and a lot of technicians spread out all over the country to cover
maintenance contracts with different customers nationwide. Also,
we are selling our products through distributors outside Mexico.
We have presence in Colombia, Peru, Chile, Dominican Republic,
Panama, etc. So we cover 12 countries through distributors.
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Nordic investment in Mexico
Interview from December 2013.
What do you think about the transport system
and the infrastructure in Mexico?
I think Mexico has a good transport and infrastructure system. We
have access to both the Pacific Ocean and to the Atlantic ocean
with a good port system. We have highways to connect to the US.
Also there is a good railroad system connecting our country from
South to North. My complain would be the airport in Mexico City. I
think we need a bigger international airport.
How do you perceive the banking system
and credit access in Mexico?
In general, access to credit in Mexico is not so easy, more over if
you are a small company or an individual entrepreneur. The
banking system is uneven. I think that we are caught by banking
institutions. If you want credit, the interest rates are pretty high
but when you want to save money, you receive a very low interest
rate. Nevertheless, there are some institutions that are now
promoting accessible credits to entrepreneurs and small and
medium sized companies with the intention to overcome the
limitation of the traditional banking system.
What do you think about the Mexican tax system?
This is a very complex subject. There is a small portion of the
working people that are subjected to pay taxes since the informal
economy represents a big portion of the population so I consider it
is uneven for some of us. The tax authority has been making some
efforts to simplify the tax processes but it is still a kind of
complicated system.
What do you think about the Mexican customs system?
I think it has been improving for years. We have a lot of interaction
with the biggest economy in the world and our customs system has
been developing accordingly.
What do you think about local talent here in Mexico?
I think talent is the most scarce resource in the world and this is
truth in Mexico. The challenge is to have the proper recruitment
approach to get the best available candidates. Besides this, it is
critical to have a strategic development plan that includes
retention initiatives. It is also important to take in mind that the
recruitment of talent in the growing industries needs to be
considered as a never ending activity.
How do you perceive security issues in Mexico?
Speaking about security in Mexico, we need to ask where. We
cannot generalise the security situation is the same all over the
country. Of course there are cities that are worst in terms of
security that I personally don’t visit. For instance in Mexico City
and the central area, were the majority of the business activity is
being done, the security situation is like in every big city in the
world. Generally speaking I think security is the crucial point for
our government to focus so all the good things we have as a
country are not offset in terms of confidence and investment.
How do you perceive the development
of the market in your sector?
The market in our industry is presenting a growing opportunity. As
mentioned before, there are some megatrends that supports my
point. First, demographics indicates that in some years from now,
7 our to 10 people will be living in a city or urban areas. Secondly,
it is safer to live in a high-rise residence than in a house and
thirdly, the population is ageing. There are going to be more old
people who need more support and technology and long-distance
elevators to transport them. These megatrends support our
industry, meaning that we can grow more than national GDPs in
general.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
As mentioned in the previous point there are a lot opportunities for
business in our sector. The need to construct vertical is great news
for all the construction industry, more over in the cities and urban
areas. This is very exciting. The threat is the lack of regulation
regarding safety compliance that promote unfair competition so
companies like us, that invest in high safety and quality standards,
compete with companies that don’t invest on this and offer very
low price services. There is a good opportunity for government to
help us with compliance requirements, so old elevators need to be
replaced after X number of years. We don’t have such a compliance
in our country while other similar emerging economies have it.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
There are many differences. One is that our culture involves more
personal dealing. In Nordic countries, you can have more
impersonal interaction. Here, it’s more important to have dealings
in person. We are more similar to the Chinese culture in this
regard. The other point is that we are not direct. We don’t get to
the point and we beat around the bush and this keeps us from
being 100% productive. Nordics are very direct. Also, we have an
informal way of making deals. We are really educating our people
on process follow up, as in our culture, we are used to taking
shortcuts when we can.
What kind of Nordic know-how could Mexico use more of?
I think that we really need to rely on processes. Nordic culture is
very process-oriented and as mentioned, we are not. We need that
know-how, so we can easily achieve targets with no gaps and less
effort. Also, Nordic people use technology as much as they can and
we need to copy that. The technology is there, we just need to
evaluate the costs and benefits to make life and work easier.
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What has been your biggest success in Mexico
and which were the key factors to achieving it?
Something I keep using from my previous life before KONE is the
customer service orientation. That is something that companies
need to understand and promote. The customer needs to be
attended as if you were the customer. I think that mindset needs
daily watering and you need to construct that culture in all the
organisation. The safety culture of KONE is another success story
and you need to work very hard on a daily basis to create that in
every member of the team. You need to be consistent in order to
have people do things as if you were seeing them all the time. I
think that is one of the biggest steps forward we have been taking.
What has been your biggest challenge
and how did you overcome it?
The biggest challenge is to find talent to maintain growth. As
mentioned before, the most scarce resource in the world is talent.
We see opportunities for new business but it takes time to
construct the key people base to assure the sustainable growth.
Another challenge in consequence is time. I have seen companies
that fail when not having enough talent so it is crucial to keep
constructing human talent.
You need to have a path to attract talent but also to develop talent
in your existent crew and create the pattern to retain and motivate
this talent. For this reason I consider that every Managing Director
needs a partner in HR. I have mine and this has been a tremendous
support for my challenge.
What main advice would you give to companies or people
who want to invest in Mexico?
I would say trust in Mexico. The majority of us want good things
for this country. We are really hard-working and optimistic people
who are willing to thrive. You only need to invest relatively very
little to obtain a lot in terms of revenue. Of course, we have some
things that we need to overcome in the macro environment, but
trust in Mexicans. That is my advice.
In the end, in one sentence, Mexico for you means…?
Well I have two. For me, it means hope and high expectations. For
investors, Mexico could mean you will always receive more from
your investment and effort in Mexico.
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Nordic investment in Mexico
KWH Mirka Mexicana
Foundation in Mexico: 2005
Number of employees: 24
Sales revenue: US$7 million
Adonai García
Length of time with KWH Mirka (total): 15 years
Length of time with KWH Mirka (Mexico): 9 years
Tell me more about the history of your company
in Mexico.
We started selling in Mexico as part of the group’s United States
division. The US subsidiary is one of the oldest in the group and I
started working with them. We started the business with car
assembly plants and after some years there was a need to expand
to the automotive aftermarket division. Worldwide, that is the most
important part of our business. In order to start developing that
division, we needed to establish the company in Mexico. We
established a warehouse which is in Puebla and then we started
hiring people for the company in 2005. However, the operations
started in mid 2006, which is when we did our first shipment out
from our warehouse in Puebla.
Are the results obtained in Mexico
those that were expected?
We’ve been growing every year with double digits and the results
have been very good. Our products have been accepted very well in
the market. There are challenges, as everywhere of course. The
goals have been achieved and we are growing every year.
How has your company expanded in Mexico
since it arrived?
The business in Mexico was the first small subsidiary created by
our mother company in Finland. The subsidiaries created before
are in developed countries such as the United States, UK, France
and mostly European countries. The growth has been surpassed
and we hope we will continue that trend.
What do you think about the transport system
and the infrastructure in Mexico?
I think that there are a lot of opportunities. The communications
and the transport that we have been experiencing for our products
still have a lot of challenges. It’s in good shape, but when we
compare it to some other countries, we know there is still a lot of
opportunity there.
How do you perceive the banking system
and credit access in Mexico?
It is still a little bit restricted in some senses, with a lot of
opportunities compared to other countries. In terms of how Mexico
is ranked in order of how easy it is to do business in each country in
Latin America, it is surprisingly ranked in the middle of the chart.
It is still with a lot of challenges and sometimes the policies are
hard to understand. But our company trusts a lot in the employees
Interview from November 2013.
PwC Mexico
67
in each country and that’s actually one of the interesting points
about our company. We don’t have a Finnish person managing the
subsidiary in the country. The owners think that the country needs
to be managed by a local person who understands the needs of the
market. That also helps to grow the business.
What do you think about the Mexican tax system?
I am used to it, but for foreign companies it is very complex. I
started working for the US division some years ago and I know that
it’s much simpler in other countries. Taxes were actually one of the
main factors for Mirka in deciding whether to establish the
company in Mexico. We had long, long meetings and it took a while
to understand the implications. They were surprised about the
need to have accountants, lawyers and support like that in such a
small company like ours. They didn’t understand the need for that
just to understand the taxes. I think there are ways that the
Mexican government needs to work on simplifying things, and tax
is one of them.
What is your opinion on the Mexican customs system?
I think that is something that has been improved and the
government has been going in the right direction about imports. In
my opinion, the system overall is very established.
What do you think about local talent here in Mexico?
Our company in Mexico is mainly dedicated to selling products
and we don’t manufacture anything here. The only place where
we manufacture is in Finland. The people who work in the
company are mainly sales people, and it has been a challenge to
find good resources because of turnover. If you don’t have support
to make a good assessment when you are trying to hire people, it
will be easy for them to leave. In our company, we try to think
about a long-term career in the company and our most important
asset is the people. But sometimes it’s a challenge.
How do you perceive security issues in Mexico?
In my opinion, of all the different challenges for a company that
decides to establish in Mexico, that’s the biggest. We have
experienced some problems with transportation and having some
materials lost or stolen. We are concerned about it because we don’t
see, at least in my opinion, a big effort to try to solve the situation.
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Nordic investment in Mexico
How do you perceive the development of the market
in your sector?
Regarding car assembly plants, we’ve been growing very well in
that market and we’ve been bringing solutions to companies and
helping them to be more efficient, which has opened doors to our
line of products. We are thinking about expanding the business to
other sectors, which I think is going to bring us very good growth
in the future.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
In our case, people trying to do the things the way they have
already been doing them for a long time. That has been the main
challenge for us - trying to convince people about more efficient
ways to do their job.
What do you think are the main differences in the
Mexican business culture compared to the Nordic one?
The way that business is done is totally different in the sense that
Mexican people are used to more personal behavior. Sometimes,
the relationships are more important than the business itself. We
are very much used to having a direct interaction and trying to
create that relationship. Sometimes that can be good and
sometimes it can go too far.
What kind of Nordic know-how could Mexico use more of?
Something I admire about Nordic countries is the way that the
future is planned. They plan and organize very well and that’s
something we should learn from. In Mexico, we always find a way
to go around an issue and in the Scandinavian countries it’s totally
different, it is very direct.
What has been your biggest success in Mexico
and which were the key factors in achieving it?
Definitely establishing the company in Mexico and having the
opportunity to give people the chance to know the mentality of a
Nordic company and the very strict guidelines that we have. I can
say that I am proud to receive phone calls from people working in
the competition who want to work with us. Probably the key
success factor for that is having support from our mother company,
but at the same time having the freedom of somebody local to
manage the company. That combination has been a key success
factor for continued growth and having people wanting to come
and work in the company.
What has been your biggest challenge
and how did you overcome it?
The biggest challenge for now has been to expand to other sectors
where we don’t have a presence. There are some sectors where in
other countries we are growing, but in Mexico the traditional
mindset has been a barrier for us to go into those sectors. We have
been able to in some states, and out of Mexico City it has been
easier, but that has been the biggest challenge we have had.
KWH MIRKA MEXICANA S.A. DE C.V. is part of KWH Group Ltd, a
successful international group with HQ in Finland. It is an
internationally recognised leader of specialised abrasive products,
which are exported to more than 80 countries in different sectors such
as automotive, aerospace and wood, where a superior quality for the
finishing of surfaces is required. We are a pioneer of ecological
sandpapers recognised for the revolutionary system of sanding
without dust with our innovative sandpapers NET by Mirka.
What main advice would you give to companies
who want to invest in Mexico?
The opportunities are tremendous, even with the economic
environment and the government we have right now. I see the
position of our country as strategic. We have the biggest economy
in the world beside us and we can do as much as we want if we find
a great way to do it. The only thing I see is opportunity and it’s just
about doing it the correct way and finding the right people. My
suggestion would be to take the risk.
In the end, in one sentence, Mexico for you means…?
I will summarise it as opportunity.
PwC Mexico
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Metso
Sector: Mining and construction
Foundation in Mexico: 2001
Number of employees: 280
Sales revenue: 2000 million pesos per year in Mexico
Leif Lindholm
Length of time with Metso (total): 33 years
Length of time with Metso (Mexico): 18 years
When was your company founded in Mexico
and how many employees does it have?
Metso was founded as a Metso company in 2001, when Metso
bought Svedala. But the company here has been in Guanajuato
since 1980. We have 280 employees.
Tell me more about the history of your company
in Mexico.
After the merger in 2001, the company was reconstructed and
since that time we have been growing on average by 35% a year
over the last 10 years.
Why did your company decide to invest
and to be present in Mexico?
Mexico is a big area for the mining industry and in 1980 it was
almost impossible to import products to Mexico. If you didn’t have
a manufacturer in the country, there were very high import duties.
That was the reason at the time, but today Mexico is a very
important market for Metso Global.
Are the results obtained in Mexico
those that were expected?
Yes, they were much better than expected.
How has your company expanded in Mexico
since it arrived ?
We still have just one location in Mexico in Irapuato. At the
moment, we are building a service hub in Sonora, Cananea, which
is close to the biggest copper mines and which will be up and
running by the end of 2013. Apart from that, we have service and
sales people around the country, working from their homes.
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Nordic investment in Mexico
Interview from November 2013.
What do you think about the transport system
and the infrastructure in Mexico?
For our business, it’s working well. We have no problem and
Irapuato is a city from where the logistics are very good. We have
good railways and the road system is working quite okay.
How do you perceive the banking system
and the credit access in Mexico?
Actually, as a global company, we hardly take any credit options
within Mexico. However, the Mexican finance system has moved in
a positive direction in the last 10 years.
What do you think about the Mexican tax system?
There has been several changes to the tax system in the last few
years. In general, I think that it tends to be a little bit more
complicated than it should be and it could be a bit more efficient.
It’s a challenge and I think it could be better. But I also think it is
moving in the right direction.
What do you think about the Mexican customs system?
Procedures have improved and become more efficient. However, at
times, the support and responsiveness from an IT standpoint is not
as efficient as it could be, with system downtime or very slow
responses. Perhaps it’s a matter of time until systems are properly
debugged.
What do you think about local talent here in Mexico?
Currently,Metso Mexico is not only bringing technical support
from outside Mexico, but it is also exporting talent at a very high
level. In the past, it was more of a one way road, and now it seems
to move in both directions.
How do you perceive security issues in Mexico?
It is a huge problem. It’s complicated and certainly there are areas
where we have to be very careful to avoid exposing our people and
be creative to mitigate security concerns, by using air
transportation, for example. Somehow we find the way to keep
doing business, but for us and our customers, it comes at a
premium cost.
How do you perceive the development of the market
in your sector?
Mining has shown significant growth over the last few years,
driven by the trend of rising metal prices. We have yet to see what
the reaction of investors will be to the new taxes on mining
starting in 2014.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
The mining sector has been affected both by new taxes effective in
2014 and also the metal price reduction. We see potential for
growth in Mexico, but certainly there will be stronger competition
and more focus on both operational and cost efficiency. Leading
companies like Metso will have to be more persuasive with their
customers to properly demonstrate the cost benefit of using our
products and know-how, and help them avoid short-term decisions
driven solely by price.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
The Mexican business culture I think is a little more complicated
and bureaucratic then the Nordic culture.
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Metso is a leading process performance provider, with customers in
the mining, construction, and oil & gas industries. Metso is also
known for its advanced automation solutions for pulp, paper and
power generation. Our focus is on the continuous development of
intelligent solutions that improve sustainability and profitability.
Metso’s shares are listed on the NASDAQ OMX Helsinki Ltd. Metso
employs around 16,000 professionals in 50 countries. Expect results.
What kind of Nordic know-how could Mexico use more of?
How to improve the education system.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
Building a very strong local service organisation with strong local
knowledge.
What has been your biggest challenge?
Having the largest operation of our biggest customer on strike for 3
years and still grow the business was a big challenge. By focusing
on other areas and products we still managed to succeed.
What main advice would you give to companies
or people who want to invest in Mexico?
I do not think that Mexico is different from any other investment.
You need to understand your market, competition and government
rules, before you make the decision. After that, you need to get the
best local support to make it happen.
In the end, in one sentence, Mexico for you means…?
It’s a country with great growth opportunities and resources, with
some problems to solve before reaching its full potential.
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Nordic investment in Mexico
Stora Enso
Sector: Paper & carton board industry
Foundation in Mexico: 2003
Number of employees: 5
Sales revenue: USD 60 million
Guillaume Le jeune
Length of time with Stora Enso (total): 7 years
Length of time with Stora Enso (Mexico): 3 years
Tell me more about the history of your company
in Mexico.
In the past, we used to work like many companies through an agent
and around 11 years ago, Stora Enso decided to invest in having its
own company here in Mexico. At that time, we employed up to 15
people here, but now the operational aspect has been outsourced out
of Mexico to a service centre acting for all Latin America countries in
Sao Paulo. One important point is that the region that we are now
operating in here covers Central America and the Caribbean area as
well. We took it over since May 2012. These areas are covered either
by contracted agents or traders or merchants with whom we have
made business agreements.
Are the results obtained in Mexico
those that were expected?
Yes, the trend for us at the moment is good but like in the general
paper & carton boards industry it is quite different according to the
segments of products. We are doing well here. We are increasing
our sales volumes as well as our products portfolio. Before Stora
Enso was mainly concentrated on two or three kinds of products
and now we sell not the total, but most of the commercial offer
proposed by Stora Enso regarding papers and carton boards.
Why did your company decide to invest
and be present in Mexico?
We are clearly identifying that there are at the moment two main
strong markets in Latin America. One is Brazil and the second one
is Mexico. So, this is the reason why we are here. And over the last
20 years the Mexican GDP has grown well (nevertheless not as
good as expected in 2013 ), which is another reason that the
market is interesting.
In spite of that, the economic lights are green in the sense that
there are still a lot of foreign investments here in Mexico and this is
something really important for an industry such as ours. Because
we produce not only paper but a lot of carton boards for packaging
across industry. We are considering to reinforce our presence here.
Interview from November 2013.
PwC Mexico
73
How has your company expanded in Mexico
since it arrived?
Even if the paper industry is a very mature industry, not to say
declining in some areas (carbonless papers, newsprint )we could
so far grow up in a regular way.
Two factors clearly changed these last years: We strongly increased
the number of our new customers (direct and distributors); As
previously said, we have developed our sales through lot of
different products. Among these, the development of the cartons
boards segment is clearly one of our priorities .In that very area,
we are not yet locally a strong actor but we are clearly investing to
increase our sales and market share and we believe that Mexico
will be an even stronger market in carton boards than it is now,
even though it already is strong.
What do you think about the transport system
and the infrastructure in Mexico?
All our papers and carton boards that arrive here in Mexico come
through shipping companies, so the commodities arrive either in
Veracruz, Altamira or in Manzanillo ports, but most of them on the
East coast. After that, it’s the job of the customer to take charge of
logistics. There are no strikes here at all, which is not the case in
Europe. So if I compare it with my European experience, I would
say that it works quite well here. Nevertheless from what I have
heard from customers, railway transportation services still need to
be improved. There is no choice in the service. Most of the US or
Canadian competitors send their cargo by rail from the US or
Canada to Mexico and it seems that it works more or less well.
How do you perceive the banking system
and credit access in Mexico?
I think it’s rather rigid. As it seems like there are a lot of people
who try to cheat and get money in a very dishonest way the banks
have implemented many steps of security. It’s really complicated,
quite heavy and not user friendly.
From what I could understand it is not easy to get credit here,
especially for people with low revenues and anyhow the interest
rates are much higher than in Europe.
We are a sales representation office here, and we do not invoice
locally, but directly from our mills. We operate in this way
everywhere else in the world. The mill invoices directly to the
customers. Accordingly this means that we have very few banking
needs, and the money comes from Brazil (our head office for Latin
America ) or from Europe. We do not ask for loans and these kinds
of things.
What do you think about the Mexican tax system?
I would say it’s quite logical and not too complicated. Based on my
own experience, and before this I’ve spent my whole professional
life in France, it is more simple here, but these new tax reforms are
changing things and it is now less simple than before.
Furthermore, cost wise we have to pay more taxes now.
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Nordic investment in Mexico
What do you think about the Mexican customs system?
For us, it’s excellent. As member of the European Community, we
or our customers, do not have to pay any taxes and this is perfect
from our customers perspective. On top of that, we sell in most of
the cases with CFR or CIF incoterms. Nevertheless, we have one
customer who has chosen to import through DDP, which means we
operate through the service of a customs agent. It’s not easy, but
whatever country you go to, you always have to comply with some
local rules and as far as Mexico is concerned, I do not consider that
it’s more complex than in a lot of other countries. For instance, if we
compare Mexico to the rest of Latin America, I think it’s easier here.
Last by not least Mexico has 44 international free trade
agreements. As far as I know, no other country in the world made
so much trade partnerships. This helps not only the development of
the country but also the integration of other foreign companies.
For example, if you go to Brazil or Argentina, it is really more
complicated.
How do you perceive security issues in Mexico?
Everywhere in the world, people are hearing about Mexico as a
place where terrible things happen, such as war between drug
cartels or gangs, and unfortunately, most of the information that
come to foreign people is about this. But honestly, I’ve been living
here for three years with my family, and I do not consider that life
here, is more dangerous than in the rest of the Latin America.
Some countries are even more dangerous. Everywhere you go in
Latin America you have to be cautious. Personally, I feel more
secure here in Mexico than when I was living in Paris. We hear a
lot about security in Mexico, but I think that the conflict between
drug gangs and/ or with the national authorities give a wrong idea
and image of the country outside Mexico. International media
should also try to pay more interest to all the other positive things
that happen in Mexico. Nevertheless you have to pay attention to
your family and yourself, especially for people who have lot of
money, because the kidnapping industry unfortunately is still
rather active here. Of course, you must be cautious but not fall
down into paranoia.
What do you think about local talent here in Mexico?
I would say it’s like everywhere. I have met here many people with
great talents. There are a lot of skilled and talented people here. I
think what can still be improved is the school education so that
children and teenagers might kept in to the school system. But
which country can afford to say: “we do not need to improve our
education system?”
Here in Mexico you have very good universities and I think that in
the next decade they are going to improve again.
How do you perceive the development
of the market in your sector?
Mexico is a country where we still use a lot of papers, particularly
the administration, because unlike in Europe there are still a lot of
people who do not have access to IT-systems, laptops. So I think
that they will still have this “paper culture “ for several years.
There is also a long lasting tradition of newspapers publishing and
as far as supermarkets are concerned, they issue flyers and they are
just starting in this area, so that it is quite promising for us. Also,
we are developing more and more the carton boards sales; the
more the general industry develop itself, the more we will be able
to sell our carton boards for packaging . So I definitely see Mexico
as a promising market.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
The weakness of the sector is a strength for us. There are three
national suppliers in wood free uncoated papers and they run
machines with rather low capacity of production, which give us
more opportunities to sell our paper because there is a huge
demand in that category of paper.
Stora Enso is the global rethinker of the paper, biomaterials, wood
products and packaging industry. We always rethink the old and
expand to the new to offer our customers innovative solutions based
on renewable materials. Stora Enso employs some 28000 people
worldwide, and is a publicly traded company listed in Helsinki and
Stockholm.
The global turn over of the group was 10,5 billion euros in 2013.
The positive and negative thing is that everybody can sell here in
Mexico, so we face competitors who are Mexican, American and
Latin American but also Asian and European companies as well. So
we have competition from everywhere. This is a good and a
negative point. The good is that we can sell here, the bad point is
that everyone can as well. The other point is that the local paper
and carton board industry cannot develop very much because to
produce paper and carton board you need two things – a lot of
water and forests. Last but not least, the money investments are
huge to build up paper machines.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
I would say that we are talking about two different ways of
thinking or culture: In the Nordic country culture, we go straight
to the point. We define the things, needs and objectives and try to
stick to what has been planned afterwards. Here in Mexico, what
you define one day is not necessarily the same the day afterwards.
The most important difference is the scale of time. If there is one
thing that I’ve learned in this country, it’s patience. So the scale of
time and the way you present things and negotiate is very
important. Once again in Europe, we mainly focus on the main
points and try to go straight to the point and final goal. Here,
sometimes you can also lose a lot of time on details. But finally
,most of the times , it works and that’s the most important.
What kind of Nordic know-how could Mexico use more of?
The fact that we concentrate on the important points. A good thing
that we could bring here is the fact that we delegate to other
people. Here, the chief is the chief! And all the decisions must first
get his green light. As a consequence very often, employees do not
dare to take initiatives. I definitely think that people should be
more empowered.
What has been your biggest success in Mexico
and what were the key factor to achieving it?
I would say that we have not only one but several interesting
successes here. Probably the most interesting ones are that we have
clearly broadened our portfolio of customers and we have
introduced a lot of other products in the market that we did not sell
so far or so few.
What has been your biggest challenge
and how did you overcome it?
The difference of culture and the fact to accept that it is not
because you might have the best product with a good price, that
you will get the business. I still find it quite frustrating, but you
have to accept it at the end. From time to time there are hidden
factors that you do not necessarily know about, in terms of
relations with people and so on. Some decisions are not made in
the way that they are usually made in Europe.
What main advice would you give to companies
who want to invest in Mexico?
It will depend on which kind of sectors you want to invest. First of
all, you need a good and complete market survey. You will also
need time and you need as well talented people who know well
their markets. Above all, you must have also knock on the right
doors and get the right contacts. Then you can also save time. This
is the first recommendation I would make.
In the end, in one sentence, Mexico for you means…?
It’s an extraordinary adventure. Let me summarise it in a sentence.
I often use this metaphor: I just feel like a child in a toys shop
because Mexico is a country full of opportunities as far as business
is concerned. Last by not least, Mexican people are most of the time
well educated and they are very positive and this makes your daily
life brighter.
PwC Mexico
75
CEO interviews
Norway
76
Nordic investment in Mexico
BWO
Sector: Oil & Gas
Foundation in Mexico: 2006
Number of employees: 125
Sales revenue: $80 million per year
Johnny E. Torp
Length of time with BWO (total): 7 years
Experience with Pemex: 32 years
Tell me more about the history of your company
in Mexico.
Back in 2004, before I joined the company, Pemex was reviewing
options on how to increase production at their Ku-Maloob-Zaap
field in the Bay of Campeche in the Gulf of Mexico. They soon
decided that the quickest, best solution would be an FPSO (floating
production storage unit) and, through a Mexican company
operating Norwegian support vessels in Mexico, contact between
PEMEX and BWO was established. There are many similarities
between our countries and it was quite natural for a Mexican
company to work with a Norwegian counterpart. BWO started
discussions with Pemex, the project tendered internationally and,
in July 2005, the contract was signed, with operations beginning
in July 2007.
Why did your company decide to invest
and to be present in Mexico?
Back then, Mexico was a virgin market for FPSOs and the Yuum K
Ak Naab (Lord of the Seas) is still the only full blown such
operation in the country. I think we all believed that the first to
come to a market and do well would have a better chance of
success in the future in that given market and now we are
tendering for a second vessel.
Are the results obtained in Mexico
those that were expected?
Not for the first 2-3 years. We had many struggles then, mainly
because those who built the vessel believed that the specifications
that Pemex had provided were the only key to succeed. When we
came to the field, however, the actual conditions were quite
different from those specified. Therefore, for the first few years we
struggled to make ends meet, but after the initial hurdles were
overcome, it’s been rock ‘n’ roll and life has been good.
How has your company expanded in Mexico
since it arrived?
We really haven’t expanded. We have just built and strengthened
the single operation that we have. The reason I say that is that
there haven’t been any new opportunities. We have been offered
many opportunities in relation to smaller oil well test vessels, but
those are not our core business so, each time, we declined
tendering. Now, of course, we are doing well and this contract is
hugely successful for Pemex. So much so, in fact, that they call it
their icon and thus we felt that we have positioned ourselves well
for the next opportunity.
Interview from February 2014.
PwC Mexico
77
What do you think about the transport system
and the infrastructure in Mexico?
Some of it is bad, but not the airlines, which are great, on time, and
with excellent safety records. Road transport is to a certain extent
unreliable due to bad roads, especially during bad weather, and
there is always a fear of your cargo being attacked and lost, on the
road. I hear that buses are frequently being stopped here and
robbed. This isn’t anything I just read in the papers anymore, I
hear it from a friend or family member. On the other hand, sea
transport in to the major ports is not a problem at all.
How do you perceive the banking system
and credit access in Mexico?
The banking system is functional for now. It is a bit archaic in the
sense that you need so many accounts if you have different
currencies as we do. They are struggling to get a cap on money
laundering, so they are putting in place quite a lot of tools, but
those don’t hamper us. In relation to credit, we don’t have, or need,
any in Mexico. What I see from friends and colleagues is that it is a
lot easier now than it was 20 to 30 years ago when I first came
here. Then, there were no automatic cash machines, so you had to
stand in line at the bank to get money, and credit for people to buy
a house or car was appallingly slow. The Mexican banking system
has improved immensely since those days, ATMs are everywhere
and processing of loans and credits are now quite efficient. What do you think about the Mexican tax system?
The tax system is okay for us. There are a lot of details that you
have to take care of with income and expenses, but these days
invoicing and tax systems are ever more done in electronic form. A
major challenge Mexico has, is that such a large part of Mexican
commerce is informal and doesn’t pay tax. When just 30% of
business is paying for running the country, it takes a toll.
What do you think about the Mexican customs system?
The customs system in Mexico is fantastic, as long as you do your
work in documenting your imports properly and it took us a couple
of years to learn it properly. In the 1980s, it could take a year to get
something through customs. Now, if you follow the rules, it’s
incredible. As long as you do all your paperwork correctly, your
import duties will be low. Mexican customs work very smoothly
and we have never experienced dishonest dealings, whatsoever.
What do you think about local talent here in Mexico?
The local talent is a bit varied. There are good minds and the talent
is there, but talent is not enough. You also need attitude and
knowledge and competence about what you are going to do. We
have worked very hard to incorporate Mexicans to our operation,
even though our contract has no local content clause. The vessel
arrived with 120 crew on board, all foreigners, now we just have a
crew of 55, making 110 people, whereof 60 are Mexican. So we
found the talent, but it’s been a long process and quite a few have
left us because they haven’t had the correct attitude. But yes the
talent is there, just don’t give up!
How do you perceive security issues in Mexico?
In our local community, we are fortunate and as long as you are
aware of your surroundings, and maintain a relatively low profile
in the community, you will be quite safe. There have been
kidnappings in Ciudad del Carmen and there have been some
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Nordic investment in Mexico
killings, but on the whole I feel safe. However, we train our people
in safety and we have a specialised company helping us with that.
It’s about awareness and being sensitive to your surroundings. On
the whole, I am happy with the level of security in Carmen.
How do you perceive the development of the market
in your sector?
I see it as a very interesting phase. With the newly approved energy
reform, we are at a point now where the market could really
develop quickly. Because it has been stagnant, run by Pemex
through government funding for many decades, I see the reform as
something very positive. I think it will bring many new actors to
Mexico and will help Pemex be the company it wants to be, but
which the legal framework hasn’t allowed until now. Therefore, in
my head, I see a very different Pemex in 5 years’ time, where it has
become a modern company celebrating modern, incentivised
contracts. So far, everything has been penalty based and that’s
partly why we struggled for the first few years. If our operation
went down, we were penalised, but when we operated above the
contract demands, we got no additional reward. Incentivised
contracts will be something great, as they will enable real
competitive conditions for suppliers and Pemex alike. Pemex have
so many smart people, but currently they cannot do their jobs as
they wish, because of the conditions. Another weakness in Pemex
current contract regime is that there is no risk sharing. It will be a
great day when you can sit with your counterpart and determine
that the chances of some extreme condition occurring are minimal
and you can decide to share that risk. Then you can take that out of
the equation and automatically the contract is cheaper.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
An obvious strength is that there is oil, a lot of it. Also, the
government really wants to change. That is, possibly, the greatest
strength Mexico has now. A weakness is limited transparency,
fixing that is a condition for success and I see clear signs of
progress in that respect. People are also eager to get things done
quickly, but things take time. The country is opening up and it
takes time to make change. For example, Russia still hasn’t made
the whole change from the Soviet Union and there are still people
who think that the Soviet Union was better. For Pemex, reform will
take time.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
It used to be the concept, or lack thereof, of time and there is some
of that, but things are improving. There is another, less obvious
difference, which is that when you go to a meeting and everyone
from the client says “let’s do this”, the Nordics leave the meeting
thinking they’re going to get the contract “next week”, but still five
years later nothing has happened. You have to understand the
culture, for nobody in Mexico likes to disappoint or say no, and
compared to the clear talk in Nordic countries, that is a huge
difference. Actually, that has been one of the major challenges
when using local talent on board, for the rule is that any job or
action has to be performed safely. If you do something incorrectly,
consequences can be very severe. Therefore, anyone who perceives
another performing an unsafe act has the right and obligation to
stop the work. Everyone from the lowest on deck to the top needs
to stop anybody if they see that something is unsafe and that is a
huge, cultural challenge.
What kind of Nordic know-how could Mexico use more of?
The Nordic countries, especially Norway, have a lot of technology
to offer them. In the energy industry, there is so much. For example
to improve recovery from reservoirs there is an unending amount
of Norwegian technology available. In addition, with the new
reform, Mexico has looked closely at “the Norwegian model” and
has established an oil fund, such as ours, amongst other things. I’m
sure there are a lot of things where we could work with each other
and, perhaps, the Norwegians could learn to relax a bit more,
whilst the more unruly Mexicans could learn a bit more about the
concept of time.
BW Offshore is a leading global provider of floating production
services to the oil and gas industry. The company is the world’s second
largest contractor with a fleet of 14 FPSOs and one FSO. BW Offshore
has an excellent track record on project execution and operations and
more than 30 years of experience.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
Our biggest success is our ongoing operations. Last year we had
99.90% uptime. We handle one third of Mexico’s oil export through
our vessel. We are getting close to one billion barrels offloaded.
Multiply that by 100 and you have the value that BWO has
generated for this country. That’s a huge success and it’s because
we have always been honest, worked hard and gained Pemex’s
trust. The latter was a struggle and I think it would have been
difficult without someone with in-depth knowledge of both the
Norwegian and Mexican cultures.
What has been your biggest challenge
and how did you overcome it?
One challenge has been the way Pemex is forced to run the
contract. Their system is based on internal/external audits and on
finding the “responsible culprit”, rather than on what can be done
to avoid it happening again. So if my Pemex counterpart and I sit
down and say this or that contract text is ambiguous and makes no
sense, and it’s clearly textually wrong and we both know it, we
can’t change it. You have to go through an impossible, lengthy legal
regime and no one will make a decision on the issue. That is an
enormous challenge, until you learn to be pragmatic and live with
the contract you have signed.
What main advice would you give to companies
or people who want to invest in Mexico?
Get someone with you who understands both cultures. Get a
proper in-country associate, such as PwC. It has to be someone
who understands the rules and regulations. If not, you’ll never set
up a company. For our contract, we have, for example, 34 permits
to maintain. By all means, read the contract and don’t sign it if
you’re not sure, because you’re stuck with it. For example, a small
thing in the contract, like lack of defining who pays for helicopter
travel to the field, can become a costly affair. Lastly, if you want to
do well in the country, be honest and transparent in everything
you do.
In the end, in one sentence, Mexico for you means…?
I would say it is a country of great opportunities and fantastic
people - such a loving, warm people, making the odd shortcoming
a lot easier to forgive and forget.
PwC Mexico
79
Det Norske Veritas
Foundation in Mexico: 1982
Number of employees: 60 (DNV), 150 (DNV GL)
Gustavo Godínez
Length of time with DNV (total): 17 years
Length of time with DNV (Mexico): 17 years
When was your company founded in Mexico
and how many employees does it have?
DNV was founded in 1982 in Mexico City. If I remember correctly,
we started with inspection activities related to maritime. Before
the merger in Mexico, we had around 60 people. Now we have
business assurance, maritime, energy and oil and gas activities and
after the merger I believe that we are going to have around 150
people.
Why did your company decide to invest
and to be present in Mexico?
That’s a difficult question because in 1982 I was not here. As far as
I understand, the main reason was because we had an office in the
US, and the office in the US had close to 100 years of operating in
America. They realised that some activities in Mexico could be
interesting for DNV. They sent one person in 1982 to Mexico to
explore the market, and finally this person started working with
maritime activities and product certification. Around 1994, we
realised that we had a very good opportunity in relation to
ISO9000 certification. It was the most “hot” standard. We were
very lucky, because we started having some certification customers
and not only with ISO9000.
Are the results obtained in Mexico
those that were expected?
Do you mean if we are happy with the results? As usual, we always
want to go for more. But yes, we are. The revenue is fine, we have
profit in this office, so that is always a good reason to stay.
How has your company expanded in Mexico
since it arrived?
After the merger, the area that is going to be impacted most is oil
and gas, because currently in DNV we are not responsible for that
area. The GL Legacy company has a good number of very wellqualified people. Oil and gas is one of the things we really want to
push as DNV GL Group.
What do you think about the transport system
and the infrastructure in Mexico?
We have a lot of improvement opportunities. I remember this
country more than 40 years ago and now it’s better. The transport
and infrastructure here in Mexico City is good, because we have
public transportation, taxis and highways for the cars. However, it
is not perfect. If you compare the transportation in Mexico to
whatever other country you prefer in Europe, of course we are
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Nordic investment in Mexico
Interview from November 2013.
weak in comparison. In relation to other types of infrastructure,
the country is not so bad. This is an emerging country, so I believe
that we are going to be better in the next three or four years. We
have two other states that are doing well, being Nuevo Leon and
Jalisco. In these two states, we have two representative cities,
Monterrey and Guadalajara. Apart from that, the rest of the states
need to improve a lot.
How do you perceive the banking system
and credit access in Mexico?
It’s getting better. As you know, the credit and the banking system
are linked to the health of the economy. In the last 12 years, the
economy has been good in terms of credit and banking, but I can
see maybe a risk in the next 2-3 years in the credit system because
of the changes we are experiencing. Interest is a bit high and
inflation is going to be a bit high, but in general terms, it is going
well and the foundation from the last 12 years is very good.
What do you think about the Mexican tax system?
The system is not so good, especially because there is just one
group of people who pay taxes. To have more people paying taxes
is the main challenge. On the other hand, we really need to see
how the government is using the taxes. Unfortunately, in some
cases, we Mexicans expect to see a better use of that money. If we
talk about companies, I believe that some people see a risk again
after the last reform, because now we have higher taxes, especially
for ISR.
What is your opinion about the Mexican customs system?
In my opinion, they are doing a good job. Maybe the big challenge
is more related to drugs and corruption. But if we look only at the
system to import and export, that is really good.
What do you think about local talent here in Mexico?
The people in Mexico are people who like to work. You can find a
lot of competent people. In terms of human resources, I can see a
lot of opportunities. The infrastructure for the management of
talent in Norwegian companies is really good and it doesn’t matter
that we are in Mexico, because we use the same values and policies
we use in Norway.
How do you perceive security issues in Mexico?
Everybody knows that we have big issues about security, but these
issues are really focused in some small cities in the North of the
country and the Pacific. But apart from that, people can walk in the
street and you can go for dinner and you won’t have any problems.
If you are not in the middle of these issues and you are a normal
person, you can live your life without any problem. I would invite
other companies to come to Mexico, because we have a lot of
business. I can see a lot of opportunities and security is not a
barrier to those.
How do you perceive the development of the market
in your sector?
The main service line we have is related to certification, for
ISO9000 or any other ISO standards. The market for certification
for ISO9000 is not growing, but if you look at other standards for
environmental, health and safety and food and beverage
certification, the market is growing.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
Nowadays, a lot of companies are concerned about quality, the
environment, health and safety and trying to improve their
sustainability approach. DNV is ready to help them, because we
have a sustainability approach in all activities we do.
Unfortunately, a lot of people still believe that sustainability is only
about the environment, but we need to think about economic,
social and environmental factors. The idea is that DNV is trying to
help those companies to understand the sustainability approach.
Some big customers are already starting to have that mindset and
they can push suppliers a bit. What I see now is that big companies
are trying to push this new concept and they cascade the
requirements to suppliers. In terms of opportunities, the market
for certification has a lot of competitors and in DNV the strategy is
about differentiation. We are not trying to sell the services with
the cheapest price, and I believe that Norwegian companies never
do that. But now more companies really perceive the value of our
services.
What do you think are the main differences in the
Mexican business culture compared to the Nordic one?
The key word is culture, because we are quite different. When you
do business, you have the values of the company, but you also have
the values of the person. If you put a Mexican in a Norwegian
company, this Mexican is going to be a different person after some
months, because he is going to be part of the Norwegian culture.
What I am trying to say is that these Nordic companies are helping
to improve the business culture in Mexico and this is one of the
best things I’ve seen in this country. The big difference is the
personal culture that we have as Mexicans. In Mexico, we need to
have a culture where we value meeting all the legal requirements.
We also need to avoid corruption. This is one thing that everybody
knows. Unfortunately, Mexico has a place in the corruption index
and that place is not so good. Maybe the economy pushes small
companies to get into corruption, because the small companies are
trying to survive and maybe the system is not really supporting
those companies to live by the right values. Nowadays it is getting
better. With globalisation, we see a lot of people from Mexico
working in companies from other countries, and they are learning,
improving and taking on these values.
What kind of Nordic know-how could Mexico use more of?
I believe that the Nordic know-how that we can use is in the oil and
gas sector. You may have heard about the intention of the country
to go into deepwater activities and we don’t know how to do that.
We don’t have the technology and we don’t have the competent
people for that. We believe that people from countries like Norway
know how to do that, because they undertake these activities every
single day in the North Sea. Another thing is the know-how about
regulations. For example, the Minister of Energy of Mexico is
trying to improve the regulations for PEMEX. If you look at the
regulations in Norway, they have a very good structure. They have
entities dedicated to each of the areas of oil and gas. The structure
and the know-how about how to manage these regulations could
be really useful for the Minister of Energy in Mexico.
PwC Mexico
81
DNV and GL have merged to form DNV GL
We are now the world’s largest ship and offshore classification society,
the leading technical advisor to the global oil and gas industry, and a
leading expert for the energy value chain including renewables and
energy efficiency. We’ve also taken a position as one of the top three
certification bodies in the world.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
I have been here (in DNV) for the last 17 years. This is a big success
and I have learned a lot of things in this company. Another big
success is to help 40-50 people to improve and to change their
mindsets. They are not average Mexicans, so let me put it in these
words; my success is not only related to the success of revenue and
profit, my success is more related to the way that we manage the
talent we have. Because the revenue is there, the profit is there,
and maybe if I will not be here in the next 2 years, my main
achievement is related to the people, not the money. We have a
market, but my idea is to manage this talent in order to make them
better Mexicans. This is my real success.
What has been your biggest challenge
and how did you overcome it?
I think the merger, because GL Legacy is a company from Germany
and we are a Norwegian company. We are very similar companies
in terms of services, but I don’t know the culture they have and
typically this kind of merger needs two or three years in order to
have a really merged company. So now the challenge is to manage
the people and to manage the current business. In addition, we
need to try to insert all the new people into the new company, the
DNV GL Group, and we have to be worried about the customers
and keeping all stakeholders happy.
What advice would you give to companies who want
to invest in Mexico?
My advice is come to Mexico and you will find competent, loyal
people who want to work. The business environment now is a lot
better compared to the business environment we had 10 years ago,
so now is a very good time to come to Mexico. My advice about the
challenges is to please read carefully about the legal requirements.
Take a look in detail into the new reforms we have and be aware of
the changes, because this is going to have an impact. Also, be
careful with your activities in the north of the country, because of
security issues. There are a lot of companies there, but just think
about that. Another piece of advice is to implement the culture you
have in your country in order to help the Mexican people to be
better. Help them to use the values that you have. Utilise the
Mexican people because they are very work-oriented.
In the end, in one sentence, Mexico for you means…?
Mexico is a big country with fantastic people and with a very good
environment for business.
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Nordic investment in Mexico
Norsafe
Sector: Oil & Gas
Foundation in Mexico: 2007
Number of employees: 67
Sales revenue: US $3 million/year (average)
José Antonio
Martínez Palacios
Length of time with Norsafe (total): 7 years
Experience with Norsafe (Mexico): 7 years
Tell me more about the history of your company
in Mexico.
It all started with a partner that we used to have here in Mexico,
but the relationship didn’t work very well, so Norsafe decided to go
for direct establishment. So in 2006, we started working on a
contract with PPI (PEMEX Procurement International) whose
offices are in Houston, but is directly related with PEMEX
operation in Mexico. We signed this contract and that’s how it all
started. The contract itself was mainly a corporate contract for all
entities in Pemex. This means that just by signing, the activities
weren’t going to start immediately. We had to market the contract
to all different entities within PEMEX. One of the main ones is
Ku-Maloob-Zaap Field. It’s one of the biggest fields and it’s our
main customer within PEMEX (28 boats) to which we provide
service on a yearly basis.
Why did your company decide to invest
and to be present in Mexico?
Mexico is an interesting market in the oil and gas industry. Before
our establishment, Norsafe had been selling Norsafe boats to
Pemex through a sales agent. They already had the boats here, so
we could sign a service agreement.
Are the results obtained in Mexico
those that were expected?
Probably not 100% as expected, but it’s a good market, the prices
are good and PEMEX is a good payer, but it’s a very bureaucratic
process to be able to invoice.
How has your company expanded in Mexico
since it arrived?
Under the contract we have signed, we have obtained blanket
orders from different fields (Cantarell, Ku-Maloob-Zaap and
Abkatun Pool-Chuc) and each different field has their own
administration, so they decide. We work as a tailor-made type of
service in each different field, according to their needs. We are
currently working to get a new blanket order for 3 years with
Unidad de Negocios de Perforacion.
Interview from March 2014.
PwC Mexico
83
What do you think about the transport system
and the infrastructure in Mexico?
I think that it’s very good and has very good infrastructure, but it’s
not well regulated. According to my perspective, everything is well
designed, but the implementation and the operation are the main
problem. I think they don’t care about regulations and it’s not
transparent, so this affects the system.
How do you perceive the banking system
and credit access in Mexico?
Banking itself is very stable and strong, but credit access is not
available to everyone because the cost of the money is high in
Mexico. The rates are quite high compared to international rates.
The good thing is that the Mexican banks also work with
international interest rates. If you try to get a credit in Mexican
pesos, rates will be high, but if you borrow in dollars, it will be an
international rate, so it’s very flexible on that side. What do you think about the Mexican tax system?
Again, it’s very bureaucratic. It’s a big thing to take care of and
there have been reforms, but each government has a different
position. I think that there’s good flexibility in the tax system, at
least in the state tax system, because they can provide good benefit
plans for newly established international companies. This means
that they “forgive” some taxes for a couple of years until the
companies are well established. So it’s bureaucratic and difficult to
fulfil on one side, but flexible on the other hand.
What do you think about the Mexican customs system?
We have not had a bad experience with customs, it’s actually very
good. We have a lot of free trade agreements. I think Mexico is the
number one country with the most free trade agreements in the
world. So the NAFTA and the Free Trade Agreement with the
European Community have helped very much and I consider it to
be a good system.
What do you think about local talent here in Mexico?
The talent is there, it just has to be polished. It is a very big
challenge, because our education level is not very high in general.
We used to be very good about 20 years ago, even rated better than
the US, I think. We have very good people and they are hard
workers, they just need to be properly educated, unfortunately, the
basic needs that people have, like having bread on the table,
supersedes the need of going to school.
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Nordic investment in Mexico
How do you perceive security issues in Mexico?
Well, it’s always an issue and it’s mainly due to drug dealing. Of
course, people have to eat and sometimes an easier way to make
more money is through drugs. There’s a lot of work that needs to be
done, but it’s not as bad as the international media states. We are
also a very warm people and we welcome everyone.
How do you perceive the development of the market
in your sector?
We are hoping that the new reform can allow a lot of investment. It
seems that there’s a lot of oil in deep waters and that’s very
interesting, because we just have to take it out, but we don’t know
how, that’s why we need more investment, of course. Also we have
gas, which has been wasted all these years, and it’s a big industry
in the world. We are hoping that we can enter agreements with
some international companies that already have the know-how
and the technology.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
The strengths are the reforms. At least we are designing a new
path and it seems to be the correct one according to international
standards. The monopoly of PEMEX will not be there anymore
under the reforms. The threats that we have include that the
design is there, but the accomplishment of the design needs some
work and it needs to be done correctly. Transparency is always an
issue. I have read that corruption should not be an issue and that
there should only be effective corruption or non-effective
corruption. That is a threat that I see. But the reforms will leave a
lot of opportunities.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
It is very, very different. The Nordics are very honest and very
good-hearted people with good intentions. This provides for some
weakness on the professional side sometimes. They think that they
will just work as usual and everything will be okay. But when they
come to Mexico the culture is completely different. Unfortunately,
people look for their own good instead of the collective one, it’s
like that and there are a lot of business topics that need to be taken
care of when the cultures are so different. So I have this saying:
“Nordics have to tropicalise their system”.
What kind of Nordic know-how could Mexico use more of?
Well, there are a lot of things. There’s a lot of technology involved
in the oil and gas industry. Nordics are well-known around the
world for developing good technology, including deep-water
technology. In our market (lifesaving appliances) Nordics are
number one and, in an overall view, I think their current
technology could be very useful here in Mexico.
Norsafe AS is the sole provider of service, maintenance and original
spare parts for Norsafe lifeboat systems in Mexico.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
It is difficult to get contracts with PEMEX due to Mexican
legislation, and by doing so, we have moved a step forward to a
stable operation that has allowed us to take a second step to
provide services to the private clients outside of PEMEX. A key
factor to achieve the afore mentioned has been the fulfilment of
the proprietary rights to our brand and the compliance of
international and national regulations in our market.
What has been your biggest challenge
and how did you overcome it?
The biggest challenge has been the bureaucracy, in terms of how
we have to let the Nordic directors know that there’s no room for
questioning the applicable laws in Mexico and we just have to meet
the path already established, but they have learned this in Norway,
which has led to a domestic administration based on a Nordic
corporate system, likewise for the operation.
What main advice would you give to companies
or people who want to invest in Mexico?
Just to take care of business before they come. They say that the
devil is in the detail - it’s true. The global plans are easy, but you
just have to take care of the details on the way of doing business in
Mexico. Once you’ve done that, it’s actually a very good country to
do business in.
In the end, in one sentence, Mexico for you means…?
Mexico means opportunity.
PwC Mexico
85
Yara
Sector: Fertilizer
Foundation in Mexico: 2007
Number of employees: 140
Pedro Parenti
Length of time with Yara (total): 11 years
Length of time with Yara (Mexico): 3 years
Tell me more about the history of your company
in Mexico.
Yara has offered the Mexican market high-level crop nutrition
technology through advanced technology products and top quality
farming nutrition advice, field work inside the country, and
support for the commercial chain. This has allowed many farmers
to increase the productivity and quality of their farms and have
access to the most demanding markets. This way, the company was
recognised in the market as high-value farming nutrition solutions
supplier, turning it into a strategic ally for farmers in Mexico.
Why did your company decide to invest
and to be present in Mexico?
Because Mexico has great potential in food production due to its
surface, variety of weather conditions and soil, besides its strategic
geographical location to supply key international markets.
Are the results obtained in Mexico
those that were expected?
Gladly, we have been able to achieve the results expected, and in
some cases, even more.
How has your company expanded in Mexico
since it arrived?
Yara Mexico has developed modern fertilizers and reception,
handling, mixing and packaging terminals in Veracruz,
Topolobampo and Manzanillo. This has allowed the company to
expand its operations countrywide.
What do you think about the transport system
and the infrastructure in Mexico?
I think that the infrastructure is good enough and could allow
growth in certain sectors of the economy, but of course extra
investment is needed to boost the potential of the country.
How do you perceive the banking system
and the credit access in Mexico?
I don’t have a formal opinion about this issue.
What do you think about the Mexican tax system?
There has just been tax reform. It is too soon to tell what the results
are, but we are looking forward to the results of the reform.
What do you think about the Mexican customs system?
We have worked well with the Mexican customs system.
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Nordic investment in Mexico
Interview from January 2014.
What do you think about local talent here in Mexico?
There are young people with good potential. But private education
is expensive, and not all of them have opportunities to develop
their talent. I think that education will be the key that Mexico
needs to develop the country.
How do you perceive security issues in Mexico?
Yara delivers solutions for sustainable agriculture, the environment
and safe and efficient industry operations.
Our fertilizers and crop nutrition programmes help produce the
food required for the growing world population. Our approach to
being accountable and contributing to sustainable growth is
Creating Impact.
It depends very much on each region. Mexico is not the easiest
country, but I hope that the situation will improve.
Founded in Norway in 1905, Yara has a worldwide presence with
sales to 150 countries.
How do you perceive the development of the market
in your sector?
Safety is always our top priority.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
What has been your biggest challenge
and how did you overcome it?
Even if the fertilizer market has growth potential, it has
maintained the same volume during the last 20 years. The players
of the sector are responsible for providing the necessary dynamism
to generate growth to enhance Mexican agricultural activities. In
Yara, we’re committed to achieving this goal, and we believe we’re
making significant positive changes in areas that need more support.
Mexico has enormous agricultural potential, but in many areas of
the country growth has many limitations. The main strengths are
the variety of weather conditions, a surface suitable for farming,
and a strategic geographic location. The opportunities that emerge
from those strengths are clear and may be materialised depending
on the capacity of farmers to integrate and improve the
commercialisation of their products, enhance the technology they
apply in their farms, and transform simple subsistence agricultural
areas into professional farming fields. Of course, there are
agricultural sectors that have advanced development conditions
and are considered world-class fields and they can serve as models
for the rest.
The main threats are in the least developed agricultural sectors,
due to the vulnerability of low scale farmers.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
The biggest challenge has been generating a high-performing work
team committed to Yara’s values and culture. We managed to build
an excellent team by working with the organisation and
incorporating new talent, who has contributed to position Yara
Mexico to grow and create a positive impact in important sectors of
Mexican agriculture.
What main advice would you give to companies
or people who want to invest in Mexico?
Mexico is a country that offers many opportunities for those who
decide to accept the challenges implied. There are some complex
variables as in many other markets, but it’s possible to overcome
them.
In the end, in one sentence, Mexico for you means…?
A great country, with friendly people and huge potential.
I wouldn’t talk about a “Mexican business culture” because
actually you can find completely different situations and cultures
in different sectors and companies. Perhaps a difference would be
that the “culture” in Mexico is more diverse.
What kind of Nordic know-how could Mexico use more of?
Sectors such as energy are obviously potential areas where the
Nordic know-how would be very useful in Mexico.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
The biggest success stories are related to enhancing the yield and
quality of the crops where we have worked, helping to significantly
improve the real conditions of the farmers involved. This happened
with small farmers with whom the technologic improvement and
enhancement of the results were translated into better life
conditions for famers; and with large agricultural companies that
became even more successful by gaining access to demanding
markets through longer shelf life for their products thanks to the
proper nutrition of their farming lands. This was possible through
the joint efforts of farmers and local advisors, in addition to Yara’s
knowledge and technology.
PwC Mexico
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CEO interviews
Sweden
88
Nordic investment in Mexico
Atlas Copco
Sector: Mining & Rock Excavation, Compressors, Construction
and Industrial Techniques
Foundation in Mexico: 1952
Number of employees: aprox. 600
Carlos Caicedo
Length of time with Atlas Copco (total): 22 years
Length of time with Atlas Copco (Mexico): 2 years
Tell me more about the history of your company
in Mexico.
The philosophy of our company is to be close to the customer.
Many years ago, the company decided to establish here because it
was an important market. In those days, we didn’t have the
business areas that we have today. It was a full company with all
the products in one area. They started in Torreon and they had a
small facility there for selling compressors, which one of our
biggest scope of products during those days.
Why did your company decide to invest
and to be present in Mexico?
Again, the priority of the company is to be close to the customer,
that’s why we can be found in close to 170 countries (so far).
Are the results obtained in Mexico
those that were expected?
Yes, today Mexico is a very interesting market for the organisation.
A good share of the company sales are done here in Mexico, so this
is a very good country for Atlas Copco.
How has your company expanded in Mexico
since it arrived?
We have several branches. We have our headquarters here in
Mexico City and we have branches in Monterrey, Guadalajara,
Torreon, San Luis Potosi, Chihuahua, Coatzacoalcos, Hermosillo
and our facilities in Zacatecas for the area of Mining and Rock
Excavation, and several distributors in other places.
Interview from January 2014.
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What do you think about the transport system
and the infrastructure in Mexico?
I think it’s fairly good. I think that the infrastructure of the harbor
is well prepared and well organised. In general, I don’t see
transportation as an issue for our market. Of course, there are
some things that could be improved. International trading is very
easy, as things come in to the ports with very good infrastructure.
How do you perceive the banking system
and the credit access in Mexico?
I think that it is very modern and there are several options for our
customers. We also have some options to offer them regarding our
lines of credit.
What do you think about the Mexican tax system?
It’s been developing, but in my point of view it’s really very
complex. There is a lot of work to be done with the tax system.
What do you think about the Mexican customs system?
It’s very efficient and I also think that the reforms will improve the
customs system even more.
What do you think about local talent here in Mexico?
Generally it’s good. You have people that are prepared, but I also
think that, especially for the mining industry, the growth has been
so huge that it’s difficult sometimes to get people with the right
knowledge. So we decided to go to some schools and prepare the
technicians before graduating by including some of our topics in
the academic programmes, and this way they were able to
understand some of our requirements right away.
How do you perceive security issues in Mexico?
I think that’s one of the biggest issues in the country. It’s something
that is really affecting business because we need to spend a lot of
time and resources taking care of security and being prepared to
overcome all the issues that we may have.
How do you perceive the development of the market
in your sector?
We handle four different business areas and mining and rock
excavation is one of those areas. In the case of Mexico this is the
biggest business area. The mining industry, in Mexico as well as
the rest of the world, has the challenge of the low price of minerals
right now. Also, we have the difficulty of facing the new tax
regulations.
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Nordic investment in Mexico
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
The country is full of minerals, it’s a very rich country. The
industry is very well developed and the challenge is of course to be
more efficient each day to get the minerals in the best way and
without affecting the environment and the people.
The other sector we operate in besides mining is construction,
which really has challenges at the moment. We also have
compressors, which are used for manufacturing and we have
another area for assembling systems and tools. Assembly is
booming, as the automotive industry and other manufacturing
segments are growing.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
It’s difficult to say. The reason is that we are a company that has
been here for 61 years and we have a very strong culture. One of
the challenges for the General Manager is to bring the Swedish
culture to the people but also, after the 60 years that we have here,
I see that it is already in the company. In general, I would say that
the main difference in the cultures is the way the Nordics get
consensus for most decisions. To do that, you need for that to be
part of your culture and to be educated from a young age to handle
decisions by consensus. This is not a very Latin way to handle
decisions.
What kind of Nordic know-how could Mexico use more of?
I really like the strong culture and the way that the company is set
up. For me, one of the biggest points is about spreading the values
and thinking long-term and sustainably and having a customer for
life. I think that is also something that the Mexican culture has,
they want to have partners for a long time.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
Our consolidation with the mining industry. A key factor for that is
that our decisions come from conversation with our customers, I
think that our Zacatecas facilities are a good example of that, and
when they asked us several years ago to support their operations in
Zacatecas, we followed that request. Therefore, we decided to
invest there, to stay there and be close to our customers and that
small branch that we decided to invest in is now one of our biggest
branches in the country.
What has been your biggest challenge
and how did you overcome it?
We have all kind of challenges, but we can talk about one of those,
which is being prepared to service the customers. We grew a
couple of years ago from 40-50 technicians to about 130. That can
be difficult because we need to educate people. The way we
handled it was, as explained before to go to the universities and
start education before students graduate, and also to attract talent
and to create our own training centre with simulators and well
prepared teachers to capacitate our people to the high level
required for mine operators. Those are the type of challenges.
Also, keeping the talent in the organisation with motivated people
is a challenge.
Atlas Copco is a world-leading provider of sustainable productivity
solutions. The Group serves customers with innovative compressors,
vacuum solutions and air treatment systems, construction and
mining equipment, power tools and assembly systems. Atlas Copco
develops products and service focused on productivity, energy
efficiency, safety and ergonomics. The company was founded in 1873,
is based in Stockholm, Sweden, and has a global reach spanning more
than 180 countries. In 2013, Atlas Copco had revenues of BSEK 84
(BEUR 9.7) and more than 40 000 employees.
What main advice would you give to companies
or people who want to invest in Mexico?
I think that Mexico is a wonderful country. It’s very rich and has a
lot of opportunities. There are a lot of people who want to work
and wherever the market is, there are opportunities here.
In the end, in one sentence, Mexico for you means…?
For me it’s culture, it’s fun, it’s work, it’s contrast. Mexico means a
lot of things. Mexico is a place where you can have whatever you
want. What I really like is the culture of the country, the different
places you can see, the good friends you can have and the good
markets, so it’s not only one sentence to define it.
PwC Mexico
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Autoliv
Sector: Automotive
Foundation in Mexico: 1992
Number of employees: More than 10,000
Sales revenue: More than US$1 billion
Raúl Armenta
Length of time with Autoliv (total): 7 years
Length of time with Autoliv (Mexico): 7 years
When was your company founded in Mexico
and how many employees does it have?
That is a good question. We started back in 1992, with a joint
venture with a Mexican group, IUSA group, building seatbelts,
which is one of the main products that we produce. Since that time,
we have installed 5 different facilities in Mexico, one being in
Lerma, two in Queretaro, one more in Tijuana and most recently in
Matamoros. Currently, we employ more than 10,000 people and
we have plans to expand in the next two and three years.
Tell me more about the history of your company
in Mexico.
In 1992, we open the facility in Lerma, Toluca. There, we launched
the seatbelt business as well as the other two businesses we have
here in Mexico, which are steering wheels and airbags. In 1999, we
decided to expand these operations and then the facilities in
Queretaro were born. At the same time, we acquired another
seatbelt facility in Tijuana, and four years ago our most recent
acquisition in Matamoros. It is a plant that is producing steering
wheels for the North American market.
Matamoros has been recently known as a complicated location due
to security issues. However logistically speaking its geographical
location is convenient for business with our customers in North
America.
Why did your company decide to invest
and to be present in Mexico?
We are an automotive company and our model looks for heavy
presence where our customers are located. Back in 1992, the plant
in Lerma was exporting most of our production to the United
States and at the same time covering the Mexican market. We also
have facilities in Asia, Europe, North and South America. The
reason for Mexico facilities was to be closer to the customers and
avoid additional cost in terms of import or export logistics.
Are the results obtained in Mexico
those that were expected?
Autoliv in Mexico has grown significantly and Mexico is the
country where most Autoliv business is; even more than China.
China is growing, but Mexico represents the country with the most
employees worldwide. Being closer to our customers provides us
with some competitive benefits that have obviously given us the
ability to gain more market. So the answer is yes, and with a
promising future.
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Nordic investment in Mexico
Interview from November 2013.
We do not have plans to install more facilities in Mexico, but there
are plans for new investments within the plants. The automotive
market in North America is in a very good position right now, so
we have plans to grow with current customers.
What do you think about the transport system
and the infrastructure in Mexico?
We have a better system than we used to have five or ten years ago,
but it is not enough. The highway system still needs additional
roads and the conditions of them are not good enough. In Mexico,
the roads that are fairly good are toll roads, and if you compare
them with other countries they should be free.
We have two main ports close to Autoliv Mexico S.A. de C.V. One is
on the Pacific Ocean located in Manzanillo and the other one is in
the Gulf of Mexico which is located in Veracruz. In terms of
distance, they are close to us, however in terms of efficiency that is
another story. Mexico definitely needs more investment from the
government in infrastructure.
How do you perceive the banking system
and credit access in Mexico?
The credit in Mexico is outrageously expensive for everyone, poor
and rich alike. The fault in tax regulation, little competition and
historically volatile currency have been the most important
elements to limit credit in Mexico for the last years.
Rates are higher in Mexico for people with the least money and
there is actually a legitimate business case for what might seem to
be an unfair treatment to them.
What do you think about the Mexican tax system?
Mexico does not have a robust tax system, depending strongly on
the revenue coming from oil royalties. In my opinion the tax
system needs improvement, simplifying the processes in order to
make it more efficient to collect taxes, as well as amplifying the
taxpayer base and combat tax evasion.
What do you think about the Mexican customs system?
I think it is fair. We understand what the requirements are, and
once you complete all the certification processes you have this
fast-track system. Tax customs are fair too, when you think about
the different free trade agreements signed with different
countries. That is also one of the reasons why we have grown in
the automotive market here in Mexico. You see companies like
Nissan, which are expanding their facilities in Aguascalientes, or
Audi, for which Mexico is attractive regardless of customs.
What do you think about local talent here in Mexico?
Nowadays Mexico has a network of different universities that are
leaders in supplying young engineers and other professionals.
According to different sources, Mexico is producing more
engineers than any other country, and a great percentage of them
have a job, which is amazing. That fact tells us that the economy is
blossoming, technical skills are well received, and that is why we
have competitive people. In terms of skilled professionals, Autoliv
has very well trained and educated people, starting from the
operators to the managers. We compete on very good terms with
any other country. So talent is available, but every single company
such as Autoliv in Mexico needs to invest in education, because we
need to keep our people competitive.
How do you perceive security issues in Mexico?
When our top management decided to acquire the Matamoros
facility, there were several of us questioning why he decided that,
according to the high crime rate in this part of the country.
Although crime is there, I think it has lowered its rate in the last
years. It is stabilising and, whether we like it or not, crime is
everywhere.
Yes, we have issues and when you live in a large city such as New
York, London, Paris or Mexico City, you have to be careful. We
were aware of some issues close to the Tijuana and Matamoros
facilities about 3 years ago. When you are close to a cross-fire event
in the street, people are really afraid and they used to see this on a
daily basis in Matamoros, however I was there three months ago
and it is a different story now, people feel safer.
How do you perceive the development of the market
in your sector?
The sector is growing. If we take advantage of the talent we have in
Mexico and the free trade agreements, the sector will probably
show continuous growth at least for the next five years. We have to
make sure that we have enough resources, not only in terms of
people but also in infrastructure, including more plants in the
other states of Mexico. Also the government needs to be very smart
in not cutting growth in the automotive sector.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
In the automotive business, tier one companies are very solid, but
we need more tier two and tier three companies in Mexico. There
is a possibility for companies like us to invest resources in the
development of these tier two and tier three companies. We all
need to care in people’s development, so investment in the
education sector is necessary as well as competitive salaries. There
should be a balance between how much you pay and the skill level
of your people. Security always needs to be taken into
consideration, especially since all the Nordic companies have very
sound processes in terms of security in their facilities.
What do you think are the differences in the Mexican
business culture compared to the Nordic one?
I admire the way Nordic people think and react. They have a very
practical long term way of thinking and information-based
decision-making. Sometimes, Mexican people tend to take
decisions based on hunches. This company has been growing for
the last seven years, since we have been here, and we have plans to
continue in the same way. We can predict and be prepared for it,
and that is a big difference. Mexican people need additional
infrastructures, otherwise when we look two or three years ahead,
it will be difficult to proceed. Mexican people are passionate and
we express more our emotions, but that is something that can be
combined with the Nordic culture, in order to have the best of both
worlds.
What kind of Nordic know-how could Mexico use more of?
I believe there are some areas, including telecommunications and
healthcare, where developments in the Nordic countries can really
provide some opportunities to Mexico, both in terms of making
businesses, but also in exchanging know-how. In those two areas, I
think we could be very lucky if we have joint ventures or common
agreements.
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What has been your biggest success in Mexico
and which were the key factors to achieving it?
One of the successes is being the largest country in terms of
population at Autoliv, meaning that we have the conditions for
sustainable businesses, with the right level of technology,
processes and people. People are key in our organization to achieve
success. We have very open, candid people who are able to learn
and it is just a matter of deciding how to manage them, to be still
growing is a continuous success.
What has been your biggest challenge
and how did you overcome it?
Back in 2008 and 2009, the automotive industry was in a very bad
condition. We had to reduce the size of operations by more than
50% and laying-off people who we had invested in. It was a big
challenge to have the capacity to be flexible and reduce size, while
keeping the key metrics of the business in a healthy condition.
Then, to grow now with new people is a challenge. We have people
with 15 or more years of seniority here and we have some others
who we have just hired last week. This will continue to be a
challenge, as well as having a system that helps to acquire and
keep talent. Mexico tries to be a very traditional society, but it is
now evolving. Developing skills to work with Generation Y is also
a challenge.
What main advice would you give to companies
or people who want to invest in Mexico?
My advice, depending on the sector, is that companies should look
at what is available in Mexico. There are some sectors that are
highly competitive; there are others where a new company can
create a breakthrough, understanding how people think and
behavior are key factors. Having people with international
background is important when you want to open a facility in
Mexico. I have seen cases where some new companies after 3 or 4
years of working close because they were not able to manage how
people work here. I recommend acquisitions or joint ventures,
where you have some know-how of how to manage people,
regulations and other important factors that help not starting from
ground zero. Doing businesses in Mexico is easy if you know how to
do them. Companies have to approach good advisors such as PwC.
In the end, in one sentence, Mexico for you means…?
It is not easy to describe it in a sentence or a word, but I think that
this is the time for Mexico.
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Nordic investment in Mexico
Autoliv develops and manufactures market airbags, seatbelts,
steering wheels, passive safety electronics and active safety systems
such as radar, night vision and camera vision systems. Autoliv also
produces anti-whiplash systems, pedestrian protection systems and
integrated child seats.
Their leading market position in automotive safety includes a global
market share of approximately 37% in passive safety and more than
20% in active safety with operations in 29 countries and ~56,000
employees globally. In Mexico they have 5 plants, which can be found
in Queretaro, Toluca, Matamoros and Tijuana.
Ericsson
Sector: Telecommunications
Foundation in Mexico: 1905
Number of employees: Around 4000
José Luis Serrato
Length of time with Ericsson (total): 29 years
Length of time with Ericsson as Country Manager (Mexico): 2
years
Tell me more about the history of your company
in Mexico.
Ericsson started in Mexico as an operator, and later became a
technology provider. We have a long history here in Mexico, and
we have had factories for some time. We have also gone from just
being a technology provider to a solution provider, implementing
and optimising customer’s operations. We have been moving in to
the service area in a quite successful way, providing training and
consultancy services, outsourcing services, as well as providing a
consultative approach, not only from a technology perspective, but
also from a business perspective. There have been big changes in
these 29 years. When I started in the company, we had close to
5,000 people, then we dropped to 300 people and now we are close
to 4,000 again. Ericsson has been adjusting to the situation in
Mexico all this time.
Why did your company decide to invest
and to be present in Mexico?
I do believe that Ericsson identified great business potential in
Mexico. I think the main reasons were the geographical position,
the number of people and the possibilities to grow. There was, of
course, the opportunity to bring the latest technology that was not
available in Mexico at the time.
Are the results obtained in Mexico
those that were expected?
There has been different cycles, but Ericsson has also been very
loyal to Mexico in the sense that there have been tough times and
there have been very, very promising years with growth and
investments. In all this time, Ericsson has been loyal to keep its
presence here. So definitely I would say that Ericsson’s results have
been positive.
Interview from November 2013.
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How is the current company expansion in Mexico?
Right now, Mexico is part of a regional structure that Ericsson has
created; Mexico belongs to the Latin American region. We have a
growth plan that has been created and we revisit it on a yearly
basis. The region is very challenging. We have countries in which
their business, market opportunities, and government regulations
are quite difficult, and other countries that are promising. Mexico’s
economy has been stable, which provides opportunities for us here,
and this is contributing to the results in the region.
What do you think about the transport system
and the infrastructure in Mexico?
I think that the transport system is good, but with great potential
to improve. In urban areas, we have problems with waiting for long
hours in traffic and public transportation at certain times is not an
option. It’s a big opportunity to invest and grow. The infrastructure
has been improving, and the government has, for example,
invested in the second layer road called “Periferico.” Imagine the
problems we would have if we didn’t have those types of
investments. Also, when it comes to infrastructure across the
country, there has been a lot of investment in high speed roads,
which will support the growth that we are expecting from the
country.
How do you perceive the banking system
and credit access in Mexico?
I think it’s very, very good. The country has a good penetration of
branch offices and most of the time you have 24/7 availability by
internet. There are a lot of institutions supporting it.
What do you think about the Mexican tax system?
I think that it’s good, but the big challenge of the Mexican
government is to get taxes from the informal economy. That’s a big
opportunity to increase the revenue generated from tax collection.
What is your opinion about the Mexican customs system?
We have indeed taken advantage of it. We have production in
Guadalajara, and most of the production is going to the US. I
definitely think it’s good.
What do you think about local talent here in Mexico?
It’s really good. Ericsson globally decided to create four global
service centres. One of them is in Mexico, and the others are in
India, China, and Romania. In Mexico, we have a lot of talent and
we are using it to create and deliver professional services for
Ericsson worldwide.
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Nordic investment in Mexico
How do you perceive security issues in Mexico?
Security is an issue in Mexico, but the government has put in place
some strategies to eradicate the security problems and protect
internal and foreign investments. For sure it will take time because
it is a long process, but the government has shown that it is a
priority.
How do you perceive the development of the market
in your sector?
We are in a sector that is very interesting and with many
opportunities. The telecommunications industry is really an area
that you can have passion to work with, because
telecommunications has become the engine for growth in the
country and it became an enabler to improve people’s life. Fix and
mobile penetration is in a good level, and there is a big potential in
fix and mobile broadband, especially with all the data and video
demand.
In your opinion, which are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
We have a big opportunity to grow in mobile broadband. Also, the
penetration of cable and TV is very low, at no more than 6 million
houses or other locations. The potential to grow there is great. In
the coming three years there will be an exponential expansion on
data traffic, and in parallel with that there is a need to increase
coverage and expand in rural areas.
What do you think are the main differences in the
Mexican business culture compared to the Nordic one?
29 years ago, there were a lot more differences than there are
today. New generations have closed the gaps between the two
cultures, but definitely one of the areas where we take advantage
of the Swedish culture is its process-oriented ways of working. In
the Mexican culture, you can identify a lot of passion and focus,
which is key to having success. I think that the cultures
complement each other.
What kind of Nordic know-how could Mexico use more of?
Ericsson—as a multinational company—can bring best practices
from any place and implement them worldwide, which of course
creates a positive multicultural environment.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
The biggest success has been to have a sustainable business in
these 110 years. One of the biggest strengths that we have in
Ericsson is the ability to adapt to change, and during this period, of
course, the country has had very different challenges and very
different opportunities. Ericsson not only survived, but grew.
Today we are the leader in telecommunications. We provide
solutions in all areas, and recently we became a strong player in
television and broadcasting. Ericsson has adapted to all these
changes and brings experiences from abroad in order to make sure
that we are successful here in Mexico.
Ericsson is a world-leading provider of telecommunications
equipment and services to mobile and fixed network operators. Over
1,000 networks in more than 180 countries use our network
equipment, and more than 40 percent of the world’s mobile traffic
passes through Ericsson networks.
What has been your biggest challenge
and how did you overcome it?
The biggest challenge that we faced was the crisis in 1994. That
was a tough one. I mentioned that at a certain point in time our
workforce had been reduced drastically. But it was just a slowdown
because after that, opportunities for growth came again.
What advice would you give to companies
who want to invest in Mexico?
It is a really good opportunity to invest in Mexico, and not just in
the telecommunications area where Ericsson is working. There is a
lot of potential in the automotive industry. We have also seen
investments in Queretaro in the aeronautical industry. New
reforms are generating opportunities in the energy sector that will
also create opportunities and investments in related industries.
In the end, in one sentence, Mexico for you means…?
For me, Mexico is opportunity. “Es un lugar donde vas a ser bien
recibido.” It’s a country that will welcome and support anyone who
is coming from abroad to invest.
PwC Mexico
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Getinge Group
Sector: Medical devices
Foundation in Mexico: December 2009
Number of employees: 38
Daniel Merlo
Length of time with Getinge Group (total): 10 years
Length of time with Getinge Group (Mexico): 3.5 years
Tell me more about the history of your company
in Mexico.
Our product has been here since the 70s, but from very sporadic
sales via doctors that went on programmes through countries like
Sweden and then asked for the kind of technology they saw and
brought it back to Mexico. It was not a real operation. In the 90s,
we started through distribution channels and the doctors were
exporting from our manufacturing sites to Mexico. In 2010 we
decided to start with our own operation.
Why did your company decide to invest
and to be present in Mexico?
For us it was a natural decision. In 2003, we started our operations
in Latin America. From San Paulo, Brazil, we had been taking care
of the whole of Latin America. The second biggest market is
Mexico. We began to have enough business in Mexico, not only to
take care of Mexico, but of the whole region. Nowadays, we act as a
hub for Mexico, Central America and the Caribbean and it’s a huge
market, where healthcare it is still growing.
How has your company expanded in Mexico
since it arrived?
In terms of financial development, in 2010 we were close to our
break-even. We had some losses, but that’s natural in a start-up
process. Regarding infrastructure, the first step was COFEPRIS of
course. Our priority was regulatory first because without the
product registration, we would not be able to do anything. Once we
had our product registration in place, we started to build the sales
channel. We revised the complete distribution channel we had and
we started with some direct sales in the big cities, Mexico City and
Monterrey, and next year we will start our operations in
Guadalajara.
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Nordic investment in Mexico
Interview from November 2013.
What do you think about the transport system
and the infrastructure in Mexico?
In order to be more competitive, I think Mexico requires better
investment in infrastructure. All kinds of investment have been
focused on a short-term view to find solutions to very specific
problems while not looking for a long-term plan.
and the drug cartels. That image was sold abroad so that when
people were considering investing somewhere, the first topic about
Mexico was our security because it was on the news. Most people
read about it in the media, so if you do not make the trip here you
do not get the whole picture. I think it has improved and I really
like the approach from the new government.
How do you perceive the banking system
and credit access in Mexico?
How do you perceive the development of the market
in your sector?
It’s extremely expensive. For example, we are working in
partnership with banks from Sweden, which is a bit weird with
such a huge economy that we would need a solution from Sweden
to be able to do a competitive 5 or 7 year lease in Mexico. However,
that’s an opportunity here as well because for the local players
they do not have access to international financing like we have. Basically, financing companies in Mexico are ready to finance
those who are not looking for financing and the customer who
really needs support generally has no credit solution.
What do you think about the Mexican tax system?
Taxes are high and the government is not collecting them well. I
think there are people who should be paying more, but they have
legal ways not to. As a consequence, this affects other sectors,
including infrastructure, transport, investments and so on.
What do you think about the Mexican customs system?
I can’t complain. I worked in Brazil before, and they have a huge
problem with the customs system. However, there is room for
improvement in Mexico. The customs system is concentrated on
collecting IVA (VAT) and also IGI (Importe General de
importación), so they have a focus on that when the focus should
be to speed up the process and make the system more competitive.
What do you think about local talent here in Mexico?
It’s a challenge, as everywhere. An important part of structuring a
company is to select the right talent. In Mexico there are 110-112
million people living in the country and of course you can find
everything here. We managed to find a very good team, so it’s not
impossible.
How do you perceive security issues in Mexico?
If you compare Mexico to San Paulo, Bogotá or even Buenos Aires,
it’s not that different to Mexico City. However, if you come from
Europe it’s a huge impact. I think the previous government’s top
priority was security and it must be a priority. However, in every
speech from the President he was talking about security, violence
I think that it is full of opportunity, which is why we are here.
Mexico has a big fountain of public and private demand. By not
being able to fulfill the public demand, you open a niche in the
private sector. Nowadays the (Mexican) health sector is relatively
small compared to other countries in Latin America, but it has
been growing. The mindset of private customers has also been
changing. In the past, there were small hospitals looking for
second-hand equipment or to purchase equipment from the US.
Now, they have a mindset that they should invest in technology
and high quality equipment that has a direct impact on the quality
of care that they are providing to the population. Public Private
Partnerships have been a trend, which is a welcome fact because
the approval process is much faster than the normal public one.
The negotiation for us is clearer, since we directly deal with a
private outsourcing provider who is obliged to construct, equip and
administer the hospital for 5, 10 or up to 25 years.
In your opinion, what are the strengths, weaknesses,
opportunities and threats of the sector in Mexico?
The Mexican market is an open market and Mexico has free trade
agreements with close to 70% of countries worldwide. Opening up
a company in Mexico is not that complicated. I would describe the
PPPs, the growth of the population and the proximity to the US
and emerging markets as opportunities. This proximity may help
future exports to the rest of America and the US. A weakness is the
tender process that takes too long, is too bureaucratic and which is
not transparent. I remember when we started in Mexico we had
some meetings with Business Sweden and they organised meetings
with IMSS and ISSSTE. We asked how we could join the tenders
and they said to use the webpage where you just access the tender
and everybody can join. However, in Mexico, if a tender comes out
to the market and you just find it when the tender is already
published, the deal is already lost. There is also insecurity and
infrastructure issues, and last but not least, corruption.
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What do you think are the differences in the Mexican
business culture compared to the Nordic one?
I think the values are definitely a big difference. Here, politicians
earn way too much. They have a lot of assistants and they have a
lot of rights and if you go to Sweden, for example, a politician is
there to improve the public system. Also, teachers in Sweden are
treated as a total different priority. Another big difference is
transparency in public accounts, legislation and so on.
What kind of Nordic know-how could Mexico use more of?
Long-term thinking, planning and strength in society values would
be important. In terms of technology and healthcare, there are a
lot of good initiatives not only in Getinge Group but also in other
companies in terms of prevention and cancer, which could be
important to Mexico.
What has been your biggest success in Mexico
and which were the key factors to achieving it?
The consolidation of brands in the Mexican market has been
important. The Getinge Group outside of Mexico and Latin
America act with three business areas, under the brands Maquet,
Getinge and ArjoHuntleigh. Here in Latin America and also in
Mexico this year we decided to consolidate the whole group under
the same umbrella. To change the mindset of the team was an
achievement because we started as Maquet Mexicana, and we still
have the name Maquet Mexicana, but the approach to the market is
as Getinge Group that provides a complete solution for the entire
hospital. The biggest success I think is the market expansion.
Nowadays, we are the market leader for our tables, surgical lights
and the OR decoration, which is a special system we have to
decorate the whole operation in the OR.
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Nordic investment in Mexico
What has been your biggest challenge
and how did you overcome it?
To understand the market dynamic, Mexico is not that simple, in
relation to the culture, the needs and many factors. Cultural
difference was a bit hard in the beginning. However, we managed
to integrate in our team experienced people who have been in the
market for a long time. This knowledge that we brought to the
company definitely supports us to understand and improve our
way of doing business in Mexico. I do not really believe that
companies should export products that work in the Nordic
countries, for example, to Mexico. You always need to do some
adaptations according to the real needs of the market.
What main advice would you give to companies
or people who want to invest in Mexico?
I think if you are looking for something beautiful, clean and stable,
you won’t find that in Mexico. I think you really need a taste for the
risk if you are going to invest in such a dynamic economy and you
definitely need a commitment to the long-term. Your business plan
won’t work immediately from day zero. You need to adapt it over
time.
In the end, in one sentence, Mexico for you means…?
I think it’s an opportunity, it’s a growing economy and not only for
healthcare, but in all other sectors there will be plenty of
opportunity.
GETINGE Group is a leading global provider of products and systems
that contribute to quality enhancement and cost efficiency within
healthcare and life sciences. We operate under the three brands of
ArjoHuntleigh, GETINGE and MAQUET. ArjoHuntleigh focuses on
patient mobility and wound management solutions. GETINGE
provides solutions for infection control within healthcare and
contamination prevention within life sciences. MAQUET specialises
in solutions, therapies and products for surgical interventions and
intensive care.
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101
Conclusion
102
Nordic investment in Mexico
Through this publication, we wanted to present the potential of the Mexican market with a special focus on
sectors which are contributing to the growth of Mexican economy and which are also the sectors in which the
most Nordic companies are present.
With an average annual growth of 3% in the recent years (excluding 2013) and with an IMF forecast of 3.4 % for
2014, Mexico is one of key players in Latin America and its importance will grow with the Pacific Alliance.
Historically, the country has been an economic powerhouse in terms of international trade and been open to
FDI. Its strategic geographical position, its free trade agreements and recent reforms on telecoms and energy,
promise a positive economic outlook and opportunities for Nordic companies.
Today, the Nordic business community in Mexico consists of over 250 companies which are benefiting from
the economic growth, growing middle class and the geographic location which is why some companies have
opted to place their regional hub their regional hub in Mexico.
PwC Mexico, relies on an international network present in 157 countries, as well as relationships with the key
players of the local market. The Nordic Desk at PwC Mexico along with the Nordic Embassies, trade offices,
Nordic Chamber of Commerce and ProMexico offer their expertise on the Mexican market and support the
development of your business adding to the many success stories of Nordic companies in Mexico!
Possibilities are vast, so the question is, are you ready to take on the challenge?
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103
Contact information
PwC Mexico
Finpro, Finland Trade Centre
ProMéxico
Juan Luis García
Erna Takala
Market Analyst
Carlos Francisco Pérez
Cirera Langenscheidt
Monte Pelvoux 111, 4th floor
Col. Lomas de Chapultepec
11000, Mexico D.F.
Puh/Tel +52 (55) 5520 3397
Faksi/Fax +52 (55) 5202 6567
Riddargatan 11B
11451, Stockholm, Sweden
+46 (763) 494149
Partner, International Business Centre
[email protected]
Walter Heredia
Manager,
International Business Centre
[email protected]
Lisamaria Markula
http://www.finpro.fi/
Leader Nordic Desk,
International Business Centre
[email protected]
The Royal Embassy
of Norway in Mexico
Pia Maria Lustig
Merethe Nergaard
Nordic Desk, International Business Centre
[email protected]
Louisa Masoura
Nordic Desk, International Business Centre
[email protected]
Laust Hjortkjær Hansen
Nordic Desk, International Business Centre
[email protected]
Ambassador of Norway in Mexico
Simen Ekblom
First Secretary
Avenida Virreyes 1460
Col. Lomas Virreyes
11000, Mexico D.F.
Tel +52 (55) 5540 3486/87
Fax +52 (55) 5202 3019
[email protected]
Embassy of Denmark in Mexico
Susanne Rumohr Hækkerup
Ambassador of Denmark in Mexico
Jakob Tvede
Head of Commercial Section
Tres Picos 43
Col. Polanco
11580, México D.F.
Tel +52 (55) 5255 3405
Fax +52 (55) 5545 5797
Embassy of Sweden in Mexico
Jörgen Persson
Trade Commissioner
for the Nordic countries
[email protected]
[email protected]
http://www.promexico.gob.mx/
The Nordic Chamber
of Commerce in Mexico
Sergio Rivas
Nordic Chamber President for 2014
Estrellita Fuentes
Nordic Chamber Director
Hanna Arnby
Nordic Chamber Manager
Ejercito Nacional 843-b
Col. Granada
11520, México D.F.
[email protected]
[email protected]
Ambassador of Sweden in Mexico
Jakob Holthuis
Second Secretary
Adam Boltjes
Commercial and Cultural Assistant
[email protected]
http://mexico.um.dk
Paseo de las Palmas 1375
Col. Lomas de Chapultepec
11000, México D.F.
+52 (55) 9178 5010
Embassy of Finland in Mexico
[email protected]
www.swedenabroad.com/mexico
Anne Lammila
Ambassador of Finland in Mexico
Kaisa Koivisto
Second Secretary
Monte Pelvoux 111, 4th floor
Col. Lomas de Chapultepec
11000, México D.F.
+52 (55) 5540 6036
[email protected]
www.finlandia.org.mx
www.facebook.com/
EmbajadadeFinlandiaMexico
www.twitter.com/EmbFinMexico
Business Sweden Swedish Trade & Invest Council
Jakob Sjölander
Market Unit Manager Mexico
Miguel de Cervantes Saavedra 193-802 Col.
Granada
11520, México, D.F.
+52 (55) 9126 3430
[email protected]
© 2014 PricewaterhouseCoopers, S.C. All rights reserved. PwC refers to the Mexico member firm, and may
sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.
com/mx for further details. MPC: 041404_GM_NordicInvestment
This content is for general information purposes only, and should not be used as a substitute for
consultation with professional advisors.
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assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.
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