Conversation: Juan Pablo del Valle, Mexichem (Jan 23)
Authored by: Paulina Mendoza
The conference began with an introduction of Mexichem which is the largest Mexican Chemical Company. Juan Pablo del Valle, Chairman of Mexichem, explained several interesting facts that make this company a global leader in the chemicals and plastics markets. It has operations in 39 countries with significant presence throughout the Americas, Europa, and Asia; also, it is the only vertically integrated producer of refrigerant gases (except China) in the world. Its product breakdown consists of 46 % refrigerant gases, 27% hydrofluoric acid, 22% fluorspar and 5% aluminum fluoride. The main drivers for this chain are construction and consumption.
Along the years, Mexichem has been an example of growth and improvement. Since 2003, more than US$3.5 billion have been invested in acquisitions; generating an EBITDA of more than USD$1.0 billion. Its future products will be fluorelastomers and fluoropolymers.
The second part of the presentation was about Juan Pablo’s family business. He described their history since 1883 and how through a series of events they came to be Grupo Empresarial Kaluz. He explained the common objectives among his family being: 1) together to ensure things were appropriately controlled, 2) grow the business, 3) focus on strategic industries, 4) regional vision, 5) develop family members to understand and be part of the business, and 6) avoid any conflict coming from the business.
Gerardo Gutierrez Candiani, Consejo Coordinador Empresarial (Jan 28)
Authored by: Paulina Mendoza
Gerardo Gutierrez Candiani, President of the Business Coordinating Council, gave a conference at Arnold & Porter in NYC regarding the Role of the Mexican Private Sector on the Definition and Implementation of the Economic and Business Events in Mexico.
Gerardo began presenting the package of proposals for the Federal Executive Branch and Congress for the period 2012 - 2018 known as Agenda for Mexico. This agenda, presented in June 2012, was developed within the CCE and defines a series of measures to promote poverty reduction, improve income distribution, real wages strengthen, improve domestic consumption and living standards of population.
Gerardo showed the 8 basic pillars underpinning the agenda along with the respective measures-
He mentioned that maintaining macroeconomic stability is a prerequisite for sustained growth. One of the measures he discussed was to not exceed 40% of GDP.
Economic Growth and Employment-
According to Gerardo, the Mexican economy requires growth of at least 6% on a sustained basis in order to create one million jobs annually. This can be achieved by increasing the total investment up to 25% of GDP, with public investment share of not less than 6%. Among other actions he also mentioned to establish a new long-term public policy that encourages farm productivity.
He explained that when major structural reforms are achieved, the economy grows at high and sustained rates. One of the proposals within the tax reform is to establish a simple tax system with a single direct tax. Within the labor reforms contractual flexibility in terms of hours is proposed, schemes of temporary employment and test periods; and within the energy reform’s opening to private investments.
One of the educational proposals mentioned was to establish transparency legislating that governments not retain syndicated dues.
Social Security- Within the health sector proposals, Gerardo mentioned the globalization and unification of the systems IMSS, ISSSTE and Seguro Popular. Reviewing the systems of public sector pensions would, as a result, consolidate the universal health care system benefiting all households the country.
The measures for this pillar will result in placing Mexico among the 20 countries best rated in public safety. Some of these measures consist on strengthening the intelligence structure of the fiscal and financial authorities and grant full powers in proactive investigation and forensic capabilities to specialized police forces.
Rule of Law- A shocking figure he gave was that 98% of crimes go unpunished. Among the proposals to change this is to convert the prosecutor agencies on victim care centers and independent prosecutor.
Democracy- The proposed measures under this pillar are political and electoral reforms in addition to the legislative ethics code; for example, re-establishing the IFE citizen character and the validity of the right to freedom of expression. This provides a distinctive and consolidated democracy.
Gerardo continued showing the advances that have been achieved in terms of this agenda. Such advances include employment and educational reform and the law against money laundering, among others. Also, he said that 58 of the 95 commitments in the Pact for Mexico proposals match Agenda por Mexico driven by CCE.
Finally, Gerardo stressed that the opportunity exists between the U.S. and Mexico to build a bilateral agenda, visionary and comprehensive, to open a new era in the relationship, based on complementarity. He mentioned that within this bilateral agenda are border issues, migrants, security and economy.
Conversation with Senator Gabriela Cuevas, President, International Commission of the Mexican Senate (Feb 22)
Authored by: Tatiana Salomon
On Friday, a breakfast and conversation with Senator Gabriela Cuevas was held at Littler. Senator Cuevas is the current President of the International Commission of the Mexican Senate. The event took place at Litter’s offices and it was organized in collaboration with them and the U.S –Mexico Chamber of Commerce. In this short article, we have summarized the conversation topics.
The conversation on Friday focused on The perspective of the Mexican Senate regarding the U.S – Mexico relation; Cooperation between Congresses involving both countries; The agenda of the Mexican Senate regarding structural reforms and other topics of interest to the international business community. The conversation was moderated by Alejandro Ramos, Executive Director at the U.S –Mexico Chamber of Commerce Northeast Chapter.
The conversation started with an introduction of the Senator and her objectives as the head of the International Commission of the Mexican Senate. Senator Cuevas mentioned that although she previously had been all her life involved in domestic politics, she has a major interest in International affairs as there is a new stage in Mexico in which political parties want to take a different approach to international affairs and start getting more involved in what the United States has to say about Mexico. The main Senator’s purpose is to focus on diplomacy in a way that it is transformed in real and tangible benefits to Mexico and the United States.
Senator Cuevas mentioned that she had a special interest on the following topics : a) Migration ; b) Mexico’s promotion as a hot destiny for foreign investment; c) Mexico’s foreign trades with a special emphasis on the Transpacific Partnership (TPP) ; d) Mexico’s need for building stronger relations with foreign Parliaments; and finally Senator Cuevas mentioned the her big interest on better understanding what the Mexican Senate can do to have an even stronger and better relationship with the United States.
After Senator Cuevas expressed her point of view in the aforementioned topics, Alejandro Ramos, explained to o the audience that the U.S –Mexico Chamber of Commerce Northeast Chapter has a big interest in strengthening its relationship with Mexico’s Senate since part of its job and responsibilities lie on solving different sort of problems for the member companies, that may have to do with the Mexican Senate.
As part of the conversation with Senator Cuevas there was a session of Questions and Answers where the major concerns were:
- The Senate’s take on NAFTA. On this topic Senator Cuevas mentioned that Institutions responsible for solving controversies between the US and Mexico, need to be stronger and solve the differences in a more efficient and timely manner.
- Mexico’s new opportunity as a leader in Economic and Political Issues. Senator Cuevas expressed that in this new period Mexico is and will work harder on the Energetic Reform as well as the Tax Reform.
- Mexico’s structural reforms. In the Senator’s view the reforms that have a stronger likelihood to pass are in first place Telecommunications reform, followed by the Tax and Energetic Reform. There is a strong inter-partisan support for all of them, but still several points of debate.
- Mexico and Entrepreneurship. According to Senator Cuevas Mexico needs to invest more on Innovation and to better apply.
Mexico: Destination and Latin American Hub for the Pharmaceutical & Medical Device Industries
Authored by: Paulina Mendoza
On February 28th, 2013 the U.S.- Mexico Chamber of Commerce in partnership with Beamonte Investments organized the event “Mexico: Destination and Latin American Hub for the Pharmaceutical and Medical Device Industries”. The presentation took place in Boston, MA, being the first event held by the Chamber in Boston.
The keynote speaker was Mikel Arriola, Federal Commissioner of COFEPRIS (Federal Commission for the Protection against Sanitary Risks). In his presentation, Mikel pointed out the economic environment in which Mexico had found itself in the past few years. He mentioned that between 2011 and 2012, the economy had a very good performance and that the same was projected for 2013.
Coverage on the pharmaceutical industry detailed that Mexico holds the 11th place within the 15 largest pharmaceutical markets in the world. He explained that the objective of the pharmaceutical policy is to improve access of the population to a well-supplied drug market that offers innovative and generic medicines at the best prices.
Mexico’s pharmaceutical policy was weak and inefficient however, after new strategies were launched by the Mexican Government in 2011 and COFEPRIS’ action plan took course, the pharmaceutical sector has shown a steady and dynamic growth.
Among the regulatory changes and their impacts, there has been a reduction in waiting times from 1 year to 3 working days for administrative procedures on sanitary registrations. Generics were introduced into the market which increased savings for both the government and consumers.
An issuance of specific requisites to produce and commercialize biological medicines and incentives for innovative drugs create benefits to consumers through lower drug prices, reductions in hospital stay days and increase in the quality of life expectancy.
Removal of the requirement to have a manufacturing plant on national soil brings investment above 100 million dollars for the next five years. Deregulation of medical devices reduced the regulatory burden by 12.1% and dissemination of registrations through equivalence agreements issue corresponding registration in the maximum period of 30 working days. The issuance of equivalence agreement on new molecules makes Mexico the fastest country to authorize the marketing for new molecules while, at the same time, ensures the efficacy, safety, and quality of medicines.
The transformation of COFEPRIS into an efficient regulator has made the Mexican Pharmaceutical Sector ripe for investment and a launch pad for firms looking towards South America; also, these policies reduce distortions to the market providing certainty and predictability. Finally, he stated that the Mexican Pharmaceutical industry has shown a steady and dynamic growth to consolidate as Latin America´s second largest market.
Mexican Housing Day (March 7)
Authored by: Marianna Rossell
The USMCOC-NE helped coordinate the Mexican Housing Day event hosted at the Pierre Hotel and sponsored by the largest housing developers in Mexico including Casas GEO, Consorcio ARA, HOMEX, SARE, and URBI.
Starting in 2004, Mexico´s public housing developers have celebrated in two of the world´s main financial districts, New York and London, an event known as the Mexican Housing Day. The event´s main objective is to promote investment in Mexico´s housing sector among the national and international investor community.
Since then, the Mexican Housing Day has been celebrated annually and it is an event where key industry leaders and policymakers present a deep analysis of the housing sector´s evolution and its future perspectives. It is also an ideal setting for participants to establish professional and business liaisons since it attracts over 300 key investors, business and housing sector analysts, specialized media and general public.
Industrial Manufacturing in Northeast Mexico: Border Success Stories (April 3)
Authored by: Tatiana Salomon
On Wednesday April 3rd, 2013, a breakfast and presentations were held with Rafael Angel Ortiz Salazar, Investment Promotion, Sub Secretary, Tamaulipas Mexico and Victor Alfonso Sánchez Garza, Mayor of Matamoros, Mexico. The presentations were followed by a panel presentation with the aforementioned Mexican government officials along with Kenneth Chandler, General Director, Spellman, Mexico; Ernesto Velarde-Danache, Attorney, Velarde Danache, Inc and Eduardo Garza Gonzalez, President of Matamoros Economic Development Committee & President of MLT International Consultants.
The event took place at Weiser Mazars´offices and it was organized in collaboration with them, and with the support of Tamaulipas’ Government, CODEM, Aeromexico, the Minister of Economy and Promexico. In this short article we have summarized the conversation topics for you.
The event focused on Tamaulipas and more specifically on Matamoros economic and business potential and future opportunities. Rafael Angel Ortiz Salazar, Investment Promotion, Sub Secretary of Tamaulipas and Alfonso Sánchez, Mayor of Matamoros, mainly talked about the state and the city`s dynamic leadership, investment opportunities in different fields and ideal conditions for sustainable growth among other topics such as its most recent water and sanitation project, regional landfill, construction of oil rigs and its logistics platform (Veteran´s International Bridge).
Kenneth Chandler, General Director, Spellman, Mexico, talked about Spellman´s operation in Tamaulipas and its success story in general. One of the main advantages and factors of having plants 1 and 2 in Matamoros and expanding their operations there were the benefits its expenses: salaries, cost of energy and the hard working people in the area. To finish Chandler talked about the major future projects for Spellman in the state of Tamaulipas: transfer new product family, expand Brownsville warehouse and drive energy effectiveness.
Ernesto Velarde-Danache, Attorney, Velarde Danache, Inc focused his presentation on Mexico as a free trade leader country in the world and recent reforms to the legal system that have increase the trade flow in and out of Mexico. In general he mentioned the following: the bureaucracy, red tape and processes have been reduced; better teachers and in general a more modernized education program, in telecommunications a removal of restrictions for foreign investors participation and a long a awaited labor reform.
The event concluded with the presentations of Eduardo Garza Gonzalez, president of Matamoros Economic Development Committee and President of MLT International Consultants. The CODEM is a nonprofit organization created to provide companies with business development support services. They support and guide all industrial and economic projects looking to establish operations in the area. They have a strong working relationship with Economic Development Organizations from Brownsville and Harlingen and also with the City of Matamoros and the State of Tamaulipas to provide efficient and quality service for your project.
In general, there was optimism about industries benefitting from government and city support in Matamoros and Tamaulipas, specifically in the manufacturing line of business.
Is it Mexicoís Year or Decade? Conversation with Shannon OíNeil & Martin Dickson (April 12)
Authored by: Nicole Niceforo
On Friday, April 12, 2013, Deloitte sponsored “Is it the Mexican Year or Decade?” A conversation with Shannon O’Neil, Senior Fellow for Latin America Studies at The Council on Foreign Relations and Martin Dickson, U.S. Managing Editor at the Financial Times. Aeroméxico and the Financial Times were co-sponsors. As the first in a series, this event was aimed at helping to answer the question of whether the recent positive changes occurring in Mexico are sustainable, or if Mexico will just be the next “flavor of the month.” Attended by over 40 members of the investment community, the discussion was held at a very appropriate time, considering the current status of affairs between Mexico and the United States.
Mr. Dickson launched the conversation by stating that Dr. O’Neil’s new book, Two Nations Indivisible: Mexico, the United States, andthe Road Ahead, is an invaluable guide as to where Mexico is currently positioned. The central thesis of the book is that over the past 30 years, Mexico has transformed as a nation, and so has its relationship with the United States. In the past, we saw a country known for one-party rule for seven decades. Now, as Dr. O’Neil explains, Mexico is at a crossroads. In her opinion, it could take two possible paths: evolve into a more of a “Spain-like” country or become more like an Afghanistan. Currently, over half of the Mexican population owns a car. The country’s economic growth last year was 4%, compared with only 1% in Brazil. There is more investment in education and individual disposable income has greatly increased. The now manufacturing/service-based economy has developed into a stable democracy. All of these factors are fundamentally shaping Mexico towards the “Spanish” road. In addition, On the other hand, the fundamental challenge for Mexico is the Rule of Law. Crime and drug-related violence have become increasingly apparent, and more areas of the country are becoming ungovernable (elicit businesses, extortion, kidnapping, lack of police supervision, etc.). The idea being that if the country were to move in this direction, this would lead to a lack of basic security.
Dr. O’Neil explained that her relationship with Mexico began almost twenty years ago, as a young analyst having newly arrived to the Mexico City office of an investment bank. The year was 1994, and filled with significant events: the debut of NAFTA, presidential elections, large investment inflows, the assassinations of two high-level political figures, the uprising in Chiapas, and the Peso Crisis. Twenty years later, rather than experiencing another “boom and bust,” Mexico is going through a real, permanent, and ongoing shift: its economy has started to stabilize, there are the beginnings of a mortgage market, individuals are purchasing more cars, and all this leading to the rise of a legitimate middle class. In addition, Mexico is a manufacturing/services-based economy, unlike its neighbor in the south, Brazil, which is still commodity-driven.
Mr. Dickson continued the conversation by asking Dr. O’Neil to comment on how over the last thirty years, political and economic transformations in Mexico have been remarkable, including a nascent middle class as an important force behind growth. Dr. O’Neil stated that today’s middle class in Mexico is much different from before. With the urbanization of Mexico, almost 80% of the country’s total population of 116 million now lives in urban areas. Large disparities of income continue to exist, though inequality has started to decrease, thus forcing more people out of baseline poverty. Other fundamental changes are that the government has significantly scaled back and now represents a smaller percentage of GDP, foreign direct investment increased drastically after the 1994 peso crisis, and a boom occurred in the Mexican private sector that has become much more diversified.
As for the underlying reasons for why things have opened up, Dr. O’Neil mentioned that the transformation took place over 20+ years, starting with the evolution out of the military regime. Between the 1980s and 1990s, civil society began to demand transparency. This culminated in 2000 with the shift of the PRI leaving Los Pinos (the Mexican President’s residence). Competitive political parties were appealing to voters, and historic changes came about because of cooperation between opposing parties.
Newly elected President Enrique Peña Nieto (PRI) announced the Mexico Pact, with 98 initiatives/principles, within days of taking office this past December. Many of these initiatives have become plans, demonstrating the PRI’s newly enforced depth of negotiation with the other parties. Among these constitutional changes are the topics of energy and tax reform. Last month, Dr. O’Neil met with President Peña Nieto and Mexico’s Minister of Finance Luis Videgaray Caso in Mexico City. As was discussed, this presidency’s end goal is not the Pact itself, but instead, the reforms.
Asked to elaborate on the subject of energy, Dr. O’Neil explained that there are many vested interests. Pemex, Mexico’s state-owned petroleum company requires a constitutional reform. Importantly, the government wants to make the change this year. There are new areas of exploration, for example deep water and shale gas which involve sophisticated technology. Mexico does not have the capabilities to pursue these areas and will have to allow foreign companies to enter, which will introduce investment and expertise.
Another key subject was tax reform: how to move the informal economy into the formal space, for example, with tax evasion. Looking at how this can be done without having to raise taxes. Using Brazil as a model to follow, incentives are needed in Mexico, such as increased access to financing (bank loans, bridge loans, etc.).
Regarding labor code, an important reform was passed last fall. According to Dr. O’Neil, Mexico has good labor principles, but poor implementation, as seen with the Teacher’s union.
Monopolies, a principal topic in Mexico, were also discussed. Very prominent individuals are behind the primary ones, being in telecommunications and television/media. Mr. Dickson asked what is different this time around. There is now real legislation in Mexico’s Senate, and soon in the House, Dr. O’Neil explained, that gives Congress the ability to identify and break up monopolies. Some change was already seen during former President Calderon’s term: changes in regulation terms, though a slow process. Not many economic reforms were made during the Calderon/Obama years, even though a lot of time was spent talking about them. The entire package of reforms is critical to foreign investment in Mexico. Lowering telecom costs and breaking up the energy industry in Mexico will be beneficial and attract significant foreign direct investment, as well as institutional investors. Such reforms also act as a sign to the rest of the world that Mexico is changing for the good. Mexico is moving from Napoleonic Code to a society of due process, oral trial, and innocent until proven guilty.
With regard to NAFTA and the theme of international trade, regional integration has benefitted all three countries, overall. With the changing of the times, Dr. O’Neil suggested that the best way to enhance NAFTA is to expand on it. For example, during its negotiations in the early 1990s, topics such as intellectual property, government procurement, and the Internet were not issues, and therefore were not included.
In conclusion, Dr. O’Neil expects there to be significant investment in infrastructure, manageable debt loads, and an increase in foreign direct investment over the next presidential term. She believes that the federal government should require the state governments to be more transparent, stating that civil society has to hold government to its own rules. She proceeds with cautious optimism and encourages the Mexican government to continue working on implementing the various reforms.
The conversation was followed by a brief Q&A session.
Mexicoís Economic Outlook: A Marketís Perspective (April 18)
Authored by: Tatiana Salomon
A panel discussion on Mexico’s economic outlook and cocktail were held with the participation of Joaquin Quirante, Head of Santander Global Banking and Markets, Eric Conrads, Senior PM Latam Equities, ING Investment Management, Alejandro Estevez, Executive Director, Head – Rates Research, Santander Investment Securities, Lisa Schineller, Managing Director, Sovereign Ratings Economist, Latin America, Standard & Poor's and Jorge Suarez Velez, Partner, SP Family Office with Jorge Mariscal, Managing Director and Chief Investment Officer, Emerging Markets, UBS Wealth Management Division as moderator. The event took place at Santander’s offices and the overall event (panel and cocktail) was organized with their collaboration and support.
The panel discussion focused on Mexico’s Economic Outlook in the following years and specifically in the current year. According to Lisa Shineller, Mexico’s economic outlook looks steady and solid but not yet vibrant, like the ones in Chile and Peru. Shineller reckons that Mexico’s biggest challenge is and will be to boost growth to higher and more impressive rates. In order for that to happen, Mexico will have to look for other sources of revenues rather than oil ones and focus more on pushing for the structural reforms. Overall, Shineller’s opinion about Mexico focused on its stability, based on low levels of internal and external debt, productive manufacturing sector, favorable exchange rates, contained labor costs and high levels of political capital. However, Shineller remarked that there is still room for improving productivity levels, competition, intermediation in the banking sector and infrastructure. It is important to notice that the aforementioned elements are at the top of the Government’s agenda and S&P recognizes that fact.
Jorge Suarez Velez along with Alejandro Estevez were more optimistic about Mexico’s economic performance, Suarez Velez pointed out Mexico’s high levels of productivity and the lower difference between China’s and Mexico’s cost of labor as a big advantage given Mexico’s and the US geographical proximity; Estevez focused on Mexico’s stability based on the country’s regulatory and macroeconomic frameworks. As opposed to Estevez, Eric Conrads believes Mexico’s productivity levels need to be more higher and for that to happen, Mexico needs to go through deep transformations in the Education and Labor sectors. Suarez Velez was optimistic about the structural reforms since, in his opinion, the current Government has the know-how and political capital that the two previous Governments’ did not have.
Regarding capital flows in Mexico, it was mentioned that during the last years, the yield curve in Mexico has successively shifted downwards, a process that has continued so far this year, leaving current interest rates for all terms close to or at their all-time lows. Aside from variations due to changes in risk aversion, the main driving force for these shifts has been almost synchronic shifts in the U.S. yield curve, resulting from the different stages of monetary easing there. The main transmission mechanism for lower interest rates has come from persistent capital inflows. As in other emerging economies, Mexico has received substantial capital flows from foreign investors seeking higher yields in both equity and bond markets. Also, foreign investors may feel more confident about the Mexican economy because of its sound macroeconomic and financial fundamentals, the openness of its capital account, the flexibility and depth of its foreign exchange market, and higher expectations for structural reforms,
On the subject of Mexico’s relation to the US and Mexico’s economic gains from it, Suarez Velez seemed bullish about it. According to him the US digitalization of manufacturing products and the energy revolution that is about to happen in the US will highly benefit Mexico because of the trade treaties that are currently in place between the two countries. Moreover, Suarez Velez believes that the Trans-Pacific Partnership (TPP) agreement is an extraordinary possibility to improve NAFTA negotiations and general alliances between the US and Mexico.
The event concluded with a Q&A session where the main questions and concerns were about the fiscal, energy and immigration reforms; levels of competitiveness in Mexico; low access to credit, possible volatility in the foreign exchange rates; and high levels of dependence on the US economy. In general, there was optimism about Mexico’s economic outlook, although all speakers coincided on the fact that Mexico has to capitalize on the current momentum and for once and all go through the so needed structural reforms favoring long-term growth.
Private Equity & Alternative investments in Mexico at NASDAQ (April 26)
Authored by: Nicole Niceforo
Private Equity and Alternative Investments in Mexico was held on Friday, April 26, 2013 in New York City. The informative event was attended byover 80 members of the alternative investment community and was hosted by NASDAQ OMX at its midtown headquarters. Law firms Duane Morris and Romo Paillés were co-sponsors, with contributions from PineBridge Investments and Beamonte Investments. Three panels of legal and financial professionals offered their insight on a broad range of topics.
Welcome remarks were given by Nelson Griggs, Senior Vice President of NASDAQ OMX, in charge of new listing initiatives. Mr. Griggs emphasized that economic ties between Mexico and the U.S. are currently very strong: while Mexican GDP growth during 2012 was 4%, U.S. foreign direct investment in Mexico has reached $300 billion, over 40% of Mexican exports go to the U.S., and newly elected Mexican President Enrique Peña Nieto has made a firm commitment to provide structural reforms in his country. In addition, many companies listed on NASDAQ have a strong relationship with Mexico, and two important Mexican companies are already listed on the stock exchange: América Móvil, S.A. de C.V. (AMOV) and Grupo Aeroportuario del Centro Norte SAB (OMAB).
The first panel, Legal, Tax, and Operational Framework for the Structuring of Private Equity and Other Alternative Investments, was moderated by Sergio Urias, Partner at Kirkland & Ellis. Panelists were Rafael Carmona, Partner at Romo Paillés, Rodrigo Fernández, Tax Partner at Ernst & Young, and Tomás Lajous, Senior Advisor at McKinsey.
Private equity in Mexico has become a nascent industry and the country is experiencing a period of high growth. Lajous commented on the recent interest in Mexico, stating that valuations of liquid asset classes are very high. In addition, there have been some significant advances in Mexico’s private equity market. The two most common special purpose vehicles currently offered are: CKDs (certificados de capital de desarollo, or structured equity securities) and Fibras (fideicomisos de infraestructura de bienes raíces, or Mexican REITs). Carmona discussed that the basic strategy for foreign private equity to invest in Mexico is tax-related. He also mentioned the three main concepts of private equity: structuring through specific entities, the life of the project, and a successful exit strategy. Additionally, funding via debt poses a significant tax advantage. Another topic discussed was how to structure an acquisition. A common challenge is when buying from a family-owned or small- to mid-cap business, it is difficult to agree on the company’s value. A buyer’s top priority is that the seller follows through with his promise; the top priority for a seller is speed: for the deal to close as quickly as possible. When a buyer starts looking for a target, pre-due diligence analysis is a critical factor. It is very important to have a sophisticated broker and sophisticated local or U.S. counsel to negotiate the intricacies of the deal.
Transactional risk insurance was discussed at length. By definition, this is a policy that protects against breaches and warranties of a seller in post-closing investment issues. Transactional risk insurance is very popular in the U.S. private equity space and has been used here for a couple of years.
Urias concluded the panel with three pieces of valuable advice: do your due diligence and set up an anti-bribery policy, build a relationship with management and run thorough background checks, and enforce records reliability: have a process and timeline and be proficient in adhering to them.
The second panel, Domestic and International Institutional Investing in Private Equity and Alternative Investments, was moderated by Rosa M. Ertze, Associate at Duane Morris. Panelists were Steven Costabile, CFA, Managing Director and Global Head of Private Funds Group at PineBridge Investments and Felipe Vila, Corporación Mexiciana de Inversiones de Capital (Mexico Fund of Funds).
Essential for a successful private equity market, stated Costabile, is the support of domestic capital, which in Mexico, was non-existent five years ago. Now that there is a critical mass of skill sets on the ground in Mexico, it makes private equity investment more appealing. Costabile pointed out that another investment advantage is that, given the size of Mexico’s economy, private equity penetration is very low, compared to other Latin American nations. Felipe Vila explained that his company, Corporación Mexiciana de Inversiones de Capital, is the oldest institutional investor in this industry, in Mexico. He noted a significant change in the evolution of Mexico’s PE/VC (private equity/venture capital) “ecosystem” between 2009 and 2012. According to Vila, Mexico’s “ecosystem” is getting closer to that of Brazil, and then will eventually reach that of the U.S. An advantage of investing in Mexico is that transaction costs are lower than those in Brazil. The PE/VC industry in Mexico is also underserved: a US$1.3 trillion sized economy that has only 65 managers. From a legal perspective, Ertze mentioned that in Mexico, there exists no corporate certificate of good standing, as there does in the U.S., thus posing due diligence challenges for U.S. investors. She then concluded by saying that the opportunities for PE/VC growth in Mexico are enormous, and emphasized that there is increased transparency.
The third and final panel, Private Equity and Other Alternative Investment Strategies in the Mexican Market: Buyouts, Growth, Real Estate, and Credit, was moderated by Alejandro Chico, Partner at Jones Day. Panelists included Claudia Arango, Principal, Private Equity Practice at the Rohatyn Group, Luis Arce, Partner at Akila Capital, Bob Baer, President and CEO of Real Capital Investment Management, Julio Márquez, Partner at Wyndham Global Partners, and Luis Treviño, Managing Director and Head of Private Equity at Beamonte Investments.
With local banks providing much of the financing for small and medium-sized companies, most deals have been growth or buyouts to help take the business to the next level. Siefores (Mexican pension funds) are now permitted to invest up to 10% of their assets in alternative investments. They tend to favor investing in Fibras (as opposed to CKDs) since the cash flow is more easily understandable. According to Arango, there is less competition between private equity funds in Mexico. There is also a need for capital in mid-market companies, and in areas outside of Mexico City, where valuations are lower. Baer mentioned that restrictions on lending for local insurance companies are very difficult, and therefore recommends pursing the CKD and sectoral CKD markets. Chico stated that there are great opportunities to invest in Mexico. Treviño concurred, indicating that it is now a buyer’s market in the country. With approximately 90% of Mexican companies being family-owned, there has been a trend of the new generation to modernize their businesses and to seek the advice of private equity managers. Arce noted that demands of the growing demographic middle class and the strengthening of Mexico’s legal framework have both posed attractive investment opportunities in Mexico. This emerging middle class provides tremendous opportunities, stated Baer, especially with the housing market. An underutilized resource in Mexico, according to Márquez, is agriculture. He mentioned that Mexico is behind the times of the rest of Latin America in this area. Arango agreed, saying that her firm has done analyses on the agricultural industry and that although it is capital intensive, she sees it as a growing trend.
All panels were followed by a question and answer session.
Cinco de Mayo Luncheon (May 3)
Authored by: Marianna Rossell
Our annual Cinco de Mayo Luncheon took place at famed chef, Richard Sandoval’s restaurant, Zengo. It is one of the most significant networking events of the USMCOCNE and is recognized as an official ceremony amongst the business community. It is a day in which we celebrate Mexican culture and heritage in New York City.
The USMCOC-NE was given a Proclamation from the Governor’s office as well as a Mayoral letter from the Mayor’s office. It was attended by 80 members of the NYC business community including the Consul of Mexico to NYC, representatives from the Governor and Mayor’s office.
We thank our sponsors: Interjet, The Mexican Tourism Board, Tequila 1921, L.A. Cetto and Dos XX.
World Trade Week 8th Annual Awards Breakfast (May 13)
Authored by: Marianna Rossell
We are pleased to announce that the United States-Mexico Chamber of Commerce, Northeast Chapter was selected to receive the Global Trade Award at the Annual World Trade Week NYC Awards Breakfast!
The award recognizes organizations in the New York City metropolitan area that have made a significant contribution to the growth of international trade in the region.
New York City offers a myriad of resources to help companies do business globally. Access to these resources truly is a locational advantage of doing business in New York. Resources such as the many bi-national chambers of commerce and foreign trade commissioners offer companies the opportunity to learn about foreign markets and develop international networks.
The USMCOC-NE was recognized for being a strong supporter of WTW NYC for many years, for participating in partner meetings and organized events as well as having been a model for fostering the types of partnerships and networks that WTWNYC seeks to promote.
Binational Meeting, Conference & Gala (May 22-23, Washington DC)
Authored by: Marianna Rossell
On May 22, we held our annual event in Washington DC at the offices of Jones Day. We began with a White House Briefing on President Barak Obama’s visit to Mexico which was given by Dr. Ricardo Zuniga, Special Assistant to the President and Senior Director for Western Hemisphere Affairs and Greg Schiffer, Director for North America at the NSS.
We later had a welcoming reception that also took place at Jones Day’s terrace which offers a phenomenal view of the Capitol. The keynote address was delivered by Ambassador Eduardo Medina Mora, Ambassador of Mexico to the U.S.A. and Ambassador Anthony Wayne, U.S. Ambassador to Mexico.
On May 23, we held our Conferences at Jones Day starting with a breakfast with various speakers. Dr. Demetrios Papademetriou, President of Migration Policy Institute discussed Workforce Mobility and Immigration Economic Impact.
Mexican Legislative Reforms: Ley de Amparo, Labor, Education and Telecommunications were discussed by Antonio Cuellar Steffan, Federal Congressman, Secretary of the Justice Commission, Member of the Constitutional Commission and of the Mexico City Commission and Alberto de la Parra, Partner, Jones Day.
A discussion panel on Energy then continued with Steve Molina, Counsel, Dentons, Guillermo Zuñiga, Commissioner, Comisión Reguladora de Energía (CRE), Soll Sussman, Coordinator, U.S.-Mexico Border Energy Forum, Dean Hull, Energy Specialist, North American Development Bank, Alejandro Chacón, Head of Mexico’s Customs Administration (Aduanas) and Ambassador Cresencio S. Arcos, Senior Advisor, Center for Hemispheric Defense Studies at the National Defense University.
Ambassador Miriam E. Sapiro, Deputy U.S. Trade Representative was the keynote speaker during the lunch and discussed NAFTA at 20, NAFTA-EU and the Trans-Pacific Partnership.
The Gala then took place at the Organization of American States where Mariachi music entertained the crowd before the Good Neighbor Awards were handed out.
Al Zapanta presented the “José Juan de Olloqui Award for Hemispheric Leadership" award to the Honorable Miguel Alemán Velasco, Chairman of Interjet, Chair of the Board of Trustees of President Miguel Aleman Foundation, President of Mexico Business Summit, Former President of Mexico’s Senate, Former Ambassador At Large for NAFTA, Former Governor of Veracruz and Honorary President of the U.S.-Mexico Chamber of Commerce
Al Zapanta also presented Good Neighbor Awards to the Honorable Ken Salazar, U.S. Secretary of the Interior, Dr. Luis Téllez Kuenzler, Chairman of the Board of Directors and Chief Executive Officer, Mexican Stock Exchange, Mr. Juan Antonio González Moreno, Chairman of the Board of Directors of GRUMA, S.A.B. de C.V.
Mr. Luis Torres Díaz, Chairman Grupo Caborca was presented with the Small Business Award and Special Recognition was given to Mr. Gerardo Funes, USMCOC Senior Vice President & Director at the Washington DC National Office after 14 years of service (1999-2003).
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