Mexican Economy Minister Ildefonso Guajardo said that investors have a very balanced view of the country, and they know which states offer guarantees, stability and security.
Despite the perception of lawlessness in Mexico, foreign direct investment is expected to increase to 30 billion dollars during the current administration, Ildefonso Guajardo, Minister of Economy, said in an interview with Mexico City Newspaper EL UNIVERSAL.
Will the goal of increasing foreign direct investment to 30 billion dollars a year be reached?
I am almost certain that during the current administration we will have 30 billion dollars on average. One of the greatest strengths of our country is that power moved from one political party to another without changing the free trade and global integration policies. That sends a clear signal to investors that bet to stability and a consistent foreign policy, as we have done since 1994. This explains the volumes of Foreign Direct Investment and the huge automotive plants that operate in Mexico.
How much investments will reforms bring about? It has been said that at least 50 billion dollars in the energy industry.
It depends a lot on calculations, I do not have a number. However, 20 months after the beginning of the current administration the country has attracted nearly 50 billion dollars. This shows that foreigners take risks, and that sends a signal. That figure represents an annual average of 30 billion dollars, which can be easily achieved. Apart from investments in energy and telecommunications in the long-term, over the next ten years investment in manufacturing is expected to increase.
The economic model of our country is based on manufacturing, but growth has not been consolidated. This year economic expansion is expected to reach a meager 2%. Is the economic model working well or do we need to change something?
The problem is not the model, but the poor implementation of policies. Reforms were not undertaken 20 years ago. If energy and financial industries are not liberated and markets are not as competitive as they should be, the benefits of growth can not trickle down if small and medium enterprises are unable to join production chains.
With the recently approved reforms will Mexico catch up or we will just recover from a 20-year slumber?
If things are done as they should, their implementation will lead to recovery and the country will attain the best possible level.
What comes next?
Competition, democratization of opportunities; all reforms are based on democratizing access to financing. Each of the reforms seeks to level the playing field. For example, the fact that Telmex had a market concentration inhibited the development of app innovators with cheaper access to broadband.
Does this mean that our country’s lethargy and the time we wasted led to the emergence of monopolies?
Monopolies are result of market concentration, but there are other factors such as education and funding issues, apart from geographic aspects linked to poverty and the lack of governance and security. All this creates a vicious cycle. Even though we are trying to offer the same security and justice conditions to all Mexicans, two or three states are lagging behind; it is necessary to ensure the same conditions as in the rest of the country.
Even the Bank of Mexico and analysts expect violence to affect growth.
I just visited Canada, Washington and Australia and investors are too sophisticated. Those who invest in the “Bajío cluster” (Tijuana, Chihuahua, Nuevo León) are analyzing the microsystems or ecosystems they have for their businesses in those areas.
Unfortunately, cities with a frail governance can not attract substantial investment, and that is reflected in a vicious cycle: lack of investment and opportunities and more security problems.
When you mention these three states do you intend to say that insecurity will not affect investment?
Investors have a very balanced view of the country, and they know which states offer guarantees, stability and security.
How much is Mexico’s federal government concerned about the image of the country abroad?
The Federal government is concerned about the reality of what is happening in certain parts of our country, and this reality has an impact on our international image. We certainly need to make an effort, because you can do 100 things right, but bad news affect a country’s image dramatically.
Would this bad image overpower reforms?
I do not think that will happen, but it will become an issue in the risk assessment conducted by analysts. However, the balance is still positive, investors are determined to continue taking risks in the country.
What is the government’s strategy for investors to feel safe despite these events?
Global players are already in Mexico and they are the main ambassadors of the success story of their investments in our country. The best promotion is the experience of foreign investors themselves, who have had success stories in Mexico.
Economy Minister Ildefonso Guajardo Villarreal holds a degree in Economics from the Universidad Autónoma de Nuevo León, a Master’s degree in Economics from Arizona State University and Doctoral Studies in Public Finance and Economics from the University of Pennsylvania.
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