2014 is done. Business in Mexico was quite active in response to reforms in progress by Peña Nieto Administration. Some industries like energy, telecom, antitrust and financial services are on the spotlight, but all together with education, tax and judicial pretend to set a backbone for a new Mexican economy. Of course, foreign investment caps were reduced in some areas.
Mexico kept investment attraction with its free trade strategy, some governments with remarkable interest were UK, China, Japan, Singapore, California and Los Angeles. This strategy was fueled by negotiation efforts with the Pacific Alliance and TPP, and efforts to integrate more with the US.
Most of the attention was attracted to oil and gas, the Mexican Eagle Ford, the solar potential and the liberalization of clean energies, and the moves of related industries to the opportunities. Here is a summary of the energy reform to see the big picture.
Telecoms was another industry that was shaken by the reforms. Historic reform indeed, specially on broadcasting. Reform tried to set fair market conditions for everyone, and some were taken to court. Regulator learned the high cost of constitutional autonomy. All these changes deserved an ethical hacking on the new telecom law and regulation, specially on three hot topics: Telmex on TV, the arrival of Virgin Mobile and telecom antitrust.
Sectors like automotive and manufacturing grew strong during 2014, as expected. Aerospace is now following that path. Mexico is living a manufacturing momentum and if combined with R&D, could take it to the next level: a technology hub. During 2014, the Government announced a $590 Bn infrastructure plan, which is expected to boost in 2015.
The business opportunities are creating great expectations around the services industries. Lawyers, among other services firms, are moving to Mexico. Some of them under new law business models, as the global law industry is being shaken. Mexican legal market will have a very different landscape at the end of 2015. Quite diverse if new law moves from experimentation to business phase.
2015 is expected to be great for Mexico and those who believe in this momentum. Have you found an opportunity yet?
Hogan Lovells acqui-entry over Barrera, Siqueiros y Torres Landa last August 1 was the most clear landmark announcing a lateral hirings wave from US Law Firms to enter Mexican legal market. US Law firms are looking to keep company to their clients when taking advantage from Mexico´s reforms.
Now, DLA Piper expanded its local office by merging almost all members of Gallastegui y Lozano. Baker & McKenzie Mexico took in two former G&L lawyers. ManattJones Global Strategies, a consulting subsidiary for Manatt, Phelps & Phillips, LLP just opened a Monterrey Office.
On the other hand, Garrigues, the biggest European Law Firm, seems will take an organic growth approach. It is only privy to its inner circle whether Garrigues has the ability to secure its pipeline at the Pacific Alliance. Here is an interview with Fernando Vives, its CEO, for America Economia that could bring on some hints on its Mexico strategy.
Mexico regulates legal market at level of individual lawyer, mostly. Partnerships, bars, financing, trusts, investments and collaboration rules are mostly unregulated. In broad terms, practicing lawyers need a Government license and comply with general rules for services companies, foreign investment caps and special rules for money laundry and client-lawyer obligations.
This low level of regulation has opened doors for Big Four, accounting firms and consulting firms to break into the legal market decades ago. UK and Asia are now opening doors for Big Four into legal market.
It is too early to know the outcome of the recent reforms, and how legal services will be developed around them. However, Mexico has a high level of globalization, global integration of the chain of value of legal services and low barriers to enter that market.
Then, one thing is certain, it is time for a pivot called New Law.
Photo credit: The Angel of Independence (Victory column) over Paseo de la Reforma in downtown Mexico City, Mexico by AarStudio / bigstock.com
eCommerce is starting to gain momentum in Mexico. According to the estimates by eMarketer, the Latin American country is expected to be one of the fastest-growing markets for B2C eCommerce in 2014. The independent market research company calculated that sales would increase by 20% this year, which is almost equal to US$11.43 billion. Sales would continue to expand at a 17.6% annual growth rate up till 2017, pushing the total to $15.11 billion by the end of the company’s forecast period.
One of the biggest reasons behind this growth is the increasing internet user base. Numbers show that 21.3% of the population (10.4 million people) have web access now, which is more than the 16.5% recorded in 2013. Of this 21.3%, the Competitive Intelligence Unit (CIU) reported that 71% have at least made one digital purchase, starting from ringtones to other micro-purchases.
Interestingly, most digital transactions have been made through computers rather than mobile devices. CIU reports that 84% of eCommerce and internet users in Mexico used computers whereas 22% relied on mobile phones, 7% on tablets, and 1% on video game consoles. These statistics shouldn’t come as a surprise considering that Mexico is yet a developing country. CIU pointed out that computers reign eCommerce operations because the Mexican population still distrust security of mobile devices and don’t have much experience handling them. However, buyers may start shopping with their devices before sealing the deal on their computers.
One of the first companies to tap into the growing eCommerce power is the Mexican branch of Wal-Mart. Despite a 1.3% drop in revenues due to a countrywide economic slowdown in 2013, the chain recovered this year through its online shopping services. By offering same-day delivery and extending the same advantage through its local upscale subsidiary Superama, Wal-Mart has been able to ensure that 92% of Mexican retail purchases on the web belong to both. Online shopping further pushed the performance of physical stores; more than 50% of the population have started shopping from Wal-Mart, making it the highest-earning supermarket and a top contributor to total retail revenues at 61%.
With such a warm welcome, Wal-Mart intends to triple the number of its stores by the second half of this year. This way, it can provide grocery deliveries quickly to its online shoppers, as well as an extensive consumer electronics stock. The U.S. based retailer also plans on opening a few dark stores – retail outlets that exclusively handle online orders and act as an order fulfilment platform – in 2015. With limited Amazon’s services in Mexico, and eBay took its first steps last week, Wal-Mart may successfully dominate the market. It’ll even profit immensely as its pickers, i.e. the people in charge of assembling online orders and at times providing customer support, are paid $360 a month while deliveries cost $1.5 per delivery. Additional costs like health care and fuel are covered by the delivery men themselves. Wal-Mart is also installing in-store costumer service modules for eCommerce clients to address a better UX.
Other companies are bound to jump on this opportunity as well, especially U.S. based ones. Fredjoseph Goldner, CEO of Aeropost, told the audience of Multichannel Merchant’s Growing Global conference that Mexico among other countries has a predisposition towards U.S. merchants. “[Latin countries] have good logistics, and in Mexico in particular most of the transactions are in cash at the store or through consumer financing. It’s a great market, and a piece of the eCommerce pie no one is paying attention to.”
With internet users expected to reach 78.2 million in Mexico with new telecom reform, online retailers and eCommerce website owners are bound to make a handsome profit. In addition, going the delivery duty paid (DDP) route will be very helpful as consumers hate paying more on delivery and the experience of delivery duty unpaid (DDU) since it’s a hassle going to the post office to pick their purchases and pay by cash. Still, Mexico´s banks and authorities have set plans for increasing access to credit card to lower income population.
Now, maybe B2B and B2G eCommerce will follow the path of the growth. And if NAFTA can go further, maybe eCommerce will become a regional indicator of growth.
Photo credit: Sleepy beagle dog in funny glasses near laptop by soloway / Bigstockphoto.com
The economic transformation brought on by President Enrique Peña Nieto’s energy reforms are expected to impact more than Mexico itself. Different countries, including the United States, welcomed the changes, especially as they allow foreign investment in energy sectors after more than seven decades of nationalization. However, while opening many doors to Mexico’s northern neighbor, California especially believes that it will benefit the most from Mexico’s unique opportunity due to its location and commercial ties.
In August, the Mexican President and California’s Governor Jerry Brown shared the stage to discuss different aspects, mainly business opportunities. Peña Nieto’s visit was expected after Brown traveled south on a trade mission in July, accompanied by many business representatives and lobbyists who eagerly paid to tag along. State energy officials are quite optimistic about these visits, especially after the president signed legislation to facilitate investment and development in both the electricity and oil and gas industries, and considering the high energy potential of the country. “These energy reforms significantly alter the structure of Mexico’s energy industry,” they said. “California’s innovative policies send a clear signal, provide incentives and generate market demand.”
California Energy Commission (CEC) Chairman Robert Weisenmiller and the California Governor’s senior adviser Michael Rossi believe that California has many companies which can help Mexico effectively carry out its reforms while reducing emissions and promoting the use of renewable energy sources. “By doing so, California and U.S. energy companies will create more jobs and tax revenue on both sides of the border and build an even stronger economic partnership,” Weisenmiller and Rossi said. Mexico has made a plan to reach 35% of electric generation with clean energy by 2024, and so opportunities abound for developers and technology companies.
Having strong ties with Mexico is also important for California due to trade. The Latin American country is the state’s largest export market. In addition, two-way trade between both reached more than $60.1 billion in 2013, a number which Weisenmiller and Rossi believe would grow now that both regions are closer than ever. “The energy reforms in Mexico allow for this collaboration to continue and result in greater economic growth and the achievement of climate and clean energy goals on both sides of the border.”
Energy and trade relations aside, the electronics industry at both ends is bound to expand in the future. While Californian companies build the components of cellphones, computers and other electronics, it is actually Mexican factories that assemble the final products. International trade advisor Jock O’Connell from Beacon Economics pointed out, “Largely because of the very high cost of doing business in California, we don’t make an awful lot of consumer goods. It tends to be stuff that goes into stuff, the components that go into more complex products.” This expansion is inevitable as Mexico’s workforce has grown more skilled. In addition, after recent Chinese government crackdowns on American companies, many are expecting California to limit its focus on trade with China to concentrate on its new Mexican ties.
Though California seems to be the most eager for ties with Mexico, the United States as a whole would benefit from its southern neighbor. Despite dealing with migration and drug issues, the U.S. cannot deny that Mexico is the world’s eighth largest producer of automobiles and fourth largest IT exporter. It is also growing into a world-class aerospace and electronics manufacturer, a feat possible due to the United States’ support and exports.
With so much to offer, California and other states are bound to update their views of Mexico. The Golden State has already taken a positive step during Brown’s trade mission by striking an educational exchange agreement, which is a first of its kind between the Mexican government and an individual U.S. state. However, this is just one step in a longer journey that would result in stronger ties between the neighbors now that Mexico has evolved into a willing and able economic partner.
Last visit of Eric Garcetti, LA Mayor brought a share of the new Mexico City airport (US$9 bn) to Parsons Corporation, one of the LA Firms that came with economic mission. So, the question is how far California and Mexico want to be integrated.
California Green Road Sign and Airplane Above with Dramatic Blue Sky and Clouds by Andy Dean Photography
As changes in international legal services continues to impact law firms around the world – a new business model within law has been developing for over a decade. That new business model is widely referred to as “NewLaw”. The characteristics that often define NewLaw law firms is a streamlined business model allowing firms to alternative fee arrangements. Oftentimes, lawyers who staff NewLaw law firms have come from BigLaw seeking an alternative to lateral hirings. NewLaw firms use technology, low-overhead and often virtual work arrangements, and sophisticated cross-functional disciplines, to achieve higher value for clients.
Noted legal blogger Jordan Furlong provides a detailed list of NewLaw law firms in a post which appeared earlier this year on his Law21 blog. Furlong describes NewLaw in that post “as any model, process, or tool that represents a significantly different approach to the creation or provision of legal services than what the legal profession traditionally has employed.” Furlong, importantly, notes that: “A disproportionate number of new legal talent arrangements are found outside the US.”
On Eric Chin´s opinion: “2018 is the year Axiom may become the world’s largest legal services firm”. Regardless of the certainty of that prediction, it is true that copycats and innovators are entering into the NewLaw market, as it is open for lawyers and non-lawyers alike.
With that in mind, and with the knowledge that NewLaw is an entrepreneurial business model, I will herein make the case why I believe Mexico is an excellent market for NewLaw law firms to consider for their foreign expansion planning. However, it is also important to point out that traditional law firms can apply NewLaw strategies to their Business of Law models, as NewLaw and traditional law are now being exposed and influenced by each other. Both models are experimenting to find growth around the world.
As Maria Luisa Taddia outlined last year in The Law Society Gazette last year, that Mexico is a remarkably open legal market – with a host of opportunities for foreign NewLaw law firms to consider. Some of the key attractions foreign firms should consider, Taddia outlines, are:
“Mexico is the second-biggest economy in Latin America after Brazil, and analysts predict it will rise to become the world’s seventh-largest – ahead of the UK – by 2050 … Mexican conglomerates are increasingly looking at international capital markets, including the London Stock Exchange, to fund their expansion … The Mexican government, led by… President Enrique Peña Nieto, is investing in infrastructure through a public-private partnership programme based on the UK model. There is also significant investment in renewables and [increasingly greater] liberalisation [in] the state-controlled oil and gas sector … Mexico has 12 free trade agreements covering 44 countries, including the US and Canada (the North American Free Trade Agreement came into effect in 1994), and the EU (the EU-Mexico Free Trade Agreement dates from 2000). This makes it one of the most open economies in the world.”
Legal Market-specific opportunity for NewLaw law firms
As Taddia outlines, Mexico’s domestic legal market provides a deregulated, welcome environment for local law firms. The highlights include, as Taddia explains:
“Foreign law firms do not need to register with the local bar and can open offices under their home name. Although only Mexican lawyers can appear in court and advise on local law, foreign law firms can employ Mexican abogados to offer advice on Mexican law in addition to international and home country law. Membership of Mexico’s six bars … is not mandatory for the country’s estimated 265,000 lawyers.” However, a mandatory bar admission is in discussion at the Senate and could end up decades of deregulation.
In addition to that, I may add that Mexico has always allowed ABS models, as long as attorneys render legal services, and the rules for practicing law are less strict that those in common law legal systems. In certain way, Mexico has always accepted the practice of NewLaw, and now that the global legal market is trying to monetize it, Mexico´s deregulation is suddenly handy.
But as Taddia outlines, there is sophistication among those lawyers already practicing in the market. Too, the market is fragmented and smaller firms predominate. And historically, most of Mexico’s lawyers have been unwilling to commit to joining larger, international law firms. Security has been cited as a concern, however the Mexican government is committed to working toward greater safety and security for all in Mexico.
For many, however, Mexico is seen as an unknown market with not as many opportunities as many foreign law firms would wish to see to enter the country. But as Mexico’s economy continues to engage more with nations beyond the US, while affording greater opportunity domestically, the opportunities increase. A landmark case of acqui-entry is the merge of Barrera, Siqueiros y Torres Landa by Hogan Lovells last August 1, as this operation reorganized the legal landscape for local firms provoking lateral hirings and a tighter competition.
Given Mexico’s rise in the international economic order, it’s attraction to international law firms increases. And hence, by definition, those opportunities also exist for NewLaw, who may be in a position to ideally match opportunity with a competitively-priced service offer.
You can tell opportunity is in Mexico, as cloud infrastructure, specialized recruiting, marketing and many other services arrived Mexico a couple of years ago to support both NewLaw and traditional law to get them clients. They know things and NewLaw should listen up.
Photo credit by: It’S The Law – johnsfon / www.bigstockphoto.com