The business year ended a couple of weeks ago. A fair year for business in Mexico with the traction provoked by the opening markets (telecom, energy, transport, etc.) Numbers on this blog were good too. Here are some statistics I would like to share with you.
The blog had 1.4 Million hits with a more than 86 thousand visitors. This is a slight improvement from previous year.
As to the most popular posts, below is the list, if you want to read them:
1 – What Would the Trans-Pacific Partnership (TPP) Mean for Mexico?
2 – Wind Power Opportunities in Mexico
3 – Mexico to Spend $100 Billion Dollars to Develop Shale Resources
4 – Mexico Reforms Attract U.S. Investors
5 – Chrysler invests US$1.2 Bn in Mexico and could cast away the IMMEX drawback
6 – As expected, Mexican telecom operators are showing tough love
7 – [INFOGRAPHIC] The US$590 Bn Mexican Infrastructure Plan in a Nutshell
8 – What if IFETEL Mexico unleashes the unseen power of free?
9 – Mexico Consumer Entertainment Spend Grows Rapidly; Now at 4.5 Billion USD
10 – Televisa and Telmex on two legs after Watchdog resolutions
The most popular searches were related and around to these topics:
1. Green energy investment.
2. Telecom antitrust proceedings.
3. San Diego – Tijuana business traction.
4. Construction companies in Mexico.
5. Oil drilling opportunities.
We have planned many projects for this year and hope all readers and sharers support this blog. Stay tuned.
Photo credit: Rear view of the business lady who is looking for the new business ideas. Blue growing arrow as a concept of successful business. Business icons are drawn on the concrete wall. / Bigstockphoto.com
Photo credit: Lille, France May 2005 by Hunter-Desportes
Mexican president Enrique Peña Nieto announced in the beginning of October that his government would be spending $300 billion on infrastructure to increase the country’s GDP’s growth. A week later, the government issued a statement announcing its plans to tender $7.4 billion on three passenger train projects in 2014.
Tendering opportunities abundant The projects, which are expected to start in the beginning of 2104, aim at connecting the country’s capital with the cities of Toluca and Queretaro. Another train is also expected to connect tourist destinations across the southern Yucatan peninsula. The Mexico City to Toluca route will cost $2.9 billion, the Mexico City to Queretaro route $3.3 billion, and the Yucatan route $1.2 billion. Notably, Mexico’s transport ministry commented that it would use both public and private funds to build the projects. Those providers of railroad technology from around the world – and any other related infrastructure or financial services – are well placed to participate in these projects. Since 2011, Mexican rail has been rising in popularity. The country’s largest railroad, Ferrocarril Mexicano or Ferromex has increased its carload volume by 6.6% and its revenues grew by 13.9%. Similarly, the second largest rail carrier Kansas City Southern de Mexico (KCSM) reported moving 15.9% more carloads in the same year than it did in 2010. With these numbers in mind, the Mexican government wants to accommodate the growing demand of rail transportation within Mexico.
Connecting US-Mexico economies The Mexican government also plans to extend its rail services to connect with it neighbor in the north. This is because the US market is shifting its attention to Mexico. With oil prices on the rise and wages in Asia increasing by the day, the strong economy, proximity and low costs of Mexico are driving US corporations to build factories in the country and then ship their goods back home. With the help of the rail industry, raw goods will be shipped south from the US and finished products will be transported north from Mexico. With the upcoming improvements to the railroad infrastructure, the service will be more reliable and shippers will shift their operations to trains, especially intermodal, as it’s less expensive. Though intermodal has been used in the past only to be discontinued, experts are positive that thing will change thanks to the government’s new measures.
Safety a priority One measure in particular has received ample praise: improving security. The Mexican railroads have partnered with their US partners to ensure that shipments moving within the country or across the border arrive at their destinations undamaged and free of smuggled goods. KCSM and Ferromex have started using x-ray machines to examine contents, dogs to search for hazardous items, and high tech cameras to monitor cars. Of the two, KCSM has a stronger security record; Patrick Ottensmeyer, the executive vice president, sales and marketing at KCS commented, “In 2010, the customer claims rate for theft, vandalism, or accidents for all shipments moving on KCS in Mexico was 0.02 percent. That means 99.8 percent of all loads we transported were moved without a customer claim.” According to government data, Mexican trains are responsible for 12% of freight cargo while cars and trucks carry half of freight. 42% of shipments are carried by rail to the US while 60% reach Canada.
The evidence that railway projects are happening fast Rail has not got too much press in comparison to the energy or telecom reforms. Nevertheless, this lack of apparent PR has helped the Government to work in small projects to support the industry growth. For example, the recent proposal for amending the Customs Law includes a provision that enables railroad as a vehicle for importing or exporting merchandise. Even though it is still no clear the complete regulation for implementing rail clearance, shows the administration interest in increasing traffic for the freight rail industry. Another one is the freight project in construction for the Honda Plant in Guanajuato, which would be in operations for transporting out of factory, delivering to trailers for crossing the NAFTA road to export. Construction of this railway will be finished by end of year to serve the plant starting operations by 2014. The upcoming expansions for the Ports of Veracruz, Lazaro Cardenas, Guaymas and Manzanillo are announced as intermodal friendly. At least Lázaro Cárdenas was announced to have an airport and an industrial park adjacent, which increases possibilitis for railway connection at some point.
There is still no confirmation whether these projects will be operated by private parties or under a PPP. Mexico has been encouraging the formation of PPP, as the US$316bn infrastructure plan is not easy to achieve in a 6-year term.
Furthermore, under the PPP Law, any party can pitch a project to the Governments (federal, state and local), even if they are not into their plans. This gives flexibility for projects to happen and opens the door for innovation and turn-key projects.
If you had the chance, what would be your elevator speech for Mexican Government? Let me know.
The interest in Mexico manufacturing is continuing to grow with additional automotive plants looking set to be built in the near future. Since announcement from Audi for creating their first plant for assembly and production in Mexico, automakers have found Mexico very likable for expanding automotive operations.
Audi confirmed plans for a $1.3 billion plant which is set to open in the next three years in San José Chiapa, Puebla. Plans have already been made for this new Mexican plant to be the sole global source for the Q5 model of SUV when it opens in 2016. Mexico has been highlighted as an ideal base for exports because of its geographical location between South and North America. Mexico also has a number of free trade agreements, a well-educated labor force and a close proximity to a lucrative market in the United States and the growing market in South America. These attributes have had a number of automotive brands queuing up to set up operations in Mexico, bolstering the Mexican economy.
The Audi announcement came shortly after Japanese brand Honda had committed to plans to construct a $470 million plant in Guanajuato. These major automotive brands are following in the footsteps of Mazda, Nissan, General Motors and Ford who have all announced plans for new plants.
This love of Mexico from the automotive industry has given the Mexican economy a huge boost, with it looking set to surpass Brazil as the largest economy in South America in the very near future. In the last year alone Mexico had attracted almost $4 billion in investments just from the automotive industry.
Since the year 2000 Mexico vehicle production has risen by almost three percent per year, while the United States and Canada are experiencing declines. This growth trend looks set to continue through to 2018 when the production forecast for Mexico is estimated at five percent annually. Mexico is currently the eighth largest manufacturer of automotive products in the world, but according to these estimates, this figure should only grow.
The Audi executive team has praised the competitive costs, free trade agreements and good infrastructure of Mexico as their reason for their chosen new plant site. The new plant looks set to be the size area of almost 400 soccer fields and will be located near to the Volkswagen plant in Puebla City. Since Volkswagen has announced that it intends to boost vehicle sales in the United States to a million vehicles over the next five years, with 200,000 of these vehicles from the Audi branch of the company, the new manufacturing facility could be a key factor.
The new production plant in Mexico is also included in plans for Audi to hit global annual sales of two million by 2020 and allow them to challenge luxury rivals such as BMW, Mercedes-Benz. With Mexico’s free trade agreements expanded to 44 countries, the new production plant will also help to achieve this goal. All these factors will soon have even more major auto plants being built to allow Mexico to develop into a serious car manufacturing industrial power.
IHS analyst Guido Vildozo, declared a couple of weeks ago, that two more plants were on sight. Now, several news on the internet point to BMW to be the next Plant to hit Mexico to produce Series 3. Apparently, BMW is already discussing terms with local authorities of the north and centre of the country. State of Queretaro appears to be the top contender. The Plant could start from 40,000 units, growing up to 150,000 units annually.
Other news point to Mercedes Benz considering a joint venture with Nissan for manufacturing either the A-Class hatch or the CLA four-door coupe in Mexico. Mercedes is also scouting for locations of the new plant and considering all other factors.
As Audi is setting the pace and luring BMW and Mercedes Benz into the Mexican Auto Cluster, several news over the internet remarked the interest of Tata, Infinity (Nissan) and Ferrari in Mexico.
Audi is luring the German luxury automakers to fight over the North America market. Will Mexico be charming enough to lure the others? It certainly has the infrastructure, regulation, export incentive benefits (IMMEX), the free trade agreements, qualified workers, great location and many other features. And when that happens, companies need to be prepared for an open season for resources and talent.
This document describes the caps and foreign investment regulation for diverse activities and industries under Mexican Law. As always, this is for informative purposes and cannot be considered as substitute for a legal advice. Learn more.
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Photo credit: EPROM CLCC-44 Devices by yellowcloud
This is part 1 of 3-part post on the recently published Mexican Telecom Reform. Follow me to explore the great opportunities to come.
What ever happened to the Telecom Market.
Mexican Telecom Reform is now on effects. It is the end of the industry, as we all knew it. Frankly, I feel fine and exited about the new regulation.
We need to double-check landmark case law on interconnection, spectrum assignment and antitrust to connect the dots backwards. All those years in court made telecom law history, though.
This Reform offers a fresh start for entrants and opens a wide range of opportunities, as now investors have less barriers for mobile, data and TV.
Telecom regulation is moving in gigaflops. Just now, COFETEL (telecom body) has concentrated all operators annual report formats into one single document. Also, has reduced the local service areas from 397 to 172. Satellite services, fixed-mobile cost models, standards for DTV decoders (NOM-192) and mobile antennas installation are under review. Other issues like passive infrastructure interconnection and white spaces are between the lines on the debate.
Now, foreign companies and individuals can invest in telecom companies up to 100%, and 49% in TV/radio companies (the latter subject to country reciprocity to Mexicans in those sectors). Previously, some investors invested only in no-voting shares with the obvious consequences.
From recent data of COFETEL, telecom services increased an aggregate of 12.5% during first quarter of 2013, comprising broadband connections up to 12 million, CATV up to 13 million, DTH up to 7 million, mobile users up to 101 million and fixed lines up to 20 million. Satellite and trunking decreased.
After the transition, the new IFETEL (succeeding to COFETEL) will review and simplify telecom licenses in one single type, and hopefully will reduce red tape to obtain it.
While the reforms encourage and support free competition on these telecom services, it is also true that incumbents have been preparing for this face-off for years. Yes, it is great for telecom lawyers, but paradise for antitrust telecom lawyers.
However, the less explored side of the Reforms is niches, trends and side markets that could generate businesses while the telecom industry grows in the years to come. Also, the Public Private Associations Law grants rights to private companies or individuals to pitch projects on all levels of Government, so the sky is the limit.
A sweet spot is in cameo here. The Reform is a game changer and abilities of the entrants and possibilities created could generate business, and hopefully profit will come along. Where to start digging?
Project Finance, Convertible Debentures, Secured Loans and other Financial Operations.
Telecom is a money consuming business with small incremental profits. It requires big amounts to acquire infrastructure and clients, as well as to run and expand the business. Now that foreign investment caps have disappeared for telecom and have risen for TV/radio, loans secured with shares can be fully executed in an event of default, as transfer of property is no longer restricted to Mexicans-only. Also, foreign VCs can acquire voting shares without restrictions on caps (except TV/radio).
TelecomMexico will become a market incubator.
Telecommuncaciones de México (TelecomMexico), is a state-owned company operates satellite services, money wires and telegraphy in Mexico. Along with the Telecom Reform, TelecomMexico is in the process of getting a telecom license for SMS, voice and data, fixed and mobile through cellular technology and satellite backbone. TelecomMexico will target low-income communities to reduce the digital divide. This strategy is expected to be in the digital agenda, which could include universal broadband. As TelecomMexico is paying for sunk costs of bringing on telecom services to low-income users, operators could ask for interconnection whether for transporting throughout that area or providing low-income niches services.
Second installment is coming in a couple of days …