Photo credit: Law School by Tulane Public Relations
Investor attention is turning somewhat away from the BRIC (Brazil, Russia, India, China) in recent months because their economies haven’t been growing as swiftly as they had been in years past. The four countries that are attracting the attention of international investors are Mexico, Indonesia, South Korea, and Turkey, or MIST for short.
Mexico in particular is attracting a lot of attention from investors; it’s currently the second largest economy in Latin America and is poised to become the world’s seventh largest economy in the coming decades. In fact, Mexico’s economy is predicted to become larger than that of the United Kingdom. Part of the country’s economic growth is due to the country’s conglomerates looking at international capital markets, and part of the growth is due to public/private partnerships in the infrastructure sector. Liberalization of Mexico’s oil sector could also fuel tremendous growth; reforms are currently being discussed inside the country’s government.
The country has one of the world’s most open economies. With a dozen free trade agreements that cover 44 nations, investors from all over the globe are scrambling to set up shop in the Spanish-speaking country. With a highly skilled and motivated workforce, the country has become the darling of international investment community.
The legal sector in Mexico is also very open to foreign firms. Interestingly, foreign law firms don’t need to register with any of the country’s local bar associations, and are allowed to use their home name to open offices. However, only Mexican-licensed lawyers are permitted to appear in court and advise on local law. It must be stated here that foreign law firms are allowed to employ Mexican lawyers to advise on Mexican law, international law, and home country law.
Mexican lawyers are not required to members of Mexico’s six bar associations.
While the legal market is open and bar association membership is not necessary, this does not mean that Mexico’s legal sector is unsophisticated or underserved. In fact, Mexico’s lawyers are among the most highly trained and educated in the world with skills that span the entire legal sector spectrum. The legal market is very competitive and very sophisticated, with a massive number of Mexican lawyers holding law degrees from Ivy League Schools and memberships in United States bar associations. International firms should not think of themselves as “swooping in” to fill a void in the legal market.
The opportunities for foreign law firms appear to exist in partnerships with local firms or with small- to medium-sized firms. Large legal firms in Mexico are few and far between, with “large” in Mexico being a firm with around 70 lawyers. Brazil, on the other hand, has a good number of firms that employ over 200 lawyers. Mexican lawyers are strongly independent, something they do not want to sacrifice by joining large firms.
But it’s quite possible for there to be many opportunities for legal firms who want to establish “spin-off” or boutique legal practices. Because of the sense of independence that Mexican lawyers have, this is one area where the legal market has been growing and the trend does not appear to be slowing down. One of the reasons given for this boutique legal firm growth is that lawyers want to avoid the long wait with larger firms to become partners.
Photo credit: VIA Telecom Booth by VIA Gallery
Maybe you have been following my latest posts on the approval process for amending the Mexican Constitution in relation to Telecom (and anti-trust). If not, I suggest you read How I Learned to Stop Worrying about Telecom and Love the Pact or Don´t Panic: The First-Mover Guide to the New Mexican Telecom Bill.
House of Representatives delivered the Bill with amendments to the Senate for second time, and Senate will vote minor revisions by April 30, 2013. If approved, it will go for approval to all 31 States of Mexican Republic. A minimum of 16 States will be required, and then Congress will declare the Constitutional Amendment going for publishing at the Federal Official Gazette.
Along will come secondary laws and regulations to update the regulatory framework and catch up with new technologies, which is expected to happen during next 6 months. This is the major overhaul on telecom regulation since early 1990´s, when Telmex was privatised and a Telecom Law was published for first time.
However, while our eyes are all over the Telecom Bill, there are other events shaping already the telecom industry like:
1. MVS is got a major victory at the Supreme Court versus recall of spectrum for 2.5 GHz band. Mexican Government, must likely, will negotiate a license to use a part of this band to MVS. Could MVS pitch Intel and Clearwire to launch its broadband project?
2. Digital TV is arriving earlier to Tijuana (May 28). While this will not move the calendar for other cities, it will certainly be an incentive for independent producers of HD content to hurry up. Also, a part of 700 MHz band will be recovered.
3. Comisión Federal de Telecomunicaciones (COFETEL) started public consultation on satellite services. Mexico has already launched Satellite “Bicentenario” last December 19, to become first of three satellites in the MexSat Fleet. Connectivity is on the rise.
4. COFETEL is retaking the project for consolidating 397 long-distance areas to 173. While this will hit the long-distance business, it will certainly open opportunities for local services.
5. COFETEL has finished the process for approving the Regulations for the Telecom Registry. These Regulations will simplify the process for acts to be registered (i.e. tariffs).
6. The Service Level Interconnection Agreement is in process of being discussed and approved. The approval will mean certainty for new entrants to the market.
Mexican telecom industry grew 15.1% during 2012 (in relation to 2011), so I am thrilled to see how these Reform and secondary regulation will soar this growth. How about you? Let me know what you think.
Photo credit: Manufacturing plant in Nevada by Jeff Barnes
In a move that is exactly surprising to industry leaders and economic growth experts, Mexico’s manufacturing sector is bringing back jobs to North America that left the continent for China in the 1990s and 2000s. What is partially responsible for the boom, other than the industriousness of Mexicans and their solid work ethic, is the Spanish-speaking country’s concerted effort to ensure that infrastructure can provide the factories with inexpensive and plentiful energy along with the transportation networks to get the manufactured goods to market.
Wages in Mexico are now a little bit higher than the wages that their counterparts in China receive; however, the highly skilled workers can produce higher quantities of quality goods, which is one thing that is influencing companies to set up base there. Mexico has now become the go-to country for industries like automotive manufacturers and automotive parts makers. But the one thing that is seriously making business owners want to go to Mexico is the fact that the country is scrambling to implement energy infrastructure projects in order to take advantage of one thing China doesn’t have: cheap oil and gas that is found in Mexico and also is imported from new energy giant the United States. While the price of energy has gone up considerably in the world, this energy bonanza is making Mexico more attractive than ever for investors in the manufacturing sector.
The energy reserves of both Mexico and the United States are said to be large enough to handle growth for well over a century, and both countries are building new pipelines in order to get those manufacturing jobs back to North America as quickly as possible.
But that’s not all; other massive infrastructure projects that are benefitting Mexico’s manufacturing are transportation projects. Rail lines connecting manufacturing powerhouses in Mexico to markets in the United States and Canada are being built in order to keep up with the manufacturing output. Expansion in the transportation infrastructure will let the manufacturing industries grow with next to no limits; in other countries that lack the roads and rail links, goods get held up in warehouse facilities and cannot get to market quickly enough. Furthermore, some experts are saying that Mexico will also be improving public infrastructure such as national roads as well in order to fuel economic growth in the domestic markets.
Deregulation may also occur in another of Mexico’s key industries: telecommunications. As of now a single company holds a monopoly on this key sector; if proposed deregulation occurs, manufacturing could enjoy another massive boost in telecom equipment as international telecom companies also pour in to set up shop in what could be a massive market.
Opportunities abound in Mexico right now; along with a booming manufacturing industry, transit links between Mexico, the United States, Central America and South America need to be further developed; railways, roads, trucking and maritime links are all being upgraded or will be upgraded in the future. All of this construction of the infrastructure need to support the manufacturing boom will also need energy, as mentioned above. Telecoms could also prove to bring handsome profit to smart investors.
Mexico is growing and is poised to become the next economic powerhouse in Latin America; those who do not invest now will be bound to regret it when it’s too late in the next few years.
Photo credit: Seagate drives being tested by Robert Scoble
Flavius Vegetius Renatus (Circa 375 AD), writer of Epitoma Rei Militaris (The Military Institutions of the Romans) is often quoted for: “If you want peace, prepare for war”. Business was way more simpler back then, and this kind of advice applied easily to every day trades. Today, globalized and technology-based world has created a more complex and competitive business world with multinationals with no nationalities or boundaries.
As we speak, one trend is challenging business in Mexico … There is a re-shoring war upon us. So, if Vegetius allows me, I would re-quote him for the present time: “Mexico-based operation: If you want profits, prepare for re-shoring war”.
There are several advantages of Mexico that US or China may use for making profit on the current re-shoring trend into America, and eventually will allow Mexico to keep some of that re-shoring inside the country.
1. Location, location, location. As in real estate, in manufacturing, location offers the big advantage of working on-time, reducing delivery times and costs. Plus, Mexico has good infrastructure. Mexico has broad cross borders with the US, as well as 102 Ports and 15 hinterland ports to handle charge and export all over the world. It has 78 airports, 264,000 miles of road and 16,000 miles of railroad. Government has been discussing increase of its railroad infrastructure to meet demand by automakers in the center of the country.
2. Free Trade Agreements and Double Taxation Treaties. Mexico has signed 12 FTAs with 44 countries, 28 Reciprocal Investment Promotion and Protection Agreements (RIPPAs) and 9 trade agreements (Economic Complementation and Partial Scope Agreements) within the framework of the Latin American Integration Association (ALADI). In addition, Mexico is an active participant in multilateral and regional organisms and forums such as the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation (APEC) mechanism, the Organization for Economic Cooperation and Development (OECD) and the Latin American Association for the Integration (ALADI). Since 2010, Mexico is negotiating its incorporation to the Trans-Pacific Partnership (TPP) with Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. After this Agreement, Mexico will be a world-class connector with reduced or non-existing trade barriers with almost all countries.
3. Export incentives (IMMEX). Through the years, Mexican Government has implemented several export and manufacturing incentive programs for investors. Currently, IMMEX is the program that supports manufacturing companies for exporting. The main benefit is that raw materials are imported under 0% VAT rate (instead of 16%) or certain import duties, and could be transfer among IMMEX companies with same 0% rate. Machinery/tools could be temporary without paying VAT or import duties, too. Finally, at the end of supply chain, if this product/part is exported, VAT is not paid and machinery/tools could be re-exported without paying taxes. One of the main unexploited features of the IMMEX is that the same provisions apply to services. Then, outsourcing services of any kind (i.e. call centers, digital media rendering for video production, etc.) could apply for the same IMMEX benefits.
4. Engineers. Mexico is producing more engineers than ever, having a base of 400,000 software engineers and 65,000 graduating every year, Mexico is an “Engineering Powerhouse“. This number is powered by the fact that Mexico has qualified and skilled employees that have helped to success of diverse industries like consumer electronics, automotive/aerospace, textile and home appliances. In fact, Mexico has become a good ecosystem for clusters of auto/aero and consumer electronics to flourish.
5. Reliable legal framework. As labor law was amended to provide a more flexible labor system, and wages are reasonable, Mexico is competing with labor conditions in Asia. Government and politics are pushing amendments to free telecom and energy markets, and promised to set a more fair tax system. This could happen as soon as this year. El Pacto Por Mexico, a political alliance between the three major political parties, has outlined some of these amendments, and has guaranteed a majority in the Congress to pass the bill.
6. Domestic market. Mexico has a big domestic market of over 110 million people, with an average age of 26 years, Mexico has a great potential for growing inner market with products manufactured in the country.
Globalization is about producing in a place where business conditions, quality and price meet. Many companies will re-shore from China to US and/or Mexico forming a kind of North America manufacturing hub. Mexico has potential for landing any type of manufacturing operation, partially or totally, as can harbor either Chinese or US foreign investment.
As this re-shoring war is showing their first signs of hostility with companies moving away from China, it is time to apply some advice from Sun Tzu´s “The Art of War”: “Whoever is first in the field and awaits the coming of the enemy, will be fresh for the fight; whoever is second in the field and has to hasten to battle will arrive exhausted.”
Photo credit: Firefox Mobile by Johan Larsson
It happened Sunday just before midnight. Politicians from The Pact for Mexico, this is, an alliance made by major political parties for debating amendments to structural laws in Mexico, agreed on a Telecom Bill to be presented to the Mexican Congress.
Yesterday, at noon, The Pact for Mexico and the Federal Government made a press event to officially present the Telecom Bill to society. This means that this Bill has already received pre-approval from majority of congressmen, and most likely will pass in essence.
As wrote in my Post: “How I Learned to Stop Worrying about Telecom and Love the Pact” the Telecom Bill was imminent with no way back. Increasing growth of telecom and IT services, would eventually make politicians to reach agreements to set things right in the telecom industry.
Certainly, this Bill will boost telecom business at mid and long-term, taking many industries with them. For first-movers, time is of the essence. Here are some highlights to understand the range of this Amendment:
1.There is a constitutional right to access broadband and access to information. Infomercials disguised as news are forbidden.
2. State will transform current COFETEL (telecom agency) and COFECO (antitrust agency) from subordinated government bodies to the Ministries of Communications and Economy, respectively, into two autonomous agencies with enough power to coordinate telecom industry and commercial markets (other than telecom).
3. Licenses and spectrum will be reorganised to allow converging telecom services. Meaning that companies may render converging services under one license, rather than having several permits, authorisations and concessions. New telecom agency will grant and revoke licenses, rather than the Ministry of Communications, as happened in the past.
3.Two new free-to-air networks will be placed under tender. Major players with 6 MHz are not invited.
4. Must-carry and must-offer obligations are included. Free-to-air TV has to offer broadcasted content and CATVs must carry those signals, both for free. There is an exception to “major” players, that would pay for them.
4. Foreign investment will be allowed at 100% in fixed and mobile services, and up to 49% in free-to-air TV and radio.
5. Local bundle for telecom, radio and TV networks of “major” players must be shared.
6. Government will grow its telecom network allowing private-public projects.
7. Bands of 700 MHz and 2.5 GHz will be reorganised, and a part used for wholesale.
It is important to notice that this Bill is to the Mexican constitution, and would require to have federal laws to detail all these aspects. However, the business expectations are great.
I can hardly find some time to discuss all aspects that come to my mind at this moment, of write “deep thoughts” of each topic. However, some topics come to my mind:
- Mexican telecom operators, no matter size or network size, have just increased market value.
- Content will be required to fill-in air time and CATVs.
- Big data analytic will play a big role in the expansion of the services, as well as in the market defence.
- The internet of things could have found broadband access, but also an emerging market that loves gadgets.
- Videocasting, internet-TV and VOD could explode during next years. Internet radio could find a niche too.
- Advertising must find other lucrative niches other than infomercial news. Maybe migrate to the internet.
- Telemedicine, electronic files and other e-health business will be pushed by this Bill.
- Local governments will be more likely to implement e-government policies with better and cheaper internet access.
- Digital products will find a bigger market.
Telecom Bill appears to have a “Do Business in Mexico” all over it, and will attract many players into the market share. Now, it is the time of Mexico embracing this historic transformation.
I will find some time to write on several topics of the Bill, and some other that are not covered by it. Meanwhile, so long, and thanks for all the first-movers …