Don´t Panic: The First-Mover Guide to the New Mexican Telecom Bill

Don´t Panic: The First-Mover Guide to the New Mexican Telecom Bill

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 …

Energy Opportunities in Mexico

Energy Opportunities in Mexico

Photo credit: Foggy Bottom Pump Jack – Duncan, Oklahoma by duggar11

When it comes to energy opportunities, Mexico right now is a very hot market indeed for companies that export oil and natural gas; furthermore, if the present federal government, headed by President Enrique Peña Nieto can manage to break the monopoly that Petróleos Mexicanos (PEMEX) has enjoyed since the 1930’s, it’s possible that Mexico will require  infrastructure investors and technological expertise in the oil extraction industry.

This week, Mexican Senate approved the National Strategy for Energy, which will include the objectives for years 2013 to 2027. Nevertheless, President is lobbying for an energy reform to come during last 6 months of year 2013 to the Congress.

Natural gas

The current situation in Mexico is this; there are plenty of opportunities for U.S. or other natural gas and oil suppliers to export product to Mexico.  In fact, there is, at this very moment, a proposal to build a 124-mile pipeline to transport natural gas from the Eagle Ford Shale area (Texas) right to the Mexican border.  The company building the pipeline will be the Houston-based NET Midstream.

It is well known that Mexico does have very large reserves of natural gas, however, development of infrastructure has not been able to keep up with the country’s demand and consumption, so, for the next while, Mexico will need to import energy such as natural gas until the infrastructure is built.   To give an idea how big the potential market could be, energy consumption in Mexico has grown at four times the pace of its economic growth several times in the past ten years.    The domestic industry simply cannot keep up.

Because Mexico’s automotive industry is growing at a very brisk rate, with vehicle production expected to top 4 million units by 2018, the country does not have the luxury of asking companies to cut back on energy consumption; it is needed to keep the economy growing and it’s needed to lift even more people out of poverty.

Therefore, natural gas exporters should see if they can sell their product to Mexico; and companies with expertise in natural gas infrastructure could perhaps act as consultants to PEMEX, or sell directly within the limits of the law, so the country’s infrastructure will be able to handle the domestic demand.

Solar energy

Other energy opportunities exist in the solar energy market.  Since 2011, the price of existing solar technology has gone down about 30%, meaning that panels will be cheaper to produce and will be affordable for many to buy.  Because the taxes on energy have gone up by 25% in some cases, people cannot afford electricity from the national grids.  However, it is exactly this group of people that would be potential solar panel clientele.  Solar panel suppliers and retailers may do very well in the Mexican market; furthermore, because Mexico receives more than its fair share of sunshine, the country would be a good place to conduct research and development, along with manufacturing.

Wind Power

Mexico has a potential 71,000 Megawatts versus 1,214 Megawatts installed. Wind generates 77% of the total electricity generated through renewable resources. By 2025, it is expected to increase capacity to 11,267 MW.

In relation to foreign investment, by 2012, Mexico received accumulated investments of around US$6.902 billion in the renewable energy industry, which was concentrated in States of Guanajuato, Oaxaca and Baja California; and coming from Spain, the United States and France, mainly. These investments were made in wind farms, as well as plants for manufacturing generators, paddles, towers and other components.

Wind-generated energy is sold to the Government (usually sold through tenders) or generated by industrial companies for self-consumption. Opportunities for builders and engineering firms are open.

Oil

The current Federal Government is looking to open oil industry to private sector. Due to a lack of capital, vast reserves in the country are going untapped.  If the industry opens, investment in infrastructure, technology and skills could be responsible for 1.6 mbd of petroleum in the next 15-20 years.  If private investment is allowed, the opportunities for investment will be massive.

Opportunities for Chinese Companies in Mexico

Opportunities for Chinese Companies in Mexico

Photo credit: chinese_new_year003 by Mark Eslick

Mexico’s economy is growing; in 2012 economic growth was 3.9 percent, and it is expected to continue growing.  Foreign companies are seeing that Mexico is a great place to conduct business for several reasons, and although there is no free trade agreement between Mexico and China as of yet, there are plenty of opportunities for Chinese companies in Mexico.

It’s well known that the Japanese vehicle manufacturing industry is firmly established in Mexico; German automakers Volkswagen have been operating in the country as well for decades and almost all car makers in Mexico are planning on expanding their production facilities or building new plants in the very near future.  Car parts manufacturers are also expanding, with many foreign companies looking to expand their presence in Latin America.  Therefore, there is a large, highly specialized work force with years of experience in car production; Chinese car companies who are wishing to access the North and South American markets should seriously consider factories in Mexico.

Related to the vehicle manufacturing industry is the aerospace industry; Mexico’s highly skilled work force is what has attracted businesses like Bombardier to set up shop in the Spanish-speaking North American country.

What’s also interesting for Chinese companies is that in Mexico, while the wages might not be as low as they are in China, chances are that in the near future wages will go up all over Asia.  This, teamed with the high cost of transport, makes Mexico the smarter option when it comes to manufacturing.

Hi-tech companies may also want to invest in Mexico; many people in the workforce are highly educated, have engineering degrees and many are completely fluent in English.  During the years that the manufacturing jobs went to Asia, Mexico did suffer somewhat economically, but instead of relying on labor-intensive, low-paying industries like textiles, young Mexicans focused on technology and working efficiently.  The result now is that innovation in information technology and cloud-based computing is coming from Mexico.  Chinese companies would be able to access some of the finest minds in high-tech industries.

As mentioned above, while there isn’t a free trade agreement between the two countries, Chinese companies manufacturing in Mexico would be able to take advantage of many of Mexico’s trade agreements with other countries.  In fact, Mexico has free trade agreements with 44 countries, including the United States, Canada, and the European Union.

Finally, as also mentioned above, China would be able to access all markets in the Americas if production facilities were established in Mexico.  Because of the high cost of fuel, transporting items by sea such as vehicles will be incredibly costly, but due to Mexico’s central location, the cost of transport from Asia is completely eliminated, which is good news for a company’s bottom line.

There are many opportunities for Chinese companies in Mexico.  Along with the automotive, aerospace and IT industries, it’s very possible that the government will be opening up the telecommunication and energy sectors, breaking the decades-long monopolies that have, some say, held back Mexico’s economic growth.  China is known to be experts in the field of telecoms and could either establish cell phone networks or consult new national companies.   Furthermore, China could be an ideal investor to update infrastructure in the energy industry.

High-Tech Manufacturing Driving Mexico Economy

High-Tech Manufacturing Driving Mexico Economy

Photo credit: Overheating laptop by nick@

Mexico’s economy, up until very recently, was based on labor-intensive, low-paying industries such as textiles.  However, in the past few years, the industry that’s been fuelling economic growth in this Spanish-speaking North American country is that of high-tech automotive manufacturing; and although the textile and other manufacturing jobs have been going to China and India, Mexico’s economy is expected to continue growing.

A big part of this growth and interest from investors isn’t simply about lower wages; it’s about highly skilled labor and experience which may not be present in other countries or regions in the world.  For example, German automaker Volkswagen opened their first plant in Mexico in 1967; and anyone who’s visited the country knows that the Bug or “el vocho” was ubiquitous in the country for decades.

The present-day Volkswagen plant in the historical city of Puebla, about a two-hour drive southeast of Mexico City, is now the largest auto manufacturing plant in North America.  Featuring state-of-the art equipment, computer and robot technology, it employs over 18,000 people and produces 2,500 vehicles a day.   The country exports most of the cars, and is at the present time the eighth largest automobile producer on the planet.   It is also the fourth largest automobile exporter, and growth is not expected to slow down any time soon.

But what are the other reasons why investors in high-tech industries should consider Mexico?   According to Thomas Karig, one of Volkswagen Mexico’s vice presidents, “Mexico is becoming quite an automotive powerhouse”.   Karig emphatically states that companies and car companies in particular should set up shop in Mexico; Mexico’s location makes it an almost perfect location for export to North, Central, and South America.  Further sweetening things for foreign investors is the fact that the country has an open trade policy and a workforce that is highly skilled and experienced.

In September of 2012, Volkswagen subsidiary Audi announced it would be establishing a new plant close to the one in Puebla.  President of the Mexican Automotive Industry Association Eduardo Solís stated:  “There is an important element here where Mexico is, currently in the automotive industry, associated with good quality, with good products.  We have been scaling up in the value chain.”

It’s not only the automotive industry that is growing; because automotive industry employees in the past were able to afford educational opportunities for their children, industries that require a highly educated workforce can operate in Mexico.  Other countries, although wages may be lower, simply do not have the education the Mexican workforce has.   Mexico is the place to invest in industries such as aerospace, technology, and autos; and these industries are, not surprisingly, growing quickly.

Other car manufacturers in Mexico include Lexus and Nissan; interestingly, New York City’s entire new fleet of taxis is currently being manufactured at the Cuernavaca Nissan plant.

To summarise why Mexico is a place high-tech industries should consider, perhaps Cesar Lopez Ramos of California-based Plantronics Inc. says it best:  Mexico is attractive because it has “human capital that is more developed and capable of not only making products but innovating.”

Growing Opportunities in Mexico for Overseas Companies

Growing Opportunities in Mexico for Overseas Companies

Photo credit: Pirate Ship, Puerto Vallarta, Mexico by SMcGarnigle

Mexico is a country that’s got its problems, and there is no way to sugar-coat them.  Yes, there are drug cartels, crime syndicates, corruption in the government and a weak rule of law in some places.  However, Mexico is poised to become one of the more dominant economic powers this century, and more and more investors, both domestic and foreign, are realising that Mexico’s solid economic growth of the past few years will only continue to expand.

When it comes to total economic clout, Mexico won’t be able to challenge India or China simply due to numbers; Mexico’s 112 million population is a tiny fraction of the billion-plus populations of the two Asian countries.   However, what Mexico offers investors is considered by many economics experts to be vastly superior.   What has happened is that metaphorically speaking, Mexico is open for business.

Mexico, in an effort not to be defined and overshadowed by it negatives, has signed 44 free trade agreements, more than any other country on the globe.  It has twice as many free trade agreements as China, and four times more agreements than South American rival Brazil.  Making things even more interesting for investors is the fact that Mexican universities and technological institutes are producing vast numbers of highly skilled workers and engineers who are not only capable of working, they’re capable of innovation and finding ways to make things run in an incredibly efficient manner.

There is also the matter of the recent natural gas finds in Mexico, which can significantly reduce transportation costs.  This, along with the fact that wages and product transit costs are on the rise in China, make Mexico one of the hottest countries for investment.  Manufacturing industries that went to Asia when it was cheaper are finding their way back to the Spanish-speaking North American country, and due to the amount of solidly educated, innovative skilled workers, high-tech industries are also hoping to establish plants and headquarters there.   Automotive and aerospace industries are flourishing at present and are expecting solid, continuous growth.

However, there is one recent development that may encourage massive amounts of investment in the country; the current government of President Enrique Peña Nieto, is working with all three of Mexico’s big political parties to fight the massive energy, telecom and teacher monopolies that some say have held back the country’s economic growth.  If these monopolies get broken, the possibilities for investors in the field of telecommunications and energy may become too numerous to count.

To summarise, in the 1990’s and 2000’s, when many of the foreign companies operating in Mexico up and let for the then-cheaper Asia, Mexico’s citizens did not waste their time; producing a skilled workforce for industries other than textiles that was innovative and efficient became key.

From aerospace industries and web-based start-ups to cloud computing and electrical engineering and a commitment to free trade, Mexico has got it all for investors and the only way to go for the foreseeable future is up.

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