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Introduction - Alliances & Investments - Expanding frontiers - Free market -
Telecom and transport - Banking - Energy sector - Tourism - States of Opportunities -
Agro Industry - Multinationals - Industrial States 
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Interview with
Dr. Herminio Blanco Mendoza,
Minister of Commerce and Industry
February 8th, 2000
| Can you give us an outline of the last three years’ development of the export climate?
I think I will better give you the picture of the last six years. Making reference to NAFTA, which came into force the first day of 1994, we have been extremely successful in the US and Canadian markets. We have increased our exports to the US 170%, so as you can see they have almost tripled in six years. We have become the third most important exporter to the US. Last year we exported for a total of 137 billion dollars, of which 90% came from manufactured goods such as automotive vehicles with about one million vehicles exported, electronic auto-parts, electrical products appliances and textiles, where Mexico became the number one supplier for the US.
As you know there has been a lot of attention attracted to Mexico throughout the last couple of years. Now that with the European Union you are following the process that NAFTA has already started and having in mind the unique position that Mexico has geographically, what can you tell us about the developments you expect for the near future?
Well, I can tell you that the free-trade-agreement (FTA) with Europe is very important for us. Europe is now our second partner even if it is a very distant one in terms of economical exchange. Last year trading with Europe meant an exchange of about 16 billion dollars, including exports for a total of 4.5 billion dollars while the US represented for us a 200 billion dollars market with exports for 100 billion dollars. Bearing in mind that Europe is a larger market than the United States, we see a substantial potential in the exporting side. Now, I think that one of the topics that you were pointing at is the interest that all this has caused in general to investors here in Mexico and worldwide. Mexico with NAFTA has become an strategical place to invest. The proof is that in six years we have tripled the amount of direct investments with 11 billion dollars per year. We believe that with the European FTA plus the trading network we are building in Central and South America we will become a real unique place to invest, in the sense that investing here will give you access not only to a market of 100 million people in Mexico, but to the world’s largest trade alliances (unions).
What have been the most significant incentives in stimulating trade for Mexico with the European Union?
I believe that what Europeans feel about Mexico is that they have been left out of this market, simply because business making with the US is being done in much better commercial conditions than with Europe. Likewise we have exactly the same situation. Europe has trade agreements with about 100 countries; all the ancient colonies and North Africa, so, goods coming from those countries have better access to the European market than Mexican ones. We believe that what’s happening now will give us a much greater exporting potential.
Is this opinion that you are speaking about prevailing now through all the private sector?
We have not started yet selling this agreement here in Mexico simply because we want to wait until all necessary internal processes are done here and in Europe. We think that there are very good chances for the agreement to come into force the first day of July, unless we hit a wall somewhere, and I don’t think so. This is the most ambitious agreement ever negotiated. Just to give you an idea, all our industrial products will be entering Europe without paying taxes (duty free) the first day of the year 2003, and full free trade will be achieved in the year 2007. Agriculture will still be a sensitive spot for both parts, but even then there will be either free trade or preferential treat for our products.
At the moment statistics place Brazil and Argentina as the strongest attractions for direct investment. What can you tell us about Mexico achieving the same privileged status and why it has been slightly slower in taking up the market to be an international investing place?
Of course Brazil has undertaken very interesting projects but also very important steps towards privatization. We haven’t done any privatization, Mexico has received only fresh new foreign direct investments, and within the realm of emerging markets we have become number two behind China. I believe that all the good work we have been doing with free trade and the fact that the macroscopic picture tells us that we will be democratically going through this change of administration without any uncertainty, and with a one digit inflation train, will keep us ahead in the competition for foreign direct investment.
Now that you have mentioned China, for what we know there are some implications that Mexicans are not really happy with China with the World Trade Organization as far as NAFTA and the treaties are concerned. Is this true?
We are perfectly happy with China making part of the World Trade Organization. That country by itself is the worlds largest market, so it has to be in. We haven’t finished negotiations with them, as you know it is a matter of giving and taking, nevertheless we believe they have to be in fulfilling of course all their obligations. And I may stress the word obligations because many Mexican production sectors have complained against some Chinese dumping policies that have made us apply anti-dumping measures. But as I have just said, as far as the World Trade Organization is concerned, they have to become members.
Geographically your placement is perfect, neighboring the US with whom you have NAFTA and now the European Union. What developments are next within the world? Would it be MERCOSUR?
Well, we have already free trade agreements with Costa Rica and Nicaragua, and I believe there are good chances that at the end of this administration we will have agreements with Guatemala, Honduras and El Salvador. I have my doubts about Panama, even if during the past administration we got almost to the end of the negotiations. So to Central America we will have a very good access. We have agreements with Colombia, Venezuela, Bolivia, Chile, a very ambitious agreement with Uruguay; not a full free trade but we consented to respect some very profitable trading rules for both sides, and last week a Brazilian delegation was here. For the last three years we haven’t had any close relationship with Brazil, not because we didn’t want to, but because they did not want to attain a deeper level, so having them here was a good sign. When we proposed for the first time a free trade agreement to MERCOSUR countries, Uruguay, Paraguay, and Argentina reacted positively but Brazil’s reaction was not the one we were hopping it to be. But now the situation is changing.
Commercially speaking you cover now three continents. What, in your opinion, will happen in the next five years?
Mexico has a very bright future. Foreign direct investment will continue coming up dynamically and our internal market will soon start a real take off. I think that forecasting Mexico with a normal 5% annual rate of growth would be a very realistic picture of what will happen.
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Today the most important thing that all of the investors are looking at in every sector is infrastructure in land and sea. What can you tell me about this kind of developments and potential privatizations?
I can tell you not about potential but actual privatizations. For example railroads. President Zedillo agreed with Congress to change the Constitution in order to allow railroads to be privatized. In fact the three most important lines are already being managed by private investors and we have been witnesses of a very important modernization phenomenon. At sea, ports are now all handled by the private sector, and by the end of this administration airports will be fully privatized excepting Mexico City’s National Airport. Communications and telecommunications sectors are already in private hands.
Could you give the names of some of the mayor companies in telecommunications that would be looking at Mexico?
Yes, they are AT&T and MCI.
For gas and electricity within the energy sector, there seems to be a great interest from European companies. Could you tell me about how that will turn out?
We have had a great success in the natural gas sector, not in exploration nor extraction, but in natural gas distribution. We have had already eight or ten projects that have been handled by some US and European companies, mostly involving gas transportation and distribution in Monterrey, Hermosillo, Chihuahua and Guadalajara among other important cities.
As far as the investments are concerned what we want to do is to highlight not only the sectors and what the government is doing but also what the companies are doing so we can give a full picture internationally. What about other strong areas for investment?
We have clusters in the north and the northwest. In Chihuahua we have a cluster of TVs; we are the number one exporter of televisions to the United States with 15 million TVs exported last year. Monterrey is a super cluster for all sort of products. In the region of Coahuila, a neighboring state of Nuevo Leon, you will find mostly an automotive industry. There is Chrysler, GM and some other companies devoted to auto-parts manufacturing. Guadalajara produces computer devices and electronics for IBM and Hewlett Packard. In Puebla you can find VW assembling plants and a large textile industry.
When you look at Mexico as a country, or when you look at it as a culture or a financial destination what is a) the image that you are portraying internationally and b) the one perceived?
I think that there is a great similarity between what we are portraying and the image that is been perceived. Mexico is conceived basically as a country that is going through a deep transformation. We became members of GAT in 1986, and by the time we were exporting for 22 billion dollars. Last year that number went up to 140 billion dollars. With NAFTA fully operational and now that the free trade agreement with Europe is almost a reality, Mexico’s business strategical position is something everyone has bearing in mind. Mexico was a country that felt into periods of crisis almost every six years, but now Mexico has not only managed to recover from the last one in1994 but also has controlled all red spots susceptible of unchaining a new crisis. We have now full control over the macro-economic situation, and that will lead us through a change of administration without any problem. A very important fact is that the private sector all around the world sees a democratic Mexico, they see a Mexico where everything that has something to do with election processes is completely detached from the Executive, and that is a great plus. Mexico is seen as a modern country in the economic and political fronts, a country that has shown a lot of competitiveness, and who’s geographic situation in behalf of it’s network of free trade agreements couldn’t be better.
Which countries have been your major commercial partners, the greatest investors so far?
The US in the first place, then the Netherlands, the United Kingdom and Japan.
This is your ministry. What would you like to see happen to it after your administration?
I think we have done quite a good job. Not only because of the free trade agreements but because of the new improved regulations implemented here. All changes have been done with the assistance of the private sector. Hopefully Congress will soon give to this new regulations their mandatory and legal character. This will mean not only a great simplification of all procedures but a much greater security for all investors who will be then fully protected against unlawful maneuvers. We have also managed to institute a Regulatory Impact Statement which forces all of the federal public officials to consider the custom benefits whenever they want to establish a new regulation. We have started a strong program with very innovative directives to support medium and small size companies. Talking about quality, today 55 ministry units are ISO 9000 certified. Almost every unit that is permanently in contact with customers has passed through a quality certification and most of them are passing this year a re-certification. All of this has changed completely our working philosophy. I would just ask to the future administration to be sure to improve coordination among ministries and secretariats.
Which way is according to you the best way of communicating a message in the year 2000?
Old ways such as television are still very effective. I also believe in the power of personal presentations, and I can tell you that the results we got with our presentations during our trips to Europe, Asia and the United States were very good. Of course internet is the tool we must be working with today, and SECOFI has it’s own page that even if it is a very visited one, we need to change its presentation in order to make it a little bit friendlier.
For how long have you been working for the public service of this country?
I started in 1978 as advisor for the Ministry of Finances until 1980, then I went to the United States, were I studied, but now as a professor. After five years I came back as advisor for President De La Madrid, a charge that I carried out for three years. Since 1988 I have worked for SECOFI.
Most of our readers are decision makers, businessmen and potential investors worldwide. What is your final message for them?
They should see Mexico as a really strategic place to invest. It may sound a little pretentious but Mexico will become a unique location. Certainly our geographical situation as we have already mentioned, as well as the great political and economical reforms and the modernization that have been taking place will make of Mexico a unique investing place. We must have in mind that very soon Mexican manufactured products will have free access to almost 25 countries all around the world. And please go ask people from the private sector about Mexican labor force and surely they will tell that you can’t find a better one.
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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Mexico published in Forbes Global.
July 3rd 2000 Issue.
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MEXICO
