Private sector urges Mexico to 'respect the rules' and win back investment

With long-awaited details on Mexican public spending forthcoming, key voices in the private sector are pressing government officials to re-establish the country as a hub for investment by setting out legal clarity for investments and adhering to the rules of the game.

“It’s not just about having clear rules, but also that the rules are respected,” said Jorge Torres Aguilar, president of the American Chamber of Commerce in Mexico (AmCham), speaking on a virtual panel on investment in Mexico hosted by Expansión.

“Because, of course there are clearly established rules, but suddenly they change the rules of the game,” said Torres.

For Samantha Ricciardi, CEO of BlackRock Mexico, the need to “provide this rule of law and this certainty to continue attracting investment to Mexico” has been magnified by “the worst recession at a global level since the Second World War.”

“With this global downturn, there will be more and more competition with less and less investment available to make,” said Ricciardi at the event.

INVESTMENTS NEED GREEN LIGHT 

Mexico’s finance ministry is expected to submit its 2021 budget proposal to congress on Tuesday, with many details expected to emerge on Wednesday, September 9, with the government also seen announcing an update on the national infrastructure plan no later than September 15. 

Major business associations, including CCE and Coparmex, have pleaded with the government to get the pipeline of PPP projects moving again, particularly in energy, with CCE recently releasing a document asking to meet with Mexican President Andrés Manuel López Obrador (AMLO) to discuss the authorization of 140 oil & gas and electric power projects.

Both groups estimate that around 280 such projects are ready to advance, with total capex estimated at about US$100bn, as the CCE lamented that only 27% of these projects are seeing any advance at all.

The government has been criticized for moving slowly on private projects and sidelining private initiative in favor of projects favoring Pemex and state-owned power company CFE, as well as undermining investor confidence with a series of policies that leave private sector investment in an unprecedented state of regulatory uncertainty, as hundreds of lawsuits have been filed in recent months aimed at blocking new energy policies. 

PLENTY IN ITS FAVOR

Despite the political divisions, Torres and Ricciardi agreed that Mexico continues to boast multiple advantages that are attractive to investors.

Ricciardi pointed out that Blackrock’s strong commitment to Mexico is evident in its recent acquisition of Citibanamex Asset Management, adding, “At Blackrock we trust that Mexico's potential in the medium and long term is still there, going very much hand-in-hand with the [USCMA trade] agreement.”

Torres said AmCham has been in constant dialogue with high-level economy and trade officials to emphasize the importance of trade and exports as a motor of the economy, with 67% of GDP dependent on international trade.

With 80% of exports already directed to the US, Torres added, the USMCA agreement is all the more important, with investment now competing to reach the potential 490mn consumers across Mexico, the US and Canada. 

It is often taken for granted, said Torres, that the US is already the biggest investor in Mexico and that the USMCA only stands to build on Mexico’s existing strengths that include: “the development of its industry, the talent, the location, which is unbeatable, and the export capacity that we have today.”