RSM Global

Embracing the Mexican wave

The first in a series of RSM blogs on the MINT economies looks at Mexico where collaboration, investment and entrepreneurialism are reaping rewards.

I was recently reminded of the saying by American entrepreneur Jim Rohn, that “for every disciplined effort there is a multiple reward.” On 5th February, the rankings agency Moody’s upgraded Mexico’s sovereign debt, giving it an A-grade rating for the first time in history. In an article in the Financial Times, this promotion to A3 from Baa1 was said to be motivated by reforms taken by President Enrique Peña Nieto that were expected to “strengthen the country’s potential growth prospects and fiscal fundamentals”. In this it appears, Mexico is starting to prove Rohn’s point.

Mexico has embraced a number of free trade policies in recent decades and since taking office on December 1, 2012, President Peña Nieto has acted swiftly to pursue overdue landmark reform. Having suffered a large decrease in FDI in 2012 (down from US$23bn in 2011 to US$15bn), he has worked hard to push through reforms including in telecommunications, energy, banking and tax legislation. Now it seems that Mexico is the Latin American market that investors like most. As Forbes’ Chris Wright states “this is largely as a result of market-friendly reforms and a sense of national momentum under President Enrique Pena Nieto”.

Our own research shows that Mexico has been one of the world’s most entrepreneurial countries; it ranked sixth in our study of 35 countries’ net new business generation in the five years since 2007, with a compound annual growth rate of 6.6%, ahead of the BRICs (5.8%) and the G7 (0.8%).

Further collaboration and investment look to be on the cards for Mexico. Mexico’s Finance and Public Credit Secretariat says it expects the country to attract a record amount of foreign direct investment for 2013 (the first quarter of the year already attracted 40 percent of 2012’s total sum) as investors show greater confidence in the Mexican economy than they have in recent years. Only two weeks after Davos, Pepsico, Nestle and Cisco announced major investments that together totalled more than $7 billion in Mexico.

However, with this increase in FDI starting to bear fruit, it is worth remembering that Mexico’s real potential lies not with exports, but with its internal market of 117 million people that are relatively young. Though half the country are considered to be living below the breadline, by 2050 Goldman Sachs project Mexico’s GDP will have increased by 4%, to $63,149 per capita across a population of 142 million.

We at RSM are very pleased to see these developments and the benefits they are bringing to the people of Mexico. And we are proud that we are part of the growth story with our Mexican member firm, RSM Bogarín, realising strong growth year on year and supporting their clients, both home grown businesses and others who are doing business in Mexico, to realise their potential and bring real economic success. 

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Author

Jean M Stephens
Chief Executive Officer

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