Agustin Carcoba Aguilar

CEO GE Capital Solutions Latin America

The international financial market is very unique and complex. How did you come-up with the idea of entering this area?

We started to run this business in Mexico back in 1995. We believed in Mexico as both a manufacturing platform for North America and an attractive internal market potential… and at this time we have over 14 years financing projects for the maquila and other companies that have established permanent operations.

How did the idea come? We believed in Mexico as a manufacturing platform.

How has this business evolved since you started operations over 14 years ago?

We started from zero. GE Capital in the U.S. has over 1,000 sales reps (No traders). What we do is structure (No train) in country solutions to our U.S. clients. Our direct sales force offers tailored solutions with swift turn-around times to respond to our clients’ growth plans… At this time our investment portfolio is US$9,000 million. This is divided into corporate credits, real estate and additional credits in energy and aviation. This has been a great story for us.

GE has worked for many years alongside MEXICONOW. We have watched as you entered into a market where the American banks didn’t work. Didn’t you give-up some reserves just to enter new markets with products wherever the American Banks had decided not to enter?

I wouldn’t like to talk about our competitors. For us this market is very attractive. GE has a direct sale force of over 1,000 traders in the U.S. What we do is train our clients in the United States with the ability to structure something in our Country (i.e. Mexico).

Our Direct Force Model offers direct expansion financing, just like it says, for our clients and it is a very aggressive model that has had very satisfactory results.

How profitable is your business in relation to other areas of work for GE?

Mexico is a very attractive market for GE capital. We have built a scale with a good product and excellent productivity. We are able to say that we have experienced a resounding success in Mexico.

We have a deep knowledge of the country’s commerce and that’s one of the reasons why our clients win, and at the same time the country grows. Our clients returned because they realized that Mexico has reasonable rule of law and infrastructure that offsets particular labor cost advantages in other Asian countries.

How do you see the environment in regard to tax regulation in Mexico?

Mexico has been gaining ground to compete. Back in the year 1994 Mexico exported US$20,000 million and last year, being a bad period, the Country exported US$200,000 million. We have to recognize that in order Mexico is the second or third commercial partner of the United States, depending on the year.

As for Mexico there are three unmistakable facts:

  1. The Country has the same time zones as the United States.
  2. We have a demography that has been erasing the myth of being limited to low cost labor. In Mexico we graduate more engineers per capita than China and India do. In fact, many companies could have their own design centers. Our demography is young and dynamic and we share common occidental values and practices.
  3. Mexican law and infrastructure. Everything is perfectible but our clients that left the country in the past, mainly from the electronic sector, have returned because they can now work in Mexico.

What is your opinion of the economic situation in Mexico?

It was very tough during the year 2009 because of Mexico’s link with the United States. There was, for instance the flu epidemic along with other shared difficulties.

This year (2010) has been very good. There have been important investments such as the Ford expansion in Hermosillo. There are also other important GE investments in the northern part of the Country.

We want to consolidate our platform and the economic slowdown seen after the first half of 2010 in the United States. This is something that made us stop to reflect.

The internal market is the other opportunity in Mexico. There is the notion of a 100 million person market that continues growing in the services industry.

Do you think that Mexico has undergone economic recovery after last year’s recession?

It depends on the sector we talk about. The manufacturing for exportation sector has already recovered. The automotive industry, for just one instance, exports 1.5 million automobiles. This, in fact, is 90% of the historical peak for any year in history.

I believe that in a period of time between 2-4 years we are going to be able to produce as many as 4 million cars. The manufacturing industry seems promising for next year.

In relation to the internal market, this really hasn’t recovered yet. Some employees have been reinstated in their jobs and the tendency looks very good.

What is the role Mexico plays in the international commercial trade with Central and South America and the NAFTA Countries?

Mexico is a good port of entry for the largest consumer market in the world. Companies from other Countries, like Brazil come and invest in Mexico to do assembling with aggregate value for exportation to the U.S. And the same thing is happening with suppliers from Brazil.

Other suppliers from Europe, such as the case of Flextronics, Hitachi also has an impressive presence in Mexico because of its proximity to the United States.

Mexico plays an important role as an integrator of medium and high aggregate value for many countries. I have to say that Mexican companies do the same thing in Europe and the United States, but here it works backwards.

It is a fact to say that 90% of the electric transformers that GE installs in the world are really made in Monterrey. This is because GE saw the potential of the Mexican engineers. Mexican engineering is a clear example of Mexico’s burgeoning competitiveness.

Are you planning to keep expanding operations in Latin America or to consolidate Mexico?

We are going to keep being aggressive in our growth in Mexico and in Latin America, especially in countries like Brazil, Chile and Trinidad & Tobago in Central America. Mexico is an important engine for GE in Latin America. Our Mexican operations represent 40% of the Latin American total.

GE Capital slowed down its revenue. It went from US$172 million to US$158 million worldwide. But the participation of Latin America continued growing. At this time Latin America’s participation is higher than India’s and China’s combined. In fact, Mexico has an even higher participation than China and it is double that of India.

Including joint ventures, our Latin America portfolios exceed US$10 billion.

What is the future of the Mexican economy for next year (2011)?

It depends on the U.S. market and their inventories. The export market trends to consolidate and the internal market keeps rebounding. I expect a year like the upcoming 2011 to be very similar to 2010, but still not at the full capacity of the figures experienced during 2006 and 2007.

The tendency is very good with continued growth in direct investment as well as in company quality.

What is the impact of GE Capital on Mexico’s industrial development?

We have over 1,000 clients with US$8,000 million in their combined portfolios.

This portfolio is the 3rd or 4th largest investment portfolio in Mexico. We will continue to believe in the medium-sized companies, as well.

We have over 1,000 real estate tenants and our commitment is not only going with the biggest, but to also believe in Mexican development. Our big hope is that every time more and more developers will grow and go on to capitalize new markets here.

This is the exciting development engine of Mexico.

Would you like to make any comments to the MEXICONOW subscribers?

I want to express the importance of betting in favor of Mexico.

There are factors right now like insecurity that have given Mexico an image that, overall, is really not that representative. Mexico is a Country with a lot of viability and is working to solve the issues as fast as they come. Having said that now is the best time to invest here, because at the instant when Mexico finally fully recuperates, investment will suddenly be more expensive. Mexico is the best kept secret!