JUDITH MACGREGOR – United Kingdom Ambassador to Mexico

Editor’s Interview

WHAT IS YOUR PLAN OF ACTION AS AMBASSADOR OF THE UK IN MEXICO?

Mexico is a country of great opportunity. There is huge potential to develop our bilateral links, including trade and investment. From renewable energy to creative industries, to capturing more inward investment - all are areas I have focused on during my early months here.

The Mexican economy is diversifying and growing. I have recently seen reports which predict it to be the 5th largest economy in the world by 2040. It’s obviously closely linked to the U.S. economy but we are starting to see many other international businesses working with Mexico.

I want to make sure this involves British companies. Our trade figures are increasing each year but there is scope for more. My commercial team and I are working hard, therefore, to promote opportunities in Mexico with British companies.
On non-trade related issues we are working with Mexico to secure an international agreement on Climate Change.
I envisage next year will see us in close co-operation with Mexico and the UN Security Council to promote security and the rule of law.

HOW HAS THE FREE TRADE AGREEMENT BETWEEN MEXICO AND THE EUROPEAN UNION AFFECTED BILATERAL TRADE BETWEEN MEXICO AND THE UK?

Our bilateral trade with Mexico has doubled since 2000 and has been increasing rapidly since the signature of the EU/Mexico Free Trade Agreement. We could, however, do better.

There is no shortage of opportunities in Mexico for companies that take the trouble to look. We want to ensure that British companies are aware of the fantastic opportunities here in Mexico and that Mexican companies are aware of the benefits the UK brings as an inward investment destination.

We need to raise awareness about the EU Free Trade Agreement. Everybody knows about NAFTA given the publicity it receives. However, the EUFTA with Mexico is less well known. For British exporters the EUFTA provides the same access to the Mexican market as U.S. and Canadian exporters enjoy under NAFTA. This is a huge selling point in promoting further trade with Mexico and we need to make certain British exporters take advantage of it.

WHAT IS THE LEVEL OF SATISFACTION BRITISH COMPANIES HAVE WITH THEIR OPERATIONS IN MEXICO?

British companies or companies with British capital are very happy with their operations in Mexico. They find them very profitable. As part of our drive to promote Mexico to UK businesses, we show them examples of British companies that have been successful here. I am glad to say we have had no shortage of British companies coming forward to share their success stories.

On the rare occasion that a British company hasn’t been satisfied with their operations in Mexico we work with them on the issues, e.g. assisting with local authorities or helping in a more traditional sense such as organizing meetings or opening doors with key interlocutors.

HOW HAVE BRITISH COMPANIES USED MEXICO AS A GATEWAY TO THE UNITED STATES AND CANADA?

The combination of Mexico’s geographic location, its free trade agreement with the EU and its NAFTA membership make it ideally placed for British suppliers to the North American market.

According to a recent report, Mexico has become the #1 low cost destination for manufacturing goods for the U.S. market. The index found that manufacturing in Mexico costs around 68% of the cost of producing in the U.S., compared to 73% in India, 86% in China and close to 91% of what things cost the U.S.A. in Brazil.

The upshot is likely to mean more global manufacturers establishing themselves in Mexico and greater opportunities for British companies that want to supply these manufacturers or set-up operations in Mexico.

NAFTA may also present important advantages for British companies, particularly in the absence of a free trade agreement between the EU and the United States. By processing or producing goods in one NAFTA country, British exporters may be able to supply all three markets at reduced tariffs or even tariff free.
NAFTA has led to the creation of numerous operations based in Mexico supplying the U.S. and Canadian markets.
This is particularly true in the automotive, aerospace, food and drink, medical, security and consumer goods industries.
Excellent export opportunities exist for British tier 2 and tier 3 manufacturers who already supply similar operations in Europe, to begin supplying these operations in Mexico.

WHAT IS YOUR OUTLOOK FOR BRITISH TRADE AND INVESTMENT IN MEXICO?

I expect to see trade and investment between the UK and Mexico continue to grow in the coming years. The British and Mexican governments have allocated additional resources for increasing trade between the UK and Mexico. It is now our responsibility to make sure companies are aware of the opportunities that both countries present.

The current economic situation aside, Mexico has seen a sustained period of economic growth and sound management of its public finances for a decade or so. Although UK exports have been carried upwards by that increase, UK market share remains below 1% and nearly 60% of imports come from Mexico’s NAFTA partners, the U.S.A. and Canada. An increasing share comes from newly industrialized Asian countries and China.

As far as my team and I are concerned, these figures aren’t good enough. The Mexican people like British products and services. It’s our job to start making sure that the figure of “1%” increases substantially over the coming years by promoting Mexico as a place in which and with which to do business in the UK and at the same time raising awareness of the key selling points such as the Free Trade Agreements, the advantages of a low-cost manufacturing base, the availability of highly skilled workers and its strategic location.

IS THERE ANY ADDITIONAL BRITISH INVESTMENT IN MEXICO TO BE EXPECTED IN THE NEAR FUTURE?

There will undoubtedly be further British investment in Mexico. I cannot talk about future investments of a specific nature as they are naturally confidential.

However, I can tell you that according to our statistics the number of companies with British capital in Mexico is steadily rising and now stands at around 830. Last year alone we helped approximately 750 British companies in one way or another that are either already in Mexico or expressed an interest in doing business there. I expect this level to continue and/or increase.

The biggest British investment is HSBC’s US$2 billion acquisition of Mexico’s fifth largest bank, Bital. We are now starting to see medium-size companies make investments. Some of these include NPL Technologies, McCormick Tractors and Tibbett & Britten.

Other British investors in Mexico include Allied Domecq; AstraZeneca; BAT; Cadburys Schweppes and Diageo. There are also GlaxoSmithKline; ICI; Invensys; Johnson Matthey; Shell; Tate & Lyle, GKN and Unilever.

ARE THERE SPECIFIC SECTORS TARGETED BY BRITISH COMPANIES?

We see British companies here working across all the sectors. The obvious ones are oil and gas with British Petroleum and Financial Services with HSBC. However, just last week I had a launch event at my residence for a British company, subastacentral.com launching their reverse auction website here in Mexico. There are even British companies involved in education including services and equipment suppliers, healthcare, aerospace, automotive, food and drink, in addition to infrastructure, security, creative industries and the environment sector, to name but a few.

The National Infrastructure Plan has caught the imagination of British companies specializing in project management and finance, as well as consultation services and specialist equipment suppliers.

The Mexican government’s commitment to preventing climate change and reducing carbon emissions has meant that British companies in the renewable energy and environmental technology sectors, both in terms of products and services, are taking a more active interest in the Mexican market. And this is certainly an area, which not just for our trade relationship but also our general bi-lateral interests, where we would like to continue to focus our attention. In the last 12 months we have also seen an upsurge in interest in British companies in the leisure and tourism, sport, leisure marine, telecommunications and ICT sectors.

In fact, we opened an office earlier this year in Tijuana to not only help British companies in these sectors, but also to make sure that we have staff on the ground in the northwestern region of Mexico given the vast opportunities in that area.

WHICH CONDITIONS ARE NEEDED IN MEXICO TO INCREASE BRITISH INVESTMENTS?

UK Trade & Investment and ProMexico have carried out perception studies in the UK and Mexico. In Mexico the results have shown that those that thought of the UK as a place in which and with which to do business, held it in very high regard as a center of creativity and financial expertise. However, the issue is that not enough people think about the UK; instead they think in terms of Brazil, their neighbors to the north and the biggest consumer market in the world, the U.S. and obviously Spain. Therefore, we are actively working to increase awareness of the UK as the right location for Investment.

Mexico is perceived to be a tough proposition even for the seasoned exporter. In fact, doing business in Mexico is no more difficult than in any other emerging market and in many cases much easier. In the World Bank’s most recent table regarding difficulty of doing business, Mexico came in well above Brazil, Russia, India and China and ranked quite high compared to other emerging markets.

The government is actively driving reforms forward to attract new investment and diversify trade. Naturally some things are done differently here but, as with all overseas markets, some research and planning will certainly help avoid potential pitfalls.

So the challenge for us is to address these incorrect perceptions in the UK and make people realize what the real Mexico in 2010 is all about and at the same time to raise awareness in both the UK and Mexico of the opportunities in both countries.

In addition, there are several sectors of the Mexican economy that are still fairly closed both to foreign investment and internal competition. This is due to legal restrictions or because of the dominance of one or a small group of companies in these sectors whose actions prevent free and fair competition.

By taking steps to improve market access and competition in these sectors the UK will not only be provided with greater opportunities to contribute to Mexican growth, but the effort will also help Mexico improve its international competitiveness and productivity throughout the economy.

HOW HAVE FINANCIAL BRITISH COMPANIES IN MEXICO HANDLED THE RECESSION?

There are a number of British companies in the Financial Services sector operating in Mexico. Obviously I can’t give detailed answers regarding the performance of private sector companies, but generally the Financial Services sector in Mexico weathered the financial crisis better than in many other countries.

The UK is seen as the originator of, and a leader in Public Private Partnerships. As a result, the Mexican Government is now implementing plans to build communications and social infrastructure using UK expertise. The Mexican PPP program, for instance, is advancing with the help of UK consultants who have won nearly £4.5 million of business so far. The individual states are now interested in learning more and developing their own programs.

ANY LAST COMMENT FOR THE MEXICONOW SUBSCRIBERS?

The UK has a huge amount going for it.

The European Cities Monitor has ranked London as the number one destination in Europe to establish a business for 19 years in a row. According to the World Bank, the UK is the easiest place to set up and run a business in Europe, as well as the second most flexible labor market in Europe. London will play host to the Olympics in 2012. Opportunities for overseas companies and contracts are available for firms of all sizes and the total budget will run into billions.

Like Mexico, we are strategically placed. Our strategic position enables the UK to act as a springboard into Europe: This gives easy access to the 27 member states of the EU, the world’s largest single market, with its population of nearly 500 million.

The UK is currently ranked as one of the four most open economies in the world. Like Mexico, we have a proud history of trade. We have a global reach that gives us a unique ability to work with markets in every part of the world.

Contrary to popular belief, we are still the sixth largest manufacturer in the world. Over half our exports are from manufacturing.

Third, the huge concentration of financial, legal and commercial expertise that has developed in London in recent decades has not somehow been wiped away in the last year. London provides access to international finance that is not available in New York. During the course of the same working day it can do business with every other major market in the world.