ATKearney FDI Confidence INDEX IMCO The International Competitiveness Index for 2013 MEXICONOW Staff Report
The Mexican Institute for Competitiveness (IMCO) and the firm A.T. Kearney recently published the results of their studies analyzing the Global Competitiveness of the Countries and both classify Mexico at their Indexes.
A.T. Kearney is a global management consulting firm, focusing on strategic and operational CEO - agenda issues for the world's leading organizations across all major industries and sector. In their Foreign Direct Investment (FDI) Confidence Index the U.S surged to Top Destination for expected FDI for the first time since 2001 and Mexico placed in position nine.
The A.T. Kearney Foreign Direct Investment Confidence Index (FDICI) is a regular measure of senior executive sentiment in the world's largest companies. It has been conducted regularly over the last 15 years by the Global Consulting Firm A.T. Kearney
and provides a unique look at present and future prospects for international direct investment flows.
The 2013 FDI Confidence Index was released at A.T. the Kearney Global Business Policy Council CEO Retreat, held this year in Morocco. "While investors are still in a holding pattern as they have been since the recession, they seem more optimistic and less jittery than they have in recent years," said Paul Laudicina, Chairman Emeritus of an A.T. Kearney office and Chairman of its
Global Business Policy Council. "There has been a leveling effect this year," he explained, "between developed economies and developing countries in terms of FDI. The world seems to be slowly finding its footing again."
The 2013 FDICI offers a set of opportunities in the developed and developing worlds. Asia is home to a growing number of economic powerhouses, as the report points out. Latin America's major economies are gaining ground and even Europe has a number of bright spots. Key emerging economies in the Americas are making a strong showing in the FDI landscape this year with Mexico, Argentina and Chile joining Brazil in the Top 25.
Mexico was ranked in fourth place for investors in America and Europe (behind the U.S., China and Brazil for both cases) and in the second place for those in Asia. The sample of the INDEX considers 302 global companies representing 28 countries: 36% of them are based in Asia; 34% are in Europe and 30% in America. Most companies have worldwide sales considered greater than US$1 Trillion.
"Instead of a temporary refugee during the economic crisis, emerging markets are becoming a complement rather than an alternative to the developed world," said Ricardo Haneine, Partner and CEO of the Mexico Office of A.T. Kearney.
The year 2013 can be recordered as a golden year in terms of FDI in Mexico. Lego, the automakers General Motors and Nissan; Mondelez (producing Oreo cookies), BBVA and hotel companies Apple Leisure Group and Starwood are among the companies that recently announced with great fanfare investments in the country amounting several millions. President Enrique Peña Nieto indicated that it will exceed US$40 billion, an unprecedented amount in contemporary history, which is mainly driven by the sale of the brewery Modelo.
Also Mexico is receiving this year large investments in diverse sectors by transnational companies like Honda, Audi, Volkswagen, L'Oreal, Eurocopter, Nestle and Ferrero, among others.
The U.S. has reclaimed 1st place in this year's FDICI for the first time since 2001. Like investment in the rest of the world, U.S. flows are below their 2008 peak of US$306 billion. But the country has made a gradual rebound mirroring that taking place in the rest of the world, according to A.T. Kearney information. The U.S. is the world's number one recipient of FDI for the 6th consecutive year and U.S. manufacturing productivity has been increasing since the recession.
China slipped to the number two position in the Index this year for the first time since 2001. The FDICI reported higher labor costs in China. This raises questions about the longer term attractiveness of China's development model and creates the potential for restoring certain manufacturing to customer markets. Yet, the vast majority of respondents (73%), according to A.T. Kearney, are staying in China despite rising labors costs.
"With many of the gains in productivity of the past few years now exhausted, companies will need to generate efficiency gains by improving communication and processes, enhancing speed and flexibility, implementing new technologies and developing talent. FDI could play a role in those efforts," Paul Laudicina, Chairman Emeritus of an A.T. Kearney and Chairman of its Global
Brazil maintained its 3rd position in the FDICI this year. More flows are likely on the way with the 2014 World Cup and 2016 Olympics. They will need transportation and infrastructure investments totaling US$200 million. Manufacturing remains the recipient of nearly half of Brazils FDI with European, Scandinavian and Chinese investors adding money to their economy.
According to A.T. Kearney, emerging markets continue to charge ahead and Mexico, with strong manufacturing and exports and close links to the United States and Canada, is in the top 10. Mexico wasn't ranked of the Top 25 in the past FDICI and according to this year's Index the Country has been evolving in a satisfactory way and with good expectations to grow.Exhibit 1
shows the Top 25 Countries on the FDI Confidence Index, according to Corporate Executives.
A.T. Kearney is a global team of forwardthinking partners who deliver immediate impact and growing advantage for their clients.
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Note: The FDI Confidence Index ® was constructed using primary data from a survey administrated to senior executives of companies comprising more than US$1 Trillion in annual global sales. It was completed in October and November of 2012.
The Mexican Institute for Competitiveness (IMCO)
The Mexican Institute for Competitiveness (IMCO) by the Global Competitiveness Index evaluates and compares the ability of the most important and advanced economies of the world to attract and retain talent and investment. To achieve these two objectives, countries should create comprehensive conditions that enable people and companies to maximize their productive potential. Also those Countries should increase steadily their welfare, beyond the intrinsic possibilities of offering its own resources and technological capabilities, along with innovation. These efforts to encourage competitiveness should be independent of normal fluctuations inherent cycles.
The IMCO International Competitiveness Index for 2013 has collected information for the year 2011 and analyzed 46 Countries by 111 indicators divided in 10 sub-indexes.
The most competitive country according to this Index is Switzerland and it has always been ranked 1st ever since the year 2001. Switzerland is followed by Denmark and Sweden. Here both countries have improved their position on the Index since 2001 to date. The GDP per capita of the top 10 Countries is US$58,951 and the investment per worker is $21,291. Exhibit 2
is a chart listing the first 10 places on the 2013 International Competitiveness Index as published by IMCO.
According to the International Competitiveness Index for 2013, the Less Competitive Countries are India and four Countries from Latin America (Bolivia, Guatemala, Nicaragua and Venezuela). The GDP per Capita of the last 10 places on the Index is US$5,939 and investment recorded per worker is US$2,649. Exhibit 3
illustrates the 10 Countries that ranked last at the IMCO International Competitiveness Index 2013, along with their comparison with the year 2001.
The Countries ranked in the middle of the Index include powerful countries with big markets like the U.S., Germany, France, South Korea, and Brazil. This is where Mexico ranks 32nd. The average of the 26 Countries results in a GDP per capita of US$23,066 and the investment per worker is US$9,564. The Countries ranked at the positions 11 to 36 are listed in the Exhibit 4
Data for Mexico features a GDP Per Capita of US$10,047 and an Investment per worker of US$4,809; this is well below the average of the media for the Index, but at the same time it doubles the digits for the less competitive countries.
Carlos Slim Domit, Telmex Chairman describes the competitiveness of Mexico this way: "Mexico has macroeconomic strength, which should result in greater internal development, job creation and prosperity for the people."
"For the United States and many European & Asian countries, Mexico is becoming more strategic because we are one of the most open and competitive economies in the region and have, in addition to the economic solidity, a young and vigorous population," added Slim Domit.
MEXICO STILL STUCK. Over the years the highest figures reached by Mexico was in 2005 when the country ranked at 29th. This was reported by the Mexican Competitiveness Study (IMCO) in its analysis. Although progress has been made in areas of the economy and society, the Institute says setbacks in the field of government have held things back.
According to the Global Competitiveness Index presented by the IMCO, the only sub index that Mexico achieves located above the media is "Stable Economy" where occupies the position 21 after advancing 14 positions since 2009. The IMCO expresses that this is
a result of the increased stability of the Mexican economy compared to setbacks experienced by other countries in crisis like Spain, Greece and Portugal.
Mexico presents setbacks mainly in two sub-indexes:
- The Sectors of World Class Precursors, where it occupies the position 42 due to severe delays in areas such as transit passengers on commercial flights, low number of Internet users in the country and the low penetration of the private financial system.
- Efficient Factor Markets, where it ranks 39 of 46 countries. Mexico is affected mostly by being one of only two nations (Along with Venezuela) in the study to maintain closed the energy sector to private investment.
By introducing the report, the General Director of the Mexican Institute for Competitiveness (IMCO), Juan Pardinas, said that one of the main weaknesses in our country, for instance, is insecurity. Another is the fall in FDI and there is the higher cost of payroll. In contrast, Mexico advanced on government liabilities stability, low external debt and a much lower risk in the banking sector, he said.
Juan Pardinas noted that the stagnation in competitiveness is due in large part to the inability to have grown steadily due to increased productivity. The institution stressed that Mexico lags in the energy sector due to the State's monopoly on the extraction of hydrocarbon resources. This suggests structural reform is a good idea to improve things.
As for the 2013 Global Competitive Index, IMCO published that the President and Congress have the opportunity to transform the oil and gas sector. This effort could strengthen the competitiveness of the national economy and generate wealth for the benefit of Mexicans of today and tomorrow. Very likely it would also promote the technological and industrial development of the country.
Investment bank Merrill Lynch said that the manufacturing industry in Mexico is becoming less competitive due to the high costs being paid for electricity.
Emilio Lozoya, director of Petroleos Mexicanos (Pemex), defended at the Business Summit in Guadalajara (October 2013) the Energy Reform proposed by President Enrique Peña Nieto, saying it will increase the competitiveness of PEMEX and the installed companies in Mexico. Lozoya Austin assumed that approval of the tax reform will bring down the costs of energy and Mexico will be more attractive for companies, which may reduce their production costs and compete better.
According to the IMCO, Mexico could soon be in the major leagues of oil and gas production. It can also be in the forefront of the technological revolution in the energy sector and maintain a privileged place in the development of knowledge.
The Study concludes: "The country can be part of the energy revolution in North America. This means converting to energy by a factor of competitiveness for all sectors in our economy. However, we first need to transform the current model that does not allow for it to realize its full potential. But achieving substantial reform is not anything that comes with a guarantee. There is a risk that the promise of any structural reform remains diluted in regard to short-range changes. Doing nothing when there is everything to gain is punishable by both present and future generations."
The complete studies can be found at www.imco.org.mx