Pablo Peñaloza Grajales, CEO GE Capital Solutions Latin America
What is the present status of GE Capital?
Well, in terms of commercial activity the first half has been very good. What I would expect for the second semester is to be as good as the first. I also believe that this is the result of what we have seed in the past few years, that is for us to improve our skills and value offering in the Market.
In my opinion it is also important that the economy has improved in several sectors showing vigor and besides we have been preparing ourselves for this.
As CEO of GE Capital what are your main objectives?
My main objective is to structure our business to be able to provide better service to our clients. Our core effort in volume has risen drastically with lines of business that require higher activity. These are the areas that have increased most and this has helped us to expand our volume of business during the past two years. This has been reflected in the areas of financing of technology, fleet leasing and factoring where the existence of many transactions is a reality.
Our business model came from a slightly different way of doing things over and for this new model we have to be well-aligned internally to be able to offer better client service and to be able to invest in the technological tools that will most help us provide our clients with the information needed in real time. Summarizing, we have suffered several internal changes in order to be better aligned and in this way provide much better service to our clients. At the same time we are investing in the technological tools that will help achieve the expected results. This has been my primary focus over the past 12 months and we plan to continue for the next 18 months.
What is your plan of action for development as CEO at GE Capital?
We are always looking to improve our value offer. We believe that there are products and financial solutions that we are able to bring to the market to complement what we do today. And with that in mind it gives us greater acceptance with our customers and helps us make solutions to successfully capture much fuller funding. At the end of the day we have several new projects we are working on internally and so innovation is very important to us.
How has your transition been from CFO of GE Capital to CEO?
In GE the position of CFO is not done at a desk, because it is a very dynamic position. It is true that the CFO is responsible for strategic planning, taxes and other duties that traditionally are realized by the CFO of a company. What happens at GE is that in addition to that, we become a “partner of the business with the leader of the project”, and what happened in my case was as time passed we were able to develop multiple skills.
But the change wasn´t radical at all. I would say it was less than a 90 degree change and not 180 degrees of adjustment. So, now I can also get involved in other areas where at my previous position as CFO I wasn´t able to do as much. To mention this now I can really get involved in human resources because that’s where I always look to improve our offer of value for our personnel and also to be able to transmit those messages of what it is that we have been doing in terms of commitment to our employees. They are really the catalysts who make the difference in the market and this, for me, is also very exciting.
How do you see GE Capital with your background in the manufacturing industry?
The manufacturing industry in Mexico is very active. I believe that the U.S. and Europe have found in Mexico the solid basis that Mexico is world class in manufacture. Then, at the end of the day, we can point to a solid foundation in Mexico. Given the crisis that happened two years ago, for many, we have not come out of the difficult times. The manufacturing activity, for instance, where there are certain sectors such as automotive, things have increased dramatically. But there are others that have not yet returned to their 2007 levels.
We know some of these sectors will rebound and we are now preparing ourselves for these expected upturns. We have the notion to offer products that add value and by the time that those sectors are ready to grow, we want to be there to support them in their growth and expansion.
How has this business evolved since you started operations over 15 years ago?
When our division started, we were the pioneers of leasing products in Mexico. Our initial market was the Corporates in search for this type of solution. It took us the first 8-10 years of business and we were busy placing our different product types. We started with CAPEX (Capital Expenditures and Production Machinery) and after that we entered into fleet and technology equipment.
For the last 3 or 4 years we began to move into what we call the middle market. This consists of those companies with sales between US$50 to 600 million dollars. We have seen more opportunities in this segment that have matured sufficiently. It’s where there are already more institutionalized businesses seeking non-traditional financial solutions such as loans or credit lines from a traditional bank. But instead they are looking for more complex financial solutions and this is where we suddenly realized that the ground is fertile for our business and it is exactly where we have also been very successful.
Something that always excites me is to visit these middle market companies featuring the quality and good practices that have created so many opportunities in the market.
How profitable is your business in relation to other areas of work for GE?
As we came out of the crisis of 2008, GE said that we have to be smaller in size while doing those things where we can add value for our customers and therefore translating for us to having profitability that met our expectations. We also focused on not only providing money for our customers, but also innovative solutions. And this is something that has created a big difference for us in the market and the customer can now see more value in the possibilities and is willing to pay a little more.
So, we have focused our value for this together with the expected profitability. At GE Capital during the past 12 months we have succeeded in proving that we have a solid business and that we managed to get out of the crisis by learning many lessons about founding a good business, and doing it in a way that really complements the industrial side of GE.
How do you see the environment for tax regulations in Mexico?
I do not know any country with a simple tax code. In every country one of the most complex areas is the tax code. Mexico has areas of opportunity where the Country can improve their tax collection and that’s a challenge for the government to create conditions that are not too bureaucratic or complex for private investment. It needs to be done in a way that doesn’t slow down the way we can do business.
This requires a critical balance where it can increase the tax base and provide an environment where companies are able to continue operating with flexibility in order to meet all the commitments complying with the law and in this way we will also help attract more investment and further growth in Mexico by contributing to the economy.
What is your opinion on the economic situation in Mexico?
I think Mexico has demonstrated fiscal discipline. Mexico left behind the past crises occurring every six years and that is very positive. Yesterday I saw that Banxico´s reserves are on record. Mexico is prepared to face the financial crises that have been triggered abroad and have an effect in Mexico because of the interaction of economies and what happens elsewhere in the world comes to affect Mexico, but the country is really much better prepared.
I think it’s a good thing in Mexico when the manufacturing level competes with the U.S., Europe and Asia and at the end of the day this gives us an advantage with our closeness to the U. S.
Mexico features a strong underlying basis and what remains pending is to ensure structural reforms they will continue to support the country’s development. These include details like energy reform and labor and tax changes to further support growth.
Mexico is enjoying good times and now the important matter is that the new President of Mexico supports bal ance and fiscal discipline and continues guiding Mexico on the right track.
Will the presidential elections in Mexico affect the financial market for GE Capital?
No, I do not think so. I think that Mexico has achieved a democratic maturity which I think the change is coming and begins on July 2nd will be a normal democratic change, and ultimately very few expect any drastic changes. We do know that the new president will come with new ideas and we will be watching to see what opportunities are generated for our customers and how contributions to national development will continue.
What is the role that Mexico plays for the international commercial trade with Central and South America with the NAFTA Countries?
Mexico is the country with more free trade agreements signed than anywhere else in the World. I have heard that statistic, but I can’t confirm it as “fact”. Mexico plays an important role in international trade. I think that Mexico, for its privileged geographical location being neighbor to the largest market in the world, has developed its skills very well in order to drive certain industries that are so important to international trade, especially where companies more and more each day look over here. And they are not only U.S. companies but European and Asian, and also from Canada. They all see Mexico for its excellent location not only in the north, but also with its presence and proximity to Central America where there are more options for establishing trade.
There are very good industries like the automotive industry where Mexico exports not only to the U.S., but also exports to Brazil and Argentina, although the latter country wants to change the rules. But I think this is evidence that the quality and effectiveness of manufacture in terms of cost competitiveness has been given to Mexico.
The Role of Mexico will certainly continue to grow. We hope that the economies of Europe solve their issues soon because Mexico is what I think is a natural market for them. Mexico plays a critical role in the international market and is certainly a dynamic leader in Latin America.
What is the impact of GE Capital on Mexico´s industrial development?
As I mentioned earlier, one of the things I like to do is go to visit clients, including companies that maybe today are not the large global corporate enterprises as there might be here in Mexico, but are middle market companies that have advanced enormously over the past 10 to 15 years. For me, one my main satisfactions is to help them grow and support their projects for further improvement. And for my job this is something exciting and thrilling because I feel that we play an important role in the development of employment generated and taxes paid by those companies. ,. GE Capital plays an important and vital role in the economic development of Mexico in this sector.
Also, one of the things we offer to these core businesses is called Access GE. This is where we open our doors to our customers to share with them our business practices, the ones that we have developed over the years in areas of human resources focusing on the way to accelerate change, the all-important treasury and how to utilize resources efficiently to make changes such as energy consumption.
So we are not only providing capital but also contributing in other areas of development for our customers. You would have to say we are playing an exciting and important role.
Would you like to make any comments to the MexicoNOW subscribers?
I think Mexico is at an important time and I think we should keep in pace with things and set the rhythm that has been reached to continue the fiscal discipline and contribute to these productive projects for the country. This is because I think the nation’s best years are yet to come. I am excited to look ahead because I think the future is much brighter than the past few years and it’s always good to know that we are making progress. We have to remember that this is not a single company or the government alone, but the work of many companies also supported by the government working closely together. This unity has achieved a society that is transforming Mexico and things are looking better every day.