The Business Year: Mexico 2023

MEXICO 2023

Diplomacy & Economy | Finance | Green Energy & ESG | Energy | Mining Industry | IT & Telecoms | Transport & Logistics | Construction & Real Estate Agriculture & Agrofood | Health & Education | Tourism & Sports

As a global specialty chemicals company, Evonik harnesses the creative power of its employees around the globe to improve the quality of life.

Evonik has more than thirty major production sites in the United States, Canada, and Mexico, as well as numerous offices, labs, warehouses and distribution centers in North America, employing about 5,000 people in the region.

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FROM THE EDITOR’S DESK

THE BUSINESS YEAR: MEXICO 2023

fter a two-year hiatus of the country’s

industry and networking events, A main the making of The Business Year: Mexico

2023 was one of celebration as we reunited with the familiar faces in the market and met with the emerging players setting new benchmarks.

This edition includes a comprehensive examination of the main trends in Latin America’s second-largest economy during an unprecedented period of uncertainty and change.

To understand how this economy performed during this period and how it might recover, we conducted a year-long investigation that includes interviews with top executives and officials from the public and private sectors.

Since The Business Year entered Mexico in 2012, we have seen the market transition from one in which a few titans ruled the conditions of the country to one still largely controlled by these few, but where smaller players with competitive solutions are finally being allowed to make a name for themselves. There are various factors behind this new reality, including the entry of a new political party in 2018, which, while divisive, changed the usual faces in the game.

Secondly, the pandemic motivated traditional companies to enter unorthodox business segments. Thirdly, technology has allowed projects with limited resources to become scalable businesses.

Our 2023 edition covers the companies that until now had been patiently waiting for their moment to come, particularly in IT. Resilience will continue to be the name of the game as

global indicators expect even more challenging market conditions in 2023 than in 2022 as the full long-term effects of the pandemic become a reality. Fortunately, a full recovery is expected in 2024 for those willing and able to wait for the economic rebound.

Three key industries were highlighted throughout the year by top business leaders, including finance, as it continues its efforts to increase access to financial services in a country with a population of 130 million; IT and telecoms, with the rise of investment in data centers and telecoms infrastructure; and manufacturing, thanks to nearshoring and the potential Mexico has to become a global hub.

Energy security remains a debate as the public and private sectors continue to search for the best ways to collaborate. The consensus among interviewees points toward making the development of national gas infrastructure a priority.

Following this trend, major investments were announced by key players in the industry, including TC Energy’s partnership with the national electricity company (CFE).

This is all to say that 2023 will be a crucial year in the Mexican economy and will determine how AMLO’s term will be remembered in history as it comes to an end. The private sector will also be rushing to complete its projects before the start of a new administration, which will bring unknown market conditions, all while balancing the opportunities that are laid out before Mexico, including the industrial investment boom. ✖

CEO Ayşe Valentin Regional Director Federica Fermo Country Manager Vanessa Rameix Country Editor Alejandra Gomez Assistant Country Editor Anastasia Fernandez Assistant Country Managers Carla Royo, Lizbeth Garcia Project Assistant Abril Gallardo Editorial Terry Whitlam, Aidan McMahon Finance Assistant Latam Fernando Amezcua Contributors Gillian Docherty, Jason Shaw, Susan Barrett, Emily Damgali, Catalina Lopez, Adrian Espallargas, Translinguo Global, Babak Babali, Kevin Mataraci, Cain Day

ISBN 978-1-80506-000-0

www.thebusinessyear.com

MEXICO

2023

50 In praise of the see-through • Focus: Formalizing the financial industry

In partnership with:

52 TBY Analytics Mexico 2023: Finance 53 Marc Martínez, CEO, Zurich Mexico • Interview 54 Gustavo Cantú Durán, Chairman & CEO, Seguros Monterrey New York Life • Interview 13

3 From the editor's desk 7 Executive summary

36

27 A fork in the road • Communiqué: DOT Consulting

9 Timeline

29 Paulo Moledo, CEO & President, Hy Cite Enterprise • Interview

10 DIPLOMACY &

30 Mónica Vera, Managing Director, TMF Group • Interview

ECONOMY

11 The time for more • Chapter summary 12 Luz María de la Mora, Former Undersecretary for Foreign Trade, Mexico’s Secretariat of Economy • Interview 13 Mauricio Kuri, Governor, Querétaro • Interview 14 Enrique Zorrilla, President, Canadian Chamber of Commerce in Mexico (CanCham) • Interview 15 TBY Analytics Mexico 2023 16 Altagracia Gómez, President of the Board, Promotora Empresarial de Occidente • Interview 18 A focal point • Focus: Nearshoring 20 A who’s who • Photo essay: Events roundup 22 Luis Durán Luján, Managing Director, Grupo Industrial Monclova (GIMSA) • Interview 24 Querétaro rising • Focus: Querétaro 26 Menotti Franceschini, Former Country Manager Mexico & Head of North Latam, Thomson Reuters • Interview

32 Voices from the sector

34 FINANCE 35 Time for reflection • Chapter summary 36 María Ariza, CEO, BIVA • Interview 37 Raúl Gallegos, President, Mexican Association of PE & VC Funds (AMEXCAP) • Interview 38 Chris Howard, Founder & CEO, Softeq • Interview 40 Karina Ojeda, President, Mujeres Invirtiendo (Women in Investment) • Interview 42 Miguel Marcos, Regional Commercial Director (Latam), Exness • Interview 44 Julio Escandón, Managing Director, Grupo Financiero Base • Interview 45 Marco Antonio Soto, Managing Director, Abanca Mexico • Interview 46 Fabián Ferrari, Managing Director, Getnet • Interview 48 Felipe Vilá, Managing Director, Fondo de Fondos • Interview

55 Saúl Ruiz, Managing Director, Asesores Senior • Interview 56 Innovation • Forum 57 Harry Sacal, CEO, Pluscorp • Interview 59 Guillermo Cruz, US Managing Partner, Maquia Capital & Jerónimo Peralta, Mexico Managing Partner, Maquia Capital • Interview 60 Guillermo Osorio Rodríguez, Founder & President of the Board, Macropay & Alejandro Herrera Correa, CEO, Macropay • Interview 62 Christian Hauswaldt Álvarez, CEO, Invested • Interview 64 Voices from the sector

66 GREEN

ENERGY & ESG

67 What next? • Chapter summary 68 Israel Hurtado, President, Mexican Hydrogen Association • Interview 69 Gerardo Pérez Guerra, Vice President & Country Manager, EDF • Interview 71 Andrés Friedman, Co-Founder & CEO, Solfium • Interview 72 The renewables battlefield • Focus: Renewable energy policy 73 Solar energy • Forum 75 Eduardo Bustamente, CEO, Biobox • Interview 76 Advisory • B2B

Contents

143 Raymundo Fernández Pendones, Deputy CEO, Megacable • Interview

95 Carlos Pavón Campos, General Secretary, National Union of Miners and Metallurgists (FRENTE) & Federal Deputy, PRI • Interview

145 Ray Fletcher, CEO, Fermaca Networks • Interview

96 Carlos Silva, CEO, Santacruz Silver Mining • Interview

148 Renato Tradardi, CEO, Gold Data • Interview

97 Mining • B2B

149 Carlos Arguimbau, CEO, IENTC • Interview

99 The long run • Focus: Mines of the future 82

100 Juan Carlos Mazón, Managing Director, Mountar • Interview 102 Suppliers • Forum

77 Jessika Slovik, Founder, Tolerancia Activa • Interview 78 Juan Pablo Navarro, Co-Founder, Introspecta & Sebastián Peñalva Orozco, Co-Founder, Introspecta • Interview 79 Foundations • Forum

80 ENERGY 81 Gas rises • Chapter summary

104 Enrique Guinea, CEO, Hanka • Interview 105 Adrián Márquez, Managing Director, VMX MinePro • Interview

127 Elias Massri, CEO & President of the Board, Giant Motors Latin America (GML) • Interview

83 Angélica Ruiz, Senior Vice President Latin America & Head of Country Mexico, bp • Interview

114 Martín Toscano, President, Evonik • Interview

87 Warren Levy, CEO, Jaguar E&P • Interview 88 Giuliano Cacciatore, Managing Director, DG Impianti • Interview 90 Energy • B2B 91 Gustavo Blejer, General Manager Americas, Bonatti, Mexico • Interview

92 MINING 93 Dig, interrupted • Chapter summary 94 Karen Flores, General Director, Mexican Mining Chamber (Camimex) • Interview

125 Automotive • B2B

110 INDUSTRY 113 Alejandro Preinfalk, President & CEO, Mexico, Central America and the Caribbean, Siemens • Interview

86 The transition • Focus: Natural gas

124 José Zozaya, President, Mexican Association of the Automotive Industry (AMIA) • Interview

126 EV rider • Focus: Electric vehicles

82 Jennifer Pierce, President, TC Energía • Interview

84 Giacomo Bonfanti, CEO, GDI • Interview

124

109 Armando Lucero, Director of Operations, Globexplore • Interview

111 Key role • Chapter summary

115 Ramon Mariscal Leal, President, DuPont Latin America • Interview 116 Miguel Valdivia, Commercial Director, Trade Chemicals & Products (TCP) • Interview 118 Verónica Pérez, President, Dow North Latin America Region & Commercial Director, Industrial Solutions Business, Dow Latin America • Interview 119 Fernanda Guarro Hernández, President & CEO, 3M Mexico • Interview 120 Angel Proaño, Sales & Marketing Director, The Western States Machine Company • Interview 121 Chemicals • Forum 122 Manuel Nieblas, Audit Partner, Deloitte • Interview

5

128 Miguel Barbeyto, President, Mazda Motor • Interview 129 José Román, President & CEO, Nissan Mexicana • Interview 131 Montserrat Martínez, Brand and Product Director, Jaguar Land Rover México, Latin America & Caribbean • Interview

152 Ricardo Arévalo, Managing Director, Odata Mexico • Interview 154 Antoine Delaprée, CEO & Founder, MXT Holdings • Interview 156 Jorge Estévez, CEO, Grupo Backbone Mexico • Interview 157 Amet Novillo, Country Manager, Equinix Mexico • Interview 158 Information hub • Focus: Investment in data centers 160 Maribel Dos Santos, Managing Director & Senior VP, Oracle • Interview 161 Angela Gómez Aiza, President, SAP • Interview 162 Digital transformation • Forum 164 Alfredo Gutiérrez, Country Manager, Workday • Interview 166 TBY Analytics Mexico 2023: IT & Telecoms

132 Felipe Villareal, CEO, Alian Plastics • Interview

167 Hugo E. Freytes, Country Manager, Salesforce • Interview

134 Ignacio Romero, Managing Director, Famosa • Interview

168 María Esther Viso Álvarez, Regional Sales Manager, Latam Bluevoyant • Interview

135 Enrique Figueroa, Managing Director, Latin American North, Caldic Latam • Interview

169 Julian Vargas, Latin America Director, Oracle NetSuite • Interview

136 Jorge Puig, Managing Director, AGM • Interview

170 Rodrigo Marinho, VP Sales Latam, Twilio • Interview

138 Voices from the sector

171 Juvenal González, General Manager, Qualcomm Mexico • Interview

140 IT &

TELECOMS

141 Data, data everywhere • Chapter summary

172 Rafael Sánchez Loza, Former Managing Director, Genesys • Interview 173 Fernando Ruiz-Galindo, Mexico Director, Avaya • Interview

Mexico 2023

6

174 Call centers • B2B 176 Juan Ignacio Sada, CEO, Teleperformance (Mexico, Central America & Caribbean) • Interview 177 Carlos Chavarría, CEO, NA-AT Technologies • Interview 178 Technology entrepreneurship • Forum 180 Carlos Brito, Executive Director NoLA, Logicalis • Interview

196 Victor Monroy Vollmer, Managing Director, MSC Mediterranean Shipping Company • Interview

226 Humberto Javier Potes González, General Director, Mexican Hospital Consortium (CMH) • Interview

197 Manuel Tamayo, Country Head Mexico, Element Fleet Management • Interview

227 Juan Carlos Griera, Managing Director, Médica Sur • Interview

198

CONSTRUCTION & REAL ESTATE

181 René Martín Torres Fragoso, CEO & Founder, CONTPAQi • Interview

199 The need for more • Chapter summary

182 Alberto Rosati, Country MD Mexico & Leader for Spanish speaking countries in the Americas, GFT • Interview

200 Simón Galante, President, Mexican Association of Real estate FIBRAs (AMEFIBRA) & CEO, Fibra Hotel • Interview

183 Julio Heshiki, General Director, Kyndryl, Mexico • Interview

201 Federico Cerdas, CEO, Global Businesses & Skyhaus • Interview

184 Voices from the sector

203 A place to build • Focus: Demand for industrial real estate

188 TRANSPORT

& LOGISTICS

189 Greater vision • Chapter summary 190 Rogelio Jiménez Pons, Undersecretary of Transport, Secretariat of Infrastructure, Communications, and Transportation • Interview 191 Isidoro Pastor Román, Managing Director, Felipe Ángeles International Airport (AIFA) • Interview 192 Come fly with me • Focus: Felipe Ángeles International Airport

228 Modern procedures • Focus: Modernizing the healthcare system

204 Eugene Towle, Managing Director, Softec • Interview 205 Proptech • B2B 206 Mauricio Suárez, Managing Director, FICADE • Interview 207 Luca Piccolo, CEO, Venit • Interview 208 Juan Pablo Ramírez Castellanos, Founding Partner, Bantimex • Interview 210 Ramón Reyes Medina, Managing Director, Imperquimia • Interview 211 Voices from the sector

230 José María Zubiría Maqueo, Managing Director, ABC Medical Center • Interview

235

232 Patrick Troop, Managing Director, Pharma Tycsa • Interview

212

AGRICULTURE & AGROFOOD 213 In the neighborhood • Chapter summary 214 Guilherme Secamilli, CEO Mexico, The Kraft Heinz Company • Interview 216 Agrofood • Forum 218 Pablo Ricaud, Co-Founder, Rising Farms & Mauricio Ricaud, CoFounder, Rising Farms • Interview 219 The seeds of smart thinking • Focus: Formalizing the agriculture industry 220 María Teresa García Plata, General Director, Mexican Food Banking Network (BAMX) • Interview 221 Alejandro Martínez, General Secretary, National Union of Food and Commerce (SNAC) • Interview

222 HEALTH & 223 Healthy starts • Chapter summary

195 Mobility transformation • B2B

235 Kenneth Campbell, President & CEO, L’Oréal Mexico • Interview 236 Mar Campos, CEO & CoFounder, Clinica MOS • Interview 237 Fernando Fogarin, Managing Director, Organon Mexico • Interview 238 Renzo Casapía, Head of Latam, Coursera Enterprise • Interview

240 TOURISM &

SPORTS

241 Rising juggernaut • Chapter summary 242 Raúl Zurutuza, Managing Director, Abierto Mexicano Tenis (Mexican Open) • Interview 243 Alejandro Ramos, Co-Founder & CEO, Síclo • Interview 246 Work in the sun • Focus: Digital nomads 248 Demetrio Alberto Hernández Coria, CEO & Founder, Mezcal Alpha Centauri • Interview

EDUCATION

194 Diana Olivares, General Manager for Mexico, LATAM Airlines • Interview

234 Health • Forum

225 Miguel Ángel Hernández, Executive Director, National Association of Private Hospitals (ANHP) • Interview

250 César Menchaca, Creative Managing Director, Menchaca Studio • Interview 251 Luis López Morton, Founder, Morton Subastas • Interview

Read more at thebusinessyear.com/mexico The Business Year is published by The Business Year International, Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands. The Business Year is a registered trademark of The Business Year International, Copyright The Business Year International Inc. 2023. All rights reserved. No part of this publication may be reproduced, stored in a retrievable system, or transmitted in any form or by any means, electronic, mechanical, photocopied, recorded, or otherwise without prior permission of The Business Year International Inc. The Business Year International Inc. has made every effort to ensure that the content of this publication is accurate at the time of printing. The Business Year International Inc. makes no warranty, representation, or undertaking, whether expressed or implied, nor does it assume any legal liability, direct or indirect, or responsibility for the accuracy, completeness, or usefulness of any information contained in this publication. The paper used in the production of this publication comes from well-managed sources.

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Image: WitR

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY Mexico heads to the polls to choose a new president in 2024, meaning 2023 could see big moves from outgoing president Andrés Manuel López Obrador.

MOMENTUM was felt throughout 2022 as activities and trade shows were back in full-swing after a two-year hiatus, a welcome opportunity to get a feel for the market and the direction it’s heading in. Despite the celebration, business leaders continue to be cautious in their investment decisions considering the risks that remain, including the knock-on effects of Russia’s invasion of Ukraine, higher interest rates, and supply chain challenges.

According to the IMF, 2023 will prove to be a more challenging year globally than 2022 as GDP growth will slow to 2.9% from 2022’s estimated 3.4%, before rebounding in 2024 to 3.1%. Locally, the IMF upgraded Mexico’s forecast by 0.5% in 2023 with estimated GDP growth of 1.7%. And while that is a drop from the estimate 3.1% of 2022, it is the highest estimated GDP growth in the region, 0.5% more than Brazil, Mexico’s main economic competitor in Latam.

In all, the final results of 2023 will depend greatly on Mexico’s capacity to strengthen international commercial ties, widen its telecommunications capacity to serve as the foundation for industrial growth,

assure energy security, and promote legal certainty to continue attracting investment.

NEARSHORING BOOM

While the rest of the world recoils from the consequences of supply chain disruptions, Mexican companies are jumping to take advantage of the opportunity to become the next global hub for manufacturing. Commercial disputes between China and the US are forcing companies to restructure global supply chains more regionally, and Mexico is an important runner-up next to countries in East Asia such as Vietnam. However, Mexico has an important advantage being neighbors with the largest economy in the world, the US. A wide array of international treaties serves as a bridge between North America and Latin America for companies wanting to enter the region for the first time. Leaders from both the public and private sectors spoke to The Business Year for this edition to share their enthusiasm for what this could mean for the country and the importance of learning

8

Mexico 2023

lessons from China, such as prioritizing added-value manufacturing over cheap labor to assure industrial growth occurs with a sense of social and environmental responsibility.

CONNECTING THE DOTS

Digitalization and technology will play a key role in making sure Mexico has what it takes to compete for investment against other countries with similar characteristics. Fortunately, players are aware of this fact and shared with The Business Year a strong interest in amping up the development of data centers throughout the country over the next couple of years. So much so, that Panduit, a provider of data center infrastructure, announced a 20% growth in data centers in Mexico in 2022, the highest growth in this area in the world. As of mid-2022, Brazil has 70 data centers thanks to its head start, while Mexico has 14. According to Research and Markets, the main drivers behind this growth are related to the rise of cloud of adoption, IoT, the commercial development of the 5G network, and smart city initiatives.

POWERING GROWTH

Amid discussions of the opportunities that lay ahead for Mexico, a primary concern that is often laid out on the table is the capacity the country’s energy grid has to supply the power demands of incoming investments. All agree that Mexico has what it takes to be an industrial power, but investment will ultimately rely on the country’s power grid. For example, Querétaro has an installed generation capacity of 1,200MW, but only 10 of the 20 data center projects will demand

GDP PER CAPITA (2021) SOURCE: THE WORLD BANK

USD9,926.42 INFLATION (2021)

350MW of energy, representing 29% of its current capacity.

According to PRODESEN, the Program for the Development of the National Electricity System, the country estimates a 2.7% annual rise in energy demand for the next 15 years. Considering the context, the Mexican Energy Association emphasizes the need for public policies and a legal framework that can guarantee the organized growth of the electricity system.

Meanwhile, companies agree that an important first step toward energy security is strengthening the national gas network. Recently, TC Energy announced a partnership with CFE to speed up the development of natural gras infrastructure in Mexico with a USD4.5 billion pipeline.

AMLO’S PENULTIMATE YEAR

All eyes will be on AMLO in 2023, as this year represents his penultimate year in office. In 2024, attention will be consumed by electioneering, meaning 2023 is his final full year to fulfill campaign promises and complete key projects. So far, two of his most recent reforms have been knocked back by congress, including an electricity and electoral reform. Some fear that he will attempt to propose one last reform before his term is up to counteract the rejections, creating legal uncertainty among investors. When it comes to the administration’s headline projects, the most anticipated among our interviewees, but strangely the least promoted, is the Interoceanic Multimodal Corridor of the Isthmus of Tehuantepec, which aims to alleviate the saturation of the Panama Canal and further diversify the country’s logistics network. ✖

TRADE BALANCE (USD BN)

GDP (IN USD TRILLIONS)

SOURCE: FOCUS ECONOMICS

SOURCE: THE WORLD BANK

10

1.5

5

1.4

0

1.3

-5

1.2

-10

1.1

SOURCE: WORLDDATA

5.7%

-15 2015

1 2016

2017

2018

2019

'13

'14

'15

'16

'17

'18

'19

'20

'21

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TIMELINE

2022

MARCH 21

Felipe Ángeles Airport (AIFA) is inaugurated, a project of the current administration to alleviate the saturation of the main airport in Mexico City, Benito Juárez International Airport (MEX)

2022

APRIL 13

2022

State-owned Olmeca-Maya-Mexica is created to administrate various airports, Tren Maya, and the development of a new airline, Mexicana de Aviación

APRIL 18

Congress rejects AMLO’s controversial electricity reform, a bill that aimed to increase the public sector’s authority over power generation

2022

JUNE 5

Aguascalientes, Durango, Hidalgo, Oaxaca, Quintana Roo, and Tamaulipas elect new governors, and four of them represent AMLO’s political party, Morena

2022 MAY 4

The Business Year celebrates the launch of its 11th edition on Mexico by uniting executives from the economy’s leading sectors to discuss the new rules of the game as the world continues to restructure itself in the wake of COVID-19 and the disruption of global supply chains

2022 JULY 1

2022

Second anniversary of the US-MexicoCanada Agreement (USMCA), an updated version of the North American Free Trade Agreement (NAFTA)

OCTOBER 28

Senate approves the elimination of daylight savings time in Mexico with an exception for border states

2022

DECEMBER 7

2023

JANUARY 1

The government implements a new vacation scheme in Mexico that demands a minimum of 12 days of vacation after an employee’s one-year anniversary and up to 32 days after 31 years of labor

Congress rejects electoral reform proposed by AMLO that had the objective of replacing INE, the national electoral institute, with a smaller organization, reduce the budget given to political parties, and reduce the number of deputies in the chamber

2023

JANUARY 9

Presidents Biden, Trudeau, and Lopez Obrador meet in Mexico City for the 2023 North American Leaders Summit to discuss the challenges and opportunities of North American cooperation

UNEMPLOYMENT (%) SOURCE: MACROTRENDS 4.5

4

3.5

3 '18

'19

'20

'21

NET OFFICIAL DEVELOPMENT ASSISTANCE AND OFFICIAL AID RECEIVED (CURRENT USD MN) SOURCE: WORLD BANK 1K 900 800 700 600 500 '16

'17

'18

'19

'20

TOP-10 EXPORT GOODS 1

Motor and vehicle parts

2

Industrial machinery

3

Electrical machinery

4

Oil & mineral fuels

5

Precision instruments

6

Furniture

7

Plastics

8

Items nesoi

9

Beverages

10

Fruit & nuts

The Mexican flag flying in Zocalo square, Mexico City

Image: Eve Orea

SOURCE: GLOBAL EDGE

Diplomacy & Economy

11

CHAPTER SUMMARY

Diplomacy & Economy

THE TIME FOR MORE earshoring

was

a

repeating

topic

this publication and it should N throughout come as no surprise that it also proved to be a main priority for Mexico’s foreign trade policy as the public sector put forth efforts to prepare itself for what many call the “Mexico Moment.” In Diplomacy and Economy, The Business Year presents the opinion of public sector authorities, chambers, and business leaders that have played a key role in strengthening Mexico’s commercial ties to the global market, including the Governor of Querétaro and the Former Undersecretary for Foreign Trade in Mexico’s Secretariat of Economy.

The second anniversary of the United States, Mexico and Canada Agreement (USMCA) was a key moment in the year as many celebrated its successes across the continent. “Diversification is an agenda that Mexico has always pursued; this is one of the pillars of the foreign trade policy of this administration,” said Luz María de la Mora, Former Undersecretary for Foreign Trade.

“Every product that complies with rules of origin of USMCA can have access to the US market.

Our exports to the US reached USD398 billion in 2021, and our exports to the rest of the world were another USD100 billion.” The former Undersecretariat also emphasized the importance of the 11th anniversary of the Pacific Alliance that was signed in 2011 as the mechanism connects Asia Pacific to Latam.

Thanks to the USMCA, connections between

Mexico and Canada have deepened and business leaders are in agreement with the Mexican government on the importance of diversification.

“Canada is the third-largest investor in Mexico, and 40% of Canadian investment is concentrated in the mining industry,” Enrique Zorrilla, President of the Canadian Chamber of Commerce in Mexico (CanCham). “There are still many opportunities to diversify the type of Canadian companies present in Mexico, for example in technology or in terms of community relations and how training is performed.”

Municipal and state authorities are also making their own initiatives to connect local communicates to global opportunities by showcasing the unique characteristics of each region considering the size of Mexico. Querétaro, for example, is currently being governed by business savvy Mauricio Kuri, an ex-entrepreneur that understands both what the state and private sector needs to combine interests. “Even though we represent less than 2% of the territory, our state is at the top of the list when it comes to economic growth, exports, labor, and training,” shared Kuri in an exclusive interview with The Business Year. “Every company that comes to Querétaro should know that the state government is their partner and wants them to succeed,” he concluded.

This chapter also highlights key moments from our networking events organized in 2022 such as our networking breakfast on nearshoring and our launch event for our 2022 edition. ✖

12

Mexico 2023

INTERVIEW

MORE options

Looking to further diversify Mexico’s export and trading partners, enter more dynamic regions, and attract foreign investors, the Secretariat of Economy has several ambitious plans in place for the coming years.

L u z Marí a d e la Mo ra F O R M E R U N D E R S E C R E TA R Y FOR FOREIGN TRADE, M E X I C O ’ S S E C R E TA R I AT O F E C O N O M Y

USMCA treaty celebrated its second anniversary in

2022 US represents

80%

of Mexico’s exports

BIO

Luz María de la Mora holds a PhD in political science from Yale University and has over 25 years of experience in the public sector, serving as head of the economic relations and international cooperation unit at the Ministry of Foreign Affairs and as head of the international negotiations unit in the Ministry of Economy. She was also part of the negotiations team of the NAFTA. She is the former vice minister for foreign trade in the Ministry of Economy in Mexico.

In what ways is Mexico benefiting from the restructuring of global supply chains?

Many factors have introduced a great deal of uncertainty to trade including the COVID-19 pandemic, Russia’s invasion of Ukraine, high levels of inflation, commodity prices, and the energy sector. This has also impacted business decisions.

We are seeing trends of the restructuring of value chains as a result of all of these events taking place in the world. This also includes the disruption in the logistic chain. Globalization has been restructured to a certain extent and there’s more interest of companies moving their production to be closer to their final consumers, building more resilient supply chains. For example, nearshoring and the new concept of ally-shoring where companies are realizing they have to do business among countries that have a similar vision. More companies are forced to rethink how they can build more resilient and also cost competitive value chains. In this regard, Mexico is seen as a reliable partner. We are also seen as a site that can offer what companies are looking for, which is preferential market access as a result of our 14 FTAs with 50 countries across the world. Mexico has a great deal of experience in doing business with other countries and a strong entrepreneurial community that knows how to do business with the world. We also have a talented and skilled local workforce that supports global value chains. We have a stable macro economy understanding that every country in the world is undergoing important challenges with respect to inflation and higher interest rates. Mexico has been able to cope well during these challenging times.

What are some of Mexico’s objectives to diversify its international commerce portfolio?

Diversification is an agenda that Mexico has always pursued; this is one of the pillars of the foreign

trade policy of this administration. It is evident that everyone wants access to the US market from the Mexican market. Every product that complies with rules of origin of USMCA can have access to the US market. Our exports to the US reached USD398 billion in 2021, and our exports to the rest of the world were another USD100 billion. We are exporting twice as much today, around 250% more than what we exported to markets beyond the US than the total amount of our exports in 1993. We sometimes lose sight of that because we only pay attention to the fact that 80% of our exports go to the US market which is a big number, but we neglect the other USD100 billion. Our business community and export sector are gradually looking for alternative markets, and they have been extremely successful. One example is agriculture. We have become the 12th-largest export market for agricultural products in the world. We are an important exporter of products from beef, cattle, and all sorts of animal exports. Processed food is also an important market where Mexico has become a thriving exporter. Entering the Pacific Alliance is an important integration mechanism for us that has been in place since 2011. We celebrated the 11th anniversary in 2022 and hold the chair of Pacific Alliance. The Alliance is an integration mechanism for trade, goods and services along with investment liberalization, people, tourism and so on. It’s also a mechanism where the four of us are looking into the Asia Pacific region. This is why we negotiated a free trade agreement with Singapore. We hope to get this agreement in place in one or two years, and it will help us to address one of the most important objectives of the Pacific Alliance, which is the four of us entering the most dynamic market or region in the world. Democratizing trade and ensuring all citizens in the region can experience the benefits of being part of the Pacific Alliance is among the priorities we are pushing this year. ✖

Diplomacy & Economy

13

INTERVIEW

getting IT DONE In addition to drawing investors’ attention to the many competitive advantages of Querétaro as an investment destination, the governor is also working on local initiatives to better serve its residents in terms of public transports, safety, and more.

What advantages does Querétaro have when it comes to investments?

Querétaro is the logistics center of the country located on the most important highway in Mexico: Highway 57. We have 45 million potential clients within 500km, and we are two hours away from Mexico City. Even though we represent less than 2% of the territory, our state is at the top of the list when it comes to economic growth, exports, labor, and training. Logistics wise, the best place is Querétaro, not just because of the location but also because of everything else it has to offer, such as qualified labor, connectivity to multiple highways in the country, an international airport that has been growing its cargo by almost 40% year after year, and so on.

We also have more than 50 daily flights and expect to have more than 1 million passengers this year.

Querétaro Airport is becoming the alternative to Mexico City airport.

What types of incentives do you offer to businesspeople entering the Mexican market through Querétaro?

We completed a successful tour in Europe, visiting Germany, Italy, the UK, and France. Every company that comes to Querétaro should know that the state government is their partner and wants them to succeed. On our tour, we did great in the automobile and aerospace industries. We went to the Farnborough Airshow in the UK, where we closed investments with Airbus for MXN400 million and with Aerotech for more than 1,000 well-paid jobs for Querétaro. What were our competitive advantages compared to other states? Mainly, we have an aeronautic university working together with companies so talent can be prepared according to companies’ needs as well as legal certainty in the state, not just in terms of physical and patrimonial assurance but also in labor assurance. Querétaro offers skilled labor that go the extra mile. This is part of our nature.

How are you promoting a circular economy?

Companies such as Siemens are asked by their

Mau ri ci o K u ri GOVERNOR, Q U E R É TA R O

clients to ensure sustainability within their operations. I admire this because we do not have another Earth. Companies and consumers are becoming aware of the need for eco-friendliness and its importance. We are creating carbon vouchers to support companies who are reducing their emissions, and we are punishing those that are not. We need to work closely with those companies that contaminate by providing them with the tools and solutions to mitigate that damage. We also have a solar energy program with around 2,000 companies. We provide them with the panels, and it is cheaper for them and better for the environment. We also offer fiscal incentives. For example, we are working with Siemens to install electric car chargers in all shopping malls.

Many logistical advantages for investors

What have been your biggest achievements in this first year as Governor?

Public work is part of the reactivation of the economy. During my first 100 days, we did more than one public work per day. Now, we are working on largescale public work for energy. We started working on the largest public work in Latin America when it comes to mobility, which is the 5 de Febrero Highway, with daily traffic of 120,000 cars, 300,000 people on public transport, and 30,000 pedestrians.

This is a considerable challenge for Querétaro, but it has to be done. In terms of the economy, economic reactivation has been an important priority.

We have many new companies that are attracting investment to Querétaro. With regards to safety, we have invested MXN4 billion on security to be spent on the border, drones, and the police. We are the only state at a national level to have its entire police force certified. Regarding legal assurance, which is what investors need, Querétaro was named as the place with the greatest legal assurance to invest. At the same time, we also work heavily on social development. Public transportation prices are low, and we continue to support women. We are on the right track, and we are getting there. ✖

BIO

Mauricio Kuri serves the people of Querétaro as Governor for the period 2021-2027. He graduated in law from the University of Valle of Mexico.

In addition, he has completed specialties in finance, personal business and leadership development. He served as president of the National Chamber of Commerce in Querétaro from 2006-2008.

He was also president of COPARMEX in Querétaro from 2012-2014. In 2015, endorsed

by Partido Acción Nacional, he ran for the municipal presidency of Corregidora. From 2008-2021, he was Senator of the Republic and coordinator of the Parliamentary Group of Partido Acción Nacional.

He won the election for the governorship of the state in 2021, with the highest number of votes recorded in the entity.

14

Mexico 2023

INTERVIEW

MORE to achieve En r ique Z o rri lla P R E S I D E N T, CANADIAN CHAMBER OF COMMERCE IN MEXICO (CANCHAM)

What are the main opportunities for investments between Mexico and Canada?

CanCham in Mexico has three main focal areas: networking for its members, know-how and expertise for a more educated decision-making process; and connecting others to participants in regional sectors, industries, and more. to: connecting business opportunities between Mexico and Canada in strategic industries.

BIO

Enrique Zorrilla was appointed Executive Vice President and Country Head of Scotiabank Mexico in 2017. He was vice president of Asociación de Bancos de México (ABM). Prior to joining Scotiabank in 2013, Zorrilla worked for Banco Nacional de México, S.A. (Banamex) for 31 years. He was also a member of the Citigroup Senior Leadership Committee, a member of the board of directors of Seguros Banamex, Afore Banamex, and Crédito Familiar, and chairman of the board of Buró de Crédito and Soriban Servicios Financieros. He received his undergraduate degree in business administration from Universidad Iberoamericana and was honored with the Presidential Award for the Best Students of Mexico. He was also acknowledged in the Professional Excellence Category with the Dr. Agustin Reyes Ponce Award in 2011. Zorrilla also holds a certified public accounting degree from Universidad Nacional Autonoma de México and an MBA from Northwestern University (Kellogg School) in Chicago.

Mining and energy play an important role in the Canadian economy. Canada is the third-largest investor in Mexico, and 40% of Canadian investment is concentrated in the mining industry. There are still many opportunities to diversify the type of Canadian companies present in Mexico, for example in technology or in terms of community relations and how training is performed. This is still a fantastic opportunity to create jobs, develop stronger and more integrated communities as a mining project is being developed and starts operating. These are the traditional kind of sectors that Canada has expertise in, and it is natural for Canadian companies to invest in those sectors in Mexico. In addition, the Canadian company Bombardier has boosted the aeronautic industry as a whole in Querétaro. Right now, we have a university there founded by Bombardier; it was originally the training department of Bombardier that eventually became a university. Canadian investment has also resulted in many positive developments.

The auto parts industry, heavily concentrated in Bajío, will require a great deal of investment, since the industry is gradually evolving toward a completely different kind of vehicles, with hybrid or electric automobiles becoming the norm. The energy sector will also require trillions in investment to produce the electricity that will be required. Another new area is agriculture, in which there are many opportunities but few partnerships between Canadian and Mexican companies. About 70% of the Canadian investment comes from Ontario, and 20-25% comes from Québec.

What can be done to further incentivize investment between these two countries?

Mexico and Canada have had a 20-year bilateral relationship with NAFTA. It is important to strengthen and enhance relations between Mexico, the US, and Canada. For Mexico to attract further Canadian investment, the stability of the rule of law, the transparency of laws, and the

way in which laws are applied and put in place are critical. Mexico is extraordinarily attractive to Canadian companies and investors, but it must guarantee greater legal certainty, for example, for local regulations that are in conflict with federal laws. Our vocation is North America, and economic integration is extremely important for the two countries. In that respect, we have to better understand our interests, customs, education, laws, and so on and be clear about those issues that are important for the different countries to better take advantage of the opportunities that Mexico offers.

What are the advantages of being part of CanCham?

We work with a Canadian company to get involved with the authorities or get in touch with other participants in a particular industry to better understand our geography through our committees. We have 11 committees and cover legal issues, diversity, entrepreneurship, talent, and international commerce. We also have task forces for mining, energy, and manufacturing. In that respect, we have representatives in industries that any particular Canadian company could be interested in. We promote a more educated decision-making process, providing our members with information directly from the experts in a particular industry or on a particular topic.

We provide access to the experts who are actually in action and know what is happening regarding the economy, region of development, and so on. Those are the three most important elements: networking, an expert’s opinion for a more educated decision-making process, and the ability to communicate with other participants in regional sectors, industries, and more.

We are enablers. CanCham is a platform, and we strive to not only be a responsible business community, but also promote trade and investment between Mexico and Canada as well as business between our members. We will celebrate our 40th anniversary, and even as a chamber, we are still young in comparison to others. ✖

Diplomacy & Economy

TBY ANALYTICS MEXICO 2023 185 interviews were conducted for The Business Year: Mexico 2023 Analytics.

BUSINESS CONFIDENCE INDEX

3.4

How confident are you about the outlook for business in Mexico this year (1-5)?

AV E R AG E R AT IN G

SECTORS TO WATCH

FI NA NCE

G R EEN ENER G Y

ENE R G Y

M IN IN G

IN DU ST RY

IT & T E L EC O M S

3

3

3.5

2

4

4

TRA NS P ORT & LOG I STI CS

CONSTR U CTI ON & R EAL ESTATE

AG R IC U LT U R E & AG R O FO O D

H E A LT H & E DU C AT IO N

TO U R IS M

3.5

3.5

4

3

4

ADVANTAGES & CHALLENGES What are the most commonly mentioned advantages and challenges of doing business in Mexico?

A D VA N TA G E S

CHALLENGES

• Increasing digitalization

• Low wage growth

• Strong labor force

• Lack of education about waste management

• Increasing rate of FDI • 5G developments • Strong growth in secondary cities • International Trade Agreements

• Falling rate of mining exploration • Lack of fuel storage • Ongoing impact of COVID-19 • HR deficiency in some areas • Lack of EV infrastructure • Inflationary pressures

15

16

Mexico 2023

INTERVIEW

Al ta g r a c i a G ó m ez PRESIDENT OF THE BOARD, PROMOTORA EMPRESARIAL DE OCCIDENTE

Why did the group decide to invest heavily in industrial real estate and logistics?

SIGNS of success With many opportunities available across Mexico, including food production, real estate, and logistics, Promotora Empresarial de Occidente is working to develop sectors that are poised to boom in the coming years.

BIO

Altagracia Gómez Sierra is Chairman of the Council of Minsa, a company of Grupo Empresarial G, which she joined as CEO. She now serves as a member of the board of directors. She is the deputy general director of Almer and is in charge of the energy division of the conglomerate. She has a law degree with three honorable mentions from the Escuela Libre de Derecho. She has also completed various academic programs at the Royal Academy of Oxford and took two finance and trading courses from Harvard Business School (HBX).

Additionally, she conducts the weekly television program “Prospecciones” in C7 Jalisco, together with the State Secretary of Education, Alfonso Gómez, and various distinguished guests.

There are different niches left unattended and a huge opportunity to grow in those special segments. For example, logistics in cold storage has the capacity to grow five times in the next five to 10 years in Mexico, and we are currently building 20,000sqm of cold storage. Then, there is last-mile deliveries, which are not the same in urban areas as they are in less densely populated areas. In terms of finance, we have a solid capital structure and are heavily diversified in our sources.

We work with development banks and traditional banking systems to ensure there are no problems with liquidity. We are working on two or three acquisitions specifically oriented toward the storage business including strategic grain facilities. We acquired 14 grain facilities in 2021 in different states in Sinaloa, Guanajuato, and Jalisco, specifically in locations right next to railroad infrastructure because we use that as centers of transfer for bulk storage. It is currently a great time to enter into industrial real estate.

There are also two or three companies that we are planning to acquire in 2022, specifically in industrial real estate. We also have 59ha in Riviera Nayarit, 1km from the marina, and it has the best location. We have sold three or four towers of real estate apartments there and are in the process of looking for a partner to develop a five-star hotel. We are also developing a financial tool for the public market in real estate. The smart choice for 2023 is to launch an instrument that has equity and not credit. We have 300,000sqm of land to develop. With the current market conditions, we expect growing interest for people to invest in real estate because it has always been the safe bet for investments. We have an excellent track record in real estate; that is where the group started 40-50 years ago.

We want to capitalize on our track record

and have some great projects not only in industrial real estate but also in real estate for homes and tourism.

Considering the size of the holding, what will be the main focus for the medium term?

Promotora Empresarial de Occidente has many companies in different sectors, and each one has its specific goals. As a holding, you have two or three main roles, one of which is legacy, because that is the one most important to the shareholders, namely the family that started it. In Tier 1 and Tier 2, we produce thermoform plastic for Tesla, Lucid, John Deere, and Greenbrier. That has grown 60% from 2021 mostly due to nearshoring. There has been a substitution of providers in Asia to Mexico, and that specific company has the opportunity to diversify, as we are getting contacted by aerospace companies. Minsa right now has to navigate the challenge of the international price of corn and its relevance to the culture in Mexico. Almer, meanwhile, has been growing by double digits for the last 10 years, and it will heavily invest in making acquisitions and also continuing to diversify its products and offerings. Dina is transforming back to heavy duty trucks. It has incorporated some Chinese technology, though we are committed to incorporating more national content each year and will do so. For Dina, we are working with the government of Mexico City and Politécnico to create the first electric bus.

We are also switching some of the fleet to electrical buses. Each company has its own goals but as a whole, we all have a responsibility to society. We have a great team right now, and the company plans to continue its relevance economically, culturally, socially, and politically. We are dedicated to influencing public policy for everyone’s benefit in providing solutions for mobility, solutions for farmers in Mexico, and solutions for the different things we have a say in. ✖

Diplomacy & Economy

17

Image: Antonio Tanaka

A coastal view of Mazatlan, Sinaloa

18

Mexico 2023

FOCUS Nea rsh or ing

A FOCAL POINT Nearshoring in Mexico is going through a paradigm shift, with Mexican contractors taking on a more proactive role in innovation and business processes.

MEXICO has been the quintessential nearshoring destination for

American businesses for almost half a century. This economic relationship has had many ups-and-downs over the years. With the rise of China as a cheap manufacturing hub in the 2000s, some American corporations had to choose between nearshoring in Mexico and offshoring in Asia.

In more recent memory, nearshoring came under threat from Donald Trump’s “trade war” against its southern neighbor. Fortunately, however, the punishments imposed by the Trump administration on some American businesses outsourcing their operations to Mexico never amounted to a full-scale trade war and a new trade agreement was signed between the US, Mexico, and Canada in 2020.

As of 2022, nearshoring is still very much alive, accounting for up to 25% of Mexico’s service economy and manufacturing sector. Let us take a step back for a second, however, to examine the economic incentives encouraging American companies to outsource some of their operations to Mexico in 2022.

In plain words, Mexico is a far more affordable place than the US or Canada, but many parts of the country enjoy nearly the same technological advancements and industrial infrastructure found in the rest of North America. The maintenance of offices, R&D labs, and production lines is considerably more cost-effective in Mexico than in the US. Outsourcing in its simplest sense has been criticized by many in Mexico in recent years, including the country’s senate. The mere outsourcing of labor is seen to be beneath Mexico, whereas the outsourcing of services and projects is welcomed. In this new framework, Mexican subcontractors are keen to accept a project from an international corporation and see through its execution with a say in how it is implemented.

It used to be the case that only manufacturing operations were outsourced to Mexican subcontractors, but in recent years, IT services, R&D, and financial services are increasingly entrusted with Mexican firms. “Our three key lines of services right now are Global Entity Management, Accounting and Tax, and HR & Payroll,” said Mónica Vera, Managing Director of TMF Group to TBY. The nearshoring of finance, IT, design, and similar services to Mexican firms has become possible, largely thanks to the country’s sizable semi-skilled and skilled workforce. Neither production lines nor international offices are likely to suffer from a shortage of human resources in Mexico these days. Mexican universities and colleges, for example, train 110,000 engineers every year, with education-

al standards which are not that different from those maintained by American universities.

The wages of the aforementioned engineers, on the other hand, are on average 30% lower than the US rates, which can be a big draw for American businesses on the lookout for skilled manpower near the US. Roughly 5.6 million members of Mexico’s active workforce in 2019 were working for a subcontractor, according to the Labor Bureau of Mexico.

Automobile manufacturing, as a quintessentially American industry, can perfectly capture the scale of nearshoring operations in Mexico. The manufacturing of light vehicles in Mexico saw a threefold growth between 1994 and 2016, rising to 3.5 million units. Quite unsurprisingly, almost every single one of those vehicles were sold under an American automaker’s brand name.

All this does not mean that the US is the sole client of Mexican contractors. Canada, as a signatory to the revised North American trade agreement, is increasingly investing in Mexico. “Canada is the third-largest investor in Mexico, and 40% of Canadian investment is concentrated in the mining industry. There are still many opportunities to diversify the type of Canadian companies present in Mexico,” according to Enrique Zorrilla, president of the Canadian Chamber of Commerce in Mexico, who talked to TBY. Mexico has seen investment from across the Atlantic, as well. Mauricio Kuri, governor of the Mexican state of Querétaro told TBY that his state is keen on attracting investment from Europe, adding “We recently completed a successful tour in Europe, visiting Germany, Italy, the UK, and France.” The tour has led to finalizing deals with European aerospace giants such as Airbus.

It is not difficult to see that Mexico’s nearshoring market has gone through a paradigm shifts. It is no longer an overseas market for cheap labor, especially because the number of skilled workers has increased greatly. It is no longer serving just US business, although the US is a strategic partner. And, above all, Mexican contractors now prefer to execute the projects they accept in innovative ways which they have developed locally.

In this new era of Mexico-US cooperations, nearshoring is also becoming truly sustainable. Some 90% of Mexico’s exports to the US are transported on-land across the border, eliminating the need for maritime logistics. This makes nearshoring in Mexico far greener than offshoring to faraway places across the Pacific. What is more, Mexico, as an ally of the US is more committed to the rule of law, financial compliance, and labor regulations than its competitors. ✖

It is a beautiful place surrounded by history, open spaces that represent the flavors of Mexico, and gardens overflowing with vegetation, alluding to its name. We find ourselves at the foot of the fairway and home to the most important equestrian events in Mexico. Quality and service will make your stay an unforgettable moment.

We are located in the municipality of Corregidora, just 20 minutes from the beautiful historic center of the city of Querétaro, where you can enjoy a wide variety of museums, churches, and monuments. We also leave a list of recommendations to do in this wonderful destination such as:

20

Mexico 2023

P H O T O E S S AY Ev en ts r oundup

A WHO’S WHO The Business Year’s Mexico 2022 launch event and a networking breakfast brought together some of the country’s top business leaders over the last year.

IN MAY 2022, The Business Year gathered key stakeholders for “Understanding the New Rules of the Game,” a day of panels and discussions and the launch of its 2022 Mexico publication, while in November key names were again assembled for Nearshoring to Mexico: Why Companies are Making the Move, a networking breakfast.

UNDERSTANDING THE NEW RULES OF THE GAME

The event was held at the Four Seasons Hotel Mexico City and organized in collaboration with BIVA MX, Skyhaus, Great Culture to Innovate®, COMCE Noreste, AIMMGM, and Amafore and sponsored by DG Impianti Industriali and Santo Gusano.

Media partners included adn40Mx and Heraldo Media Group.

The event had two panel discussions. The first examined Mexico’s role in the global supply chain and featured Ildefonso Guajardo, Federal Deputy of the LXV Legislature & Ex-Secretary of Economy; Antonio Tejedo Obregón, Executive Vice President of Investor Relations at Grupo Traxión; and Veronica Perez, President of the North Region Latam at Dow. This was followed by a presentation from Federico Cerdas, CEO of Global Businesses Inc & Skyhaus, on empowerment and entrepreneurship.

The second panel looked ahead to the future of the Mexican economy and featured Ulises Neri, Vice Chair of the Expert Group on Sustainable Resources Management & Executive Director of the International Center of Excellence on Sustainable Resources Management for México and Latinamerica at

the United Nations ICE SRM; Arturo Saval, President of Nexxus Capital; Claudia Janez, an independent advisor on the boards of directors of América Móvil, Grupo Industrial Saltillo (GIS), IDEAL, HSBC Mexico, and Bolsa Mexicana de Valores; and Bruno Riga, Country Manager of Enel Green Power.

María Ariza, CEO of Bolsa Institucional de Valores (BIVA MX), delivered closing remarks at this launch event for The Business Year’s latest Mexico publication, The Business Year: Mexico 2022.

Diplomacy & Economy

NEARSHORING TO MEXICO: WHY COMPANIES ARE MAKING THE MOVE

The event was Co-Hosted by Latin American Invest, sponsored

by Evonik, IENTC Telecomunicaciones, and Alian Plastics, and supported by BIVA, CANCHAM, AMAFORE, Mujeres Invirtiendo, and AIMMGM. The panel discussion kicked off after a welcome address from Berenice Rangel, Managing Director of Latin American Invest, about the implications of Globalization 2.0 and the new standards that the manufacturing industry is incorporating into its

21

processes. The discussion included the perspective of the public sector from Rogelio Jiménez Pons, Undersecretary of Transportation, the private sector from Altagracia Gómez Sierra, President of the Board of Promotora Empresarial de Occidente, and the manufacturing industry from Luis Manuel Hernández González, President of the National Council of the Maquiladora and Export Manufacturing Industry (INDEX NACIONAL).

All three panelists agreed that Mexico is in a favorable position to attract investment from international companies but needs to further prepare itself for the demand that this will create for infrastructure, energy, talent, and technology to compete with other manufacturing countries in East Asia. It is also an opportunity to promote the country as a hub for added value and innovation in industrial processes and eliminate the stereotype of Mexico as a country of cheap labor. ✖

22

Mexico 2023

INTERVIEW

Lui s D ur á n Lujá n MANAGING DIRECTOR, G R U P O I N D U S T R I A L M O N C L O VA (GIMSA) What new industries is the company investing to enter?

BIO

Luis Durán is Managing Director of GIMSA. Previously, he was managing director of Strategy Primus. He was also vice president of International Markets in FEMSA and president of the National Education Commission for COPARMEX. He is currently member of COPARMEX, the Aspen Institute Mexico, Atlas Beverages, Christel House, Ebeltec, and T1 Internet. He has served on other boards such as the CEEG, Walden University, and COMCE. Durán holds a bachelor’s degree in economics from ITESM and a master’s degree in international business from the Thunderbird School of Global Management.

We have a joint venture with Greenbrier, a company from the US, where we build rail cars for markets around the world. We went into a down cycle at the start of the pandemic, though it is just about over. GIMSA is also a strong player in the energy industry. We build offshore oil platforms, mostly in the US and Mexico. We focus on building on our strengths. We recently started another joint venture to produce end covers for the rail tank cars. We are also building trailer tanks for highway transportation together with Greenbrier, bringing the total number of joint ventures with Greenbrier to three. Greenbrier GIMSA produces railroad tanks, GG Trailers makes chassis and trailer tanks, and GG Sinergy makes the covers for rail car tanks. All of our businesses create many jobs and provide opportunities for growth in Monclova. On the industrial side of our company, we have three large factories, one of which focuses on the maintenance of steel-producing equipment. We have a strong relationship with some of the biggest suppliers of steel and will continue to build on that. We have another factory that can build all kinds of

equipment with steel, aluminum parts, and cast iron.

What expansion opportunities have you identified in the US?

We want to develop more markets and clients in the US. The supply chain in the US broke down because of all the issues with China and other geographies during the pandemic. We are right here nearby with extensive experience. Our joint ventures with Greenbrier are producing many items that were previously imported from China. Our delivery times are about a day or two.

Companies are desperate for this now. In this particular division where we have these three factories, there is an opportunity for significant growth.

Can you elaborate on the investments GIMSA is doing in the area of sustainability?

We care a lot about the environment. This is why we want to create organic fertilizer with our lime mining company. We want to become responsible corporate citizens that both do business and take care of the environment. We also want to foster a great working environment for employees. Amazing things happen when employees are satisfied and motivated in their workplace.

GG Synergies became the first company in Monclova to be a great place to work. ✖

Diplomacy & Economy

23

Image: Benjamin Lopez G

An agave farm in Jalisco State

Mexico 2023

24

FOCUS Queré t ar o

QUERÉTARO RISING A number of programs and initiatives have helped develop Querétaro into one of the leading industrial and economical states in Mexico.

POPULATION

WORKING POPULATION

AVERAGE AGE

GDP PER CAPITA (2020)

AVERAGE GDP GROWTH (2019)

2.3 MILLION

1.5 MILLION

29 YEARS OLD

USD 11,920

5.7%

EDUCATION TECHNICAL HIGH SCHOOLS

TECHNICAL UNIVERSITIES

28 13

HIGHER EDUCATION SCHOOLS

74

POST GRADUATE INSTITUTIONS

39

INFRASTRUCTURE 2 PACIFIC AND 2 ATLANTIC PORTS WITHIN A

MORE THAN

940 512 650 50

KM TO THE US BORDER VIA THE NAFTA HIGHWAY

KM OF RAILWAYS

KM RADIUS

INDUSTRIAL PARKS

ENTERTAINMENT CULTURAL VENUES

COUNTRY CLUBS

GOLF COURSES

HOTELS

270 12 10 400+

Diplomacy & Economy

25

INDUSTRIAL DEVELOPMENT

DATA CENTERS

IT COMPANIES PRESENT

9 141

IT

ATTRACTED

AEROSPACE

50% 80+ 200%

OF AEROSPACE FDI OVER THE LAST DECADE

AEROSPACE COMPANIES

GROWTH IN AEROSPACE COMPANIES 2006-2019

HOME TO THE AERONAUTIC UNIVERSITY OF QUERÉTARO (UNAQ)

SHARE OF STATE MANUFACTURING GDP

JOBS

AUTOMOTIVE

SHARE OF TOTAL STATE EXPORTS

70K+ 34.4% 28.5% 27% 19% 13% AUTOMOTIVE TOP THREE FDI SHARES

GERMANY

JAPAN

US

HOME TO A DEDICATED VEHICLE SECURITY EXPERIMENTAL TRACK

Sources: Invest in Querétaro

26

Mexico 2023

INTERVIEW

M e n o tti F r an ces ch i n i FORMER COUNTRY MANAGER MEXICO & H E A D O F N O R T H L ATA M , THOMSON REUTERS Why did the company choose Mexico as its location for such an assertive expansion strategy?

VITAL support Thomson Reuters provides solutions for tax, legal, global trade, and compliance professionals and corporations while also helping clients to adapt to digital transformation and navigate the Mexican legal framework.

BIO

Menotti Franceschini has vast experience of more than 25 years working in the specialized technology industry and areas such as global trade management, marketing, and business. He has collaborated in companies such as Softway, where he was co-founder, and Thomson Reuters, where he was Country Manager for Mexico. He previously held positions including business and sales development director, head of GTM Brazil business, head of corporate value proposition, and north & south LATAM corporates leader. He graduated from the State University of Campinas.

Thomson Reuters is a Canadian content-driven technology company headquartered in Toronto with strong business in the US. We operate in more than 70 countries and employ more than 25,000 people. Basically, we have five business units through which we support professionals in tax and accounting, from small firms to globally recognized accounting firms and professionals in corporations.

We support legal professionals, lawyers, and legal counsels in companies and firms, as well as compliance and global trade professionals. We also inform the world through the Reuters News Agency.

We provide platforms and solutions to help professionals stay informed on the latest laws and regulations and run their businesses. Our solutions are built on leading technology and rely on machine learning, AI, big data, and other innovations integrated with the specific knowledge that we have in these areas. Mexico is the second-largest economy in Latin America, and we already have a presence here in terms of customers and products.

There are also some key points such as density, US proximity, and business information. Then, there is the quality of the Mexican talent. We are investing in Mexico for two reasons: to support local professionals in the region. We use Mexico as a base to drive the digital transformation across the entire North Latin America region, and we opened a Shared Services Center here to support our customers and businesses worldwide.

What challenges are your clients facing in these segments, and how do you help them?

In terms of challenges, we focus on supporting our clients to adopt new technologies as the pandemic has accelerated trends by many years. Customers are looking to us not only help them to adopt more technology but also to support the transformation of their businesses. Second, all the professions that we support (tax, global trade, legal, and so on) operate in complex and dynamic environments.

Our customers trust us to know how to

understand and adapt to these changes and ensure they comply with them. The cost of non-compliance is significant, and customers are looking to automate and increase the efficiency of processes, to both reduce risks as well as focus on strategic tasks that would enable their growth.

How much potential does Mexico have to become a global hub for logistics?

Mexico has great opportunities in the upcoming years. It has a great location for companies to be based here, including manufacturing operations and logistics as an alternative to balance the global supply chain. When companies come here, they need to figure out how to manage global trade as well as the local requirements in terms of taxes and legislation. This is exactly one of the points that we support.

Some of them are global multinational companies that we are supporting in other parts of the world, and they are starting to enter Mexico as well. Through our expanded presence in Mexico, we are looking into how our technology and expertise can support companies here or looking to start operations in the country.

What are the main challenges in the market?

One hot topic here is technology adoption. If the government is pushing for more digitalization, we are helping companies to bring more technology to support this government request. When companies use technological solutions, they are better prepared to comply regularly and during any auditing process. There is also the global trade market component.

There is a huge opportunity to automate the processes for import and export in the north of the country for example and other similar places in Mexico and push for more digital transformation. Our technology and information solutions can help businesses navigate this complexity successfully. In addition, we see another huge opportunity in Mexico: legaltech.

Our technological solutions can help the legal sector digitalize large amounts of data, automate processes, work collaboratively across colleagues and with customers, access news and research information easily, and overall work more efficiently. ✖

Diplomacy & Economy

27

COMMUNIQUÉ DO T C o nsu l t i ng

Ignacio Domínguez Torrado, Managing Partner at DOT Consulting, discusses the political and economic landscape at a challenging time for the country.

A FORK IN THE ROAD IT HAS BEEN almost a decade since I started contributing to The Business Year. Such time has given me the opportunity to discuss a broad range of topics, from the structural reforms enacted by former President Peña Nieto, to the so called 4T of President López Obrador. I have been an optimist and a pessimist, but always with my country in my heart and mind. Even though I was asked by the editors to review the current legal perspectives, legal reforms, and what to expect for this piece, I wanted to write something a little different this year. We can discuss what is going to happen with the National Electoral Institute, what the government will continue to do or try to do to change the legal framework to win the 2024 elections, and continue with the López Obrador’s transformation politics. Such politics have brought the country to the worst era in terms of security. Thousands have died at the hands of organized crime but the government sees it as normal. I am not a politician, nor have I ever been formally affiliated with a political party.

What I am is a common middle-class Mexican. My father did not come from a wealthy family as he lost his father at the age of 10, but he fought and was able to graduate as an attorney and provide his family with a good formal education. Also, both of my grandfathers were attorneys. My “fifi” education (a term used by the current government to discredit the middle and upper classes) included a law degree from one of the top Mexican private schools and a master’s of laws in the US from one of the top-10 law schools.

I can affirm and attest that neither me nor

The content of this article is intended to provide a general guide to the subject matter.

Specialist advice should be sought about your specific circumstances.

my family have benefited from the public system. But, to the contrary, we have paid every single dime that we were obliged under tax laws. To me, Mexico has never been a system or a political conclave, but a country, people, flag, shield, and anthem, with one of the broadest cultural heritages and history in the world.

A couple of years ago, in this same publication, I posed a question; what will happen to Mexico if López Obrador wins? Now, the query should be what will happen to Mexico if we continue on the current path? I have discussed economic, political, and legal issues throughout these years, giving my opinion on what to expect. Today, I cannot say what to expect. Mexico has the highest inflation rate in decades, yet a controlled exchange rate between the peso and the US dollar. Uncertainty and discomfort are the feelings of many Mexicans. If we want to continue to be a democracy, we have to continue respecting our institutions. Our institutions are what maintain our freedom and liberty.

Let us see what will happen during 2023, where we are going, and where we want to be. It is up to us to determine that. Now let us get to non-political issues. Today, macroeconomics is not looking strong; foreign investment continues to grow but we are facing an inflation rate not seen in decades. For 2023, the central bank has decreased growth predictions initially considered from 2.4% to 1.6%, while others are not as optimistic and foresee 0% growth. We cannot put aside the controversies between the three north

American countries derived from changes in energy policies. Certainly, this will also affect the countries’ growth. As for the legal scenario, the biggest and most important issue will be the already mentioned electoral reforms that the government is trying to pass through congress.

Unfortunately, we do not have the certainty as to the path that the government will take during 2023, but hopefully it will be for the greater good of the country and of the Mexican people. ✖

CONTACT

T. +52 555 408 4574 ignacio@dotconsulting.com.mx

Image: TANYA LARA

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Mexico 2023

A warehouse pictured in Cuautitlán, Izcalli

Diplomacy & Economy

29

INTERVIEW

recipe FOR SUCCESS With Mexico currently its second-largest market, Hy Cite Enterprise is extremely optimistic about its growth prospects in the coming years.

P au lo Mo led o C E O & P R E S I D E N T, HY CITE ENTERPRISE

What added value do you offer in comparison to other suppliers that allows you to remain an entrepreneur?

Our company was created 63 years ago by the Gil family, which it still belongs to. This is the first time that it has a non-family member as CEO. The company today is present in nine markets.

And despite our presence in the US of over 64 years, we work exclusively with Latinos in the US and in all other markets. Mexico was our second market after many years in the US. The company’s mission, among other things, includes helping Latinos to establish a business anywhere in the world. Therefore, through direct selling and our exceptional kitchenware product, we give Latinos a business opportunity to have their own business and we use direct selling as the channel to make that happen. Today, we have 10,000 distributors in Mexico, which is our second-largest market accounting for around 30% of our total business. In regard to our added value, customers are first exposed to our products through our distributors and independent distributors. That is our differentiator in terms of achieving the ultimate goal. We are strongly committed to the direct sellers and knowing the independents and encouraging their success. Second, we work with full-time independent distributors. Our products have fantastic value and perceived value, which makes the business as attractive for the distributor as the products are for the consumer. Our cookware line is our main category. And, for example, with the stainless-steel items we give a 50-year warranty. When the distributor

visits a customer at home for the product demonstration, they fall in love and have a sense of pride in acquiring. Moreover, we make the purchase easier for the consumers through our direct-to-consumer financing program. One of the consequences of this focus on direct selling and making distributors successful is that we have an 80% annual retention rate for people who go through the initial training program, which takes a few months. This rate is unheard of in the direct selling industry. Ultimately, this is because we are not pushing products that consumers don’t want it. They love the product.

How is the brand performing in Mexico and what are your plans to sustain your growth?

The company has experienced double-digit growth over the past 20, and not just in Mexico. Every year, we have registered growth, of which we are truly proud. Over the past four years, the Royal Prestige brand has seen worldwide growth of 82%. We are set to end 2022 with total revenues of USD505 million.

Mexico is the second-largest market, accounting for 30% of the total business, and we believe this will continue to be the case. We are introducing approximately 12 new products within the next 18 months, and that will give more business to our distributors. We have 800,000 active consumers today in our client database making a payment. So, we have strong plans for the New Mexico brand, including being part of Master Chef.

Prestige has been sponsoring the Master Chef program in Mexico for the past two years, and we intend to do so again,

as it gives the brand substantial visibility to create brand awareness. For the new year, we will continue to invest heavily in traditional and digital media. Digital media, notably social media, is crucial as well, and our investment in Mexico will continue to grow. Our intention is to again achieve double-digit growth over 10% in Mexico in 2023. It will surely happen because we continue recruiting new distributors, who in turn continue to expand our nationwide presence.

Our business model has proven to be the products that are outstanding with 50-year warranty on the book, where the distributors model with an important audio opportunity ahead of the any other direct sellers. And we are committed to the direct selling model. ✖

BIO

Paulo Moledo joined Hy Cite’s team in 2019 as vice president of strategy after a long career at leading global corporations including JAFRA, Avon, and AOL. At Hy Cite, he has spearheaded key transformations in new product development, IT, customer relationship management, and global brand strategy, resulting in sustained growth across international markets. In 2020, he became company president and in early 2022, he was appointed CEO. He holds a BS in economics from Mackenzie University in Brazil and an MBA from the University of Miami.

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Mexico 2023

INTERVIEW

trusted ADVISOR

TMF Group is a leading global provider of high-value business services to clients operating and investing globally.

Supports multinational clients that want to enter the Mexican market High employee satisfaction rating BIO

Mónica Vera has dedicated her career to business transformation in several industries, across Canada and Latin America. She has experience as entrepreneur in the software-related business development. Previously, she was vice president and partner for IBM Mexico. In other roles, she developed deep consulting expertise in systems integration and application services for retail, pharmaceutical, and manufacturing companies.

She has led large ERP implementation teams for large, medium, and small businesses, including regional projects, both in Canada and Latin America. Vera holds a public accounting licentiate degree from Universidad Católica Andres Bello, Caracas; a bachelor of sciences degree from Syracuse University, and a humanistic studies master’s degree from Universidad Virtual Tecnológico de Monterrey.

What kind of clients are entering Mexico more, and in what kind of industries do they work with?

We are heavily focused on corporate compliance now. Our three key lines of services right now are Global Entity Management, Accounting and Tax, and HR & Payroll. We basically serve corporate clients in industries that either make products or provide services. Our growth plans include increasing our presence and expanding our portfolio in financial services, in particular the Fund Administration and Capital Markets fields. We hope to launch fund services in Mexico in the next few years. Currently, we are in the process of sizing it up and understanding the opportunities for us. It is an extremely exciting moment. We are also in the process of expanding our portfolio in the capital markets service line. We provide our clients with the same accounting and tax compliance services or other kinds of compliance for Special Purpose Vehicles (SPVs). We can also act as agents for several kinds of processes in the financial services industry. For example, we can be the collateral agent for a syndicated loan. As we are a non-financial institution, we can work with any bank. And because we have a direct presence in 80-plus jurisdictions, we can be a collateral agent for loans that span across one or several regions, with recent examples of deals that initiated in New York but have collaterals in Mexico, Colombia and Brazil, for example.

What main opportunities of growth has TMF Group identified in Mexico?

Our main projects in the next few years include the growth in the financial services space. This is a heavily regulated industry in Mexico, and banks and financial institutions in the sector are increasingly not interested in doing the operations behind the funds or trusts; that is what we want

Mó n i ca V era MANAGING DIRECTOR, TMF GROUP

to do. We want to become guarantee trust administrator, which is what the regulation in Mexico allows for non-financial companies and provider of fund services. We also find opportunities for growth in the rapidly changing compliance space, where we have the opportunity to understand and evaluate the changes new regulation brings, like 2021’s anti-outsourcing reform, and we help our clients implement such changes; however, to sustain any opportunity for growth we need to stay focused on an important pillar to the success of the company and our financial objectives. We need to keep the team engaged in these difficult times of change. We have grown in terms of employee engagement from a score of 70% to 87% in two years, 17 percentage points. At this point in time, Mexico is considered the highest ranked country in all of TMF’s jurisdictions from an engagement point of view. However, it is a challenge. We need to make it sustainable. People are behind the services, no matter how automated or digitized we may be. People are the key to successful delivery of services.

What are the main challenges your clients face when entering Mexico?

Successfully entering the country depends on fully understanding how things work; that is the key. Mexico’s authorities are still very keen to conduct business in person. We have to be there in person in the different establishments with the tax authority, the labor authority, and others. The other side of the businesses is keeping companies compliant. We have a guide or checklist that companies need to fulfill to remain compliant, avoid penalties, or even have their licenses revoked. If companies do not comply with certain regulations, it can have an impact on their reputations and finances. ✖

Diplomacy & Economy

We make a complex world simple TMF Group is a leading provider of critical administrative services, helping clients invest and operate safely around the world.

We are a key part of our clients’ governance, providing them with critical administrative services that allow them to invest and operate safely around the world.

We make a complex world simple for them, with experts on the ground to make sure that all rules and regulations are adhered to and operational compliance is maintained.

technology platform and service model put our clients in control of their portfolio of entities and global locations. The data insights we deliver keep them on top of emerging regulation, the status of their own activity and any points of risk.

clients include more than 60% of the Fortune Global 500 and

Find out more

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Mexico 2023

VOICES FROM THE SECTOR

E m i li o C ad en a CEO, PRODENSA What kind of industries are you interested in seeing in Mexico?

It is really across the board, but perhaps not so much in textiles. Electric and electronics are huge. Automotive is good, especially the heavy truck industry. We will see a trend in electric vehicles, adopting the current assembly plans to the new platforms and also a new supply chain. The supply chain of electric vehicles is different from that of their traditional counterparts. We will see more companies engage in mobility, which has seen strong development. There will also be a degree of activity in of aerospace, although not to the extent seen before.

Itz el Tor r e s MANAGING DIRECTOR, MERCO How can Merco help companies strengthen their brands and reputation, and what solutions do you offer?

We first diagnose the reputation of companies. Our ranking list is a tool for public relations through which we have made ourselves known. We play an important part in the world of rankings and are 100% self-supported. We are audited by KPMG, which makes our published data more transparent. We do not certify, nor do we do consulting. We have rejected all that to build a transparent and credible monitor.

Our ranking is the conduit to obtaining diagnoses; what we do is diagnose reputations. We earn our revenues from the post-ranking processes. Companies want to access specific data on their reputations, and that post-ranking information is what we sell so that targeted strategies based on KPIs and indicators may be put in place. We report on everything that came out during our procedures, and our indicators can be used to detect gaps between their reality and perception, for example. Merco works hand-in-hand with every consulting agency in the country and connects them with the many companies, forming a perfect triangle between the consulting experts, operating experts, and us. We are the doctor that diagnoses, and we leave decision-making to the agencies and companies.

How have you adapted to meet the new demands of the industry?

We continually improve and innovate. We have a metric whereby we aim for at least 10% of our yearly revenue to come from new products and services. We have to adapt to the new industries and cultures of investment. We will see more interest from companies from Asia, especially China. They are already the second-largest investor in Mexico in terms of industry. Meanwhile, we are increasingly moving toward digital transformation where actionable data is helping to comprehend not just the commercial reality of today, but of tomorrow.

F eli p e V ald eb en i t o SENIOR SOLUTION ENGINEER, ENERGY EXEMPLAR What are the most interesting findings from your recent studies of the Mexican market?

More renewable penetration is possible, and it could be a solid option for the Mexican market. Mexico also has a large gas matrix that can be mixed with renewables. Transmission is extremely important—sometimes it is not possible to transmit renewable energy from generators to the load centers. With the proper transmission investment or planning, PLEXOS can determine if it is better for a system to invest in a line or a generator closer to the load center. With our software, companies can quantify or put into numbers different scenarios which are not practical to experiment in real life, because these scenarios involve extremely large investments.

What is the profile of your clients?

We work for government companies, which extensively use PLEXOS; private companies on the generator side; and retailers, or traders, which is an interesting segment. We also work for independent system operators, the entity in charge of coordinate electricity market participants. We have them as clients as well. We are also active in the energy market, including gas and water. We are working to move into other industries, because the software is flexible, and we are looking into the mining industry as well.

Diplomacy & Economy

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Al e ja n d r o V il l a s e ñ o r MANAGING DIRECTOR NORTH AMERICA, ARTECHE What are industries and sectors do you work with in Mexico?

Directly, we work with the electrical segment; the Federal Electricity Commission (CFE) is our main customer, as are the contractors.

We manufacture instrument transformers, and in Mexico we are the only one that produces high-voltage instrument transformers; we do not have any domestic competitors. We are one of the leaders of instrument transformers. In fact, for general medium-high-voltage transformers, our market share is 93-95%. We participate in generation, transmission, and distribution projects in the electrical segment.

In what ways is Arteche increasing its manufacturing capacity?

We have three factories in Mexico as well as a commercial office in the US in Miami. Two of our factories are in Hidalgo, and one is focused on manufacturing high-voltage instrument transformers.

In the last two years, we have increased the production capacity of this factory by 100%. For this company, our income is about USD50 million. We also have another factory that manufactures medium-voltage instrument transformers, the devices for power quality, and reclosers. The third on is located in the metropolitan area of Mexico City. Similarly, we have increased its capacity by 100% since the beginning of 2022 because of the CFE projects. We compete with high convention brands such as CEMEX, GE, and other manufacturers of the first level.

P ab lo G u ald i CEO, AT I O ® G R O U P What is holding back the growth of gas stations in the country?

The main problem in Mexico is that the current legal structure is causing many constraints against investment. The issue is that there are about 900 permits stuck in the country and considering the size of Mexico, 300 gas stations is not enough. Therefore, we need to provide new services for our current customers in order to accommodate the current situation. We now provide training and have opened a university with four career paths. We started during the pandemic and realized that it was an interesting method to encourage growth, train sales team, and give people an opportunity to get into the business of fuel.

Are you working on diversifying outside of Mexico, including widening your current portfolio?

We do many projects outside Mexico including in the Caribbean, Central America, and South America, mainly with overflights solutions for loyalty, fleet management, gift cards, and similar services for stations. Mexico is not growing like it used to in the past, and we are seeing movement in some countries in Central America as well as Colombia. We are also automating all the airports in Colombia as well as the one in Lima. We are a leader in Mexico, but we were unable to replicate this leadership in the region.

PERCENTAGE OF BANK ASSETS HELD BY TOP THREE BANKS SOURCE: THE GLOBAL ECONOMY 47.5 45 42.5 40 37.5 35 '16

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BANK ASSETS (% OF GDP) SOURCE: THE GLOBAL ECONOMY 50 48 46 44 42 '16

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DOMESTIC CREDIT PROVIDED BY FINANCIAL SECTOR (% OF GDP) SOURCE: THE WORLD BANK 64 62

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Image: Victor Jiang

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Finance

35

CHAPTER SUMMARY

Finance

TIME FOR REFLECTION he past year has proven to be a time of

for the Mexican finance inT reflection dustry as the market recovers from the impact of supply chain disruption and conflict in Ukraine. Players took advantage of this period to create new strategies and further formalize internal structures.

In this chapter, The Business Year speaks to the movers and shakers of the finance industry working to position the Mexican market as a prime location for investment and further incorporate international standards to financial tools that are new to the country. “We are competing against the world for capital, and it has been somewhat of a struggle to attract investor attention to Mexico from other countries that have provided more incentives to their economies, explained Raúl Gallegos, President of the Mexican Association of PE & VC Funds (AMEXCAP).

“Certain sectors are more challenging than others, but there is excitement in many areas. For example, fintech has shown great potential given the prevailing low level of financial penetration.”

Gallegos sees a huge opportunity in strengthening new financial vehicles and in standardizing practices according to international standards in Mexico to create trust among investors.

Within the evolution of the finance industry,

ESG remains a top priority among sector leaders.

International funds and investors are beginning to be more demanding of social responsibility and sustainability practices and Mexico must stay on top of these trends to continue attracting capital. “We are in the early stages of the implementation of ESG practices in the private equity world and in the economy as a whole, and this is an area where this organization is taking a leading role,” added Gallegos. On this topic, The Business Year spoke to different associations including Mujeres Inviertiendo, a non-profit focused on raising the visibility of women and gender equity in the investment market.

Mexican unicorns were another hot topic among interviewees as start-ups with a valuation of over USD1 billion continue to make headlines in Latin America, making Mexico, along with Colombia, Brazil, and Argentina prime targets for venture capital. “We’re extremely impressed with the quality and quantity of start-ups coming from the Latam region,” said Chris Howard, Founder & CEO, of SOFTEQ. “There’s a tremendous amount of engineering talent in Mexico and throughout Latin America. We are really excited because Mexico and Latam are growing in the tech sector, the market is huge, and it’s still developing.” ✖

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Mexico 2023

INTERVIEW

M a r í a Ar i z a CEO, B I VA

What were BIVA’s greatest achievements in Mexico throughout 2022?

BETTER standards BIVA is continuously working to develop a strong ecosystem for sustainable finance in Mexico.

BIO

María Ariza is CEO of BIVA. She was previously CEO of the Mexican Private Equity Association (AMEXCAP), worked on the investment team of NAFTA Fund of Mexico, LP, was director of the project office at Grupo Impulso, and was strategic planning manager at the APEC Organizing Committee. Additionally, she is founding partner of Facial Design S.A. de C.V.; partner and board member of Grupo Salus S.A. de C.V.; partner and board member of Crediauto Financial; partner and board member of Muventa SAPI de CV; partner and board member of Matterscale; partner and board member of KL Studios; and partner of Cervecería Colima SAPI de CV. She also participates on the boards of several academic institutions. She has a master’s degree in management from Harvard University and is an industrial engineer from Universidad Iberoamericana.

2022 was a challenging year for markets.

Russia’s invasion of Ukraine, as well as supply chain disruptions derived from the pandemic, triggered a series of price shocks that affected the functionality of the world economy. Despite the challenging environment, BIVA had significant advances in positioning itself as a preferred alternative for market participants. We have brought to market more than 25 new issuers, nine in 2022. Also, 65% of all new debt instruments in the Mexican market were issued at BIVA. Overall, in our four years in the market we have helped issuers finance a total of USD19 billion in the Mexican equity and debt markets. All IPOs this year in the Mexican market were done at BIVA. We listed one Fibra E (energy infrastructure trust) and one FIBRA (infrastructure and real estate trust). In addition, all newcomers into the market are choosing BIVA as their stock exchange. In addition, operations in the secondary equity market increased by 10.6% from a year earlier. Average daily operated volume in 2022 is now close to USD1.1 billion.

Moreover, in 2022 we started competing on a more level playing field thanks to the implementation of the regulation on Best Execution. After three months of the entry into force of this regulation, BIVA’s market share of the volume operated in the Mexican market increased to 17% (from 9%, previously). Through our educational arm, Instituto BIVA, we have produced close to 200 learning experiences, including courses, workshops, conferences, webinars, and masterclasses aimed at increasing financial education at different levels. In 2022, we consolidated our position as the sustainable stock exchange in Mexico. We are constantly working on the development of a strong ecosystem for sustainable finance in Mexico that is compliant with international best practices and contributes to the transformation to a low-carbon economy.

In what ways is BIVA continuing to promote sustainability and ESG practices within the stock exchange?

One of our priorities at BIVA is to enhance the ESG ecosystem in Mexico. We focus on creating solutions to develop the market efficiently. In particular, we promote the standardization of taxonomies, frameworks and evaluations to improve transparency and communication among market participants. This has meant that more than a third of the longterm debt issued in BIVA complies with environmental, social, and governance principles. We continue to guide companies from an early stage on their transformation towards integrating and measuring ESG values. Our program, BIVA 360° Sostenible, links companies with experts and specialized allies to streamline the process and equip them with the tools they need before raising capital under an ESG framework. We have also developed a technological platform that concentrates issuers’ ESG information in one place. This allows issuers and investors to have access to standardize data based on the main international and local standards, such as SASB, GRI, PRI, AMAFORE, GRESB, and so on. Based on our close interaction with clients, we have spotted the need to develop sustainability skills and talent. This encouraged us to create the Chief Sustainability Officer (CSO) Accelerated Program that aims to elevate ESG standards in Mexican companies. We want to train as many issuers as possible to reach critical mass and have system-wide impact in the local market. At BIVA we have been very strong advocates of gender equality. We sponsor research and recognize publicly organizations who stand out on practices like the inclusion of women in boards or at decision-making positions. In the next few years, we are moving one step forward with our recently approved Gender Equality Questionnaire. Through this questionnaire we will be able to collect information about companies’ practices regarding women’s entry into the work force, policies for career advancement and equal pay. All of these will be included as part of BIVA’s internal regulations applicable to all issuers listed at BIVA. The information obtained through this questionnaire will be made public starting in 2026. ✖

Finance

37

INTERVIEW

a part TO PLAY As an organization, AMEXCAP is working to bring global best practices to Mexico and ensuring the sector performs to the highest standards possible, with full transparency and ethics.

R aú l G allego s P R E S I D E N T, M E X I C A N A S S O C I AT I O N O F P E & V C F U N D S ( A M E X C A P )

What is your vision as the new president of AMEXCAP?

I am particularly interested in continuing to ensure that, as managers of money, we continue to perform in the best way possible. We have done a lot of learning over the years in terms of the development of new vehicles, in particular, how things are done in developed markets, to bring those best practices to Mexico. We have a huge mandate as an organization to bring such practices here and ensure that we perform to the highest standards possible. We are focused on promoting transparency and ethics, on having the most professional managers possible, and conducting optimal interaction with investors to have the best industry we can. One of the best practices that we specifically want to implement in Mexico is the standardization of reporting.

Indeed, it is one of our main projects for this year. We tend to lack standardization from both the investor and the manager side. Much standardization can be introduced in terms of how we provide information to investors. Colombia, for example, has come a long way, in terms of standards and the way firms report information in general.

How would you describe the current state of the private capital and venture capital market in Mexico?

Today, we are in a new phase with both local and international investors, participating in new types of vehicles and more specialized strategies. We are competing against the world for capital, and it has been somewhat of a struggle to attract investor attention to Mexico from other countries that have provided more incentives to their economies. Certain sectors are more challenging than others,

but there is excitement in many areas.

For example, fintech has shown great potential given the prevailing low level of financial penetration. We all know that financial access means progress and growth. Investors are excited about Mexico because there is a huge opportunity for a deeper financial sector, particularly, through innovation. Additionally, we see Environmental, Social, and Corporate Governance (ESG) as a great area of growth. We are in the early stages of the implementation of ESG practices in the private equity world and in the economy as a whole, and this is an area where this organization is taking a leading role.

Another area of great opportunity given what is happening around the world with supply chains, is the industrial sector. We have a large and well-established manufacturing base that has seen double digit growth in the last two decades and supplies all major economies, together with a very solid distribution and logistics sector. Finally, our tourism sector is one of the largest ones in the World. We have a strong offering, with great service, variety of experiences so the potential is huge.

folios with more alternative investments to increase returns and reduce volatility.

There are also opportunities on making things easier for investors, such as certain taxation rules, and other administrative requirements. We also trying to work with authorities as sector-specific expert consultants to align our objectives with those of the current administration.

Finally, there is opportunity to increase the awareness level of the industry. We are working with universities, for example, to establish a graduate program related to private equity in general, and we have also done a number of studies and papers demonstrating the impact this industry has in job creation and in the overall economy. ✖

BIO

What can be done to strengthen the private capital market in Mexico?

There is always room for improvement in this area; for example, we are working with the authorities to see how we can develop greater funds, particularly venture capital or impact investments through development banks or various other funds. AMEXCAP will definitely play an important role in this regard. We are also working on bringing more investors to the market, for example trying to show insurance companies how they can complement their investment port-

Raúl Gallegos joined the asset management group at Credit Suisse in 2016. Prior to this, he was president & CEO of GE in Mexico. He began his career with GE in 1997 in Stamford, Connecticut with the Latin America group of GE Capital Structured Finance. In 1999, he returned to Mexico to join the GE Capital Real Estate business, where he first worked as a relationship manager and originator, and then as the leader of the debt business. He also served as general manager of GE Real Estate in Mexico. Gallegos is a civil engineer from Universidad Anáhuac and holds an MBA from Columbia University in New York.

He started his professional career at Industrias Gar-Vel.

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Mexico 2023

INTERVIEW

ACCELERATING start-ups Softeq provides a combination of funding, mentorship, and engineering development services to start-ups throughout LATAM, allowing them to build, scale up, and thrive.

C h ri s H o w ard FOUNDER & CEO, SOFTEQ

What prompted you to start a technology venture fund and venture studio?

I operated an engineering services company for 25 years and started angel investing about 10 years ago. After investing in other people’s syndicates, I realized my team knew more about building new technologies than many of the people I was funding. Softeq has built products for big enterprises like Disney, Lenovo, Epson, and AMD, so I knew we had the engineering skill. In creating a venture fund and studio model, my goal was to de-risk tech startups for investors and founders. In 2021, we welcomed 22 new start-ups through the Softeq Venture Studio, our accelerator program, and we now have 49 start-ups in our investment portfolio. It is somewhat similar to an index fund made up of tech start-ups. This most recent cohort includes entrepreneurs from around the world, including Mexico, Peru, Uruguay, Egypt, Saudi Arabia, the UK, and Iceland.

“We plan to be unstoppable in finding the best ways to turn start-ups’ bold visions into huge success stories that span borders and time zones.” can help advance the vision and provide access to talent, customers, partners, and investors. Next, we unleash our talented team of engineers on a start-up’s idea in a manner that will lead to the next round of funding. Our engineers build for scale so that tech risk is reduced. As a consulting company to large enterprise tech firms, Softeq offers experienced hardware, firmware, and software developers along with certified cloud and infrastructure engineers to augment a start-up’s team. For us, it is a matter of reputation. Softeq engineers provide an individual approach and a variety of engagement models that can be adjusted to business needs and budget objectives. Taken together, these three areas make for a very powerful combination.

What is unique about your business model?

We like to think about our unique model in the same way one might tackle a math equation: venture fund + venture studio + 500 engineers = future success. We have created a new model that de-risks investments while improving founders’ chances for success. Twice annually, we open the application process for funding. If we’re excited about an early-stage start-up, we’ll meet the founders to learn about them and their team, vision, growth strategy, and technology. If it goes well, we invest USD125,000 and spend three months with the founders either in the spring or fall.

This is where the Softeq Venture Studio in Houston comes into play. Together, we develop a technology roadmap, identifying the most strategic areas we can help accelerate. Our companies also get access to our mentor network, free workspace at the studio, and a variety of free or highly discounted services including hosting, legal, banking, and more. It is about matching a particular company’s needs with experienced operators and executives who

Why did you open an office in Monterrey and begin hiring developers in Latam?

Most of our engineering staff were located in Eastern Europe, a region that has been destabilized over the past few years. We did our due diligence and learned that there is a tremendous amount of engineering talent in Mexico and throughout Latin America. We are excited because Mexico and Latam are growing in the tech sector, the market is huge, and it is still developing. There are some other key reasons as well. Our customers like that part of our team is located in the Central time zone.

Also, Monterrey is only an hour by plane from our corporate headquarters in Houston, Texas. Mexico and Latam also offer very competitive rates for nearshore development talent.

What start-ups have you invested in Mexico and Latam?

We are extremely impressed with the quality and quantity of start-ups from the Latam region. We have invested in several

companies, including Pagaloop, a financial technology company in Mexico City; HelloDoctor, a healthcare start-up in Mexico; Hapi, a stock trading platform based in Peru; Boxes, a retail tech company based in Uruguay, and Mesada, a digital remittance company in Mexico.

What are your main goals for 2023?

Softeq is planning to continue to expand the core development services business to 600 engineers, with at least 200 located in Mexico and Latam. We also want to invest in 40 additional early-stage startups to add to the 49 investments we have already made. We also plan to close out the USD50-million Venture Fund 1 that we launched in 2022 and raise a new USD250-million Venture Fund 2. It is also important for us to add at least two more Venture Studio locations and be able to put more money behind the winners in our portfolio. And as we have done for the past quarter century, we plan to be unstoppable in finding the best ways to turn start-ups’ bold visions into huge success stories that span borders and time zones. ✖

BIO

Chris Howard is the founder & CEO of Softeq. He also serves as a General Partner in the Softeq Venture Fund.

Howard started his career as a co-op student at IBM’s Federal Systems Division, which supported the space program at NASA. A lifelong entrepreneur, he is an active angel investor and advisor in several start-up technology ventures. He is a published magazine and book author, a podcaster, and an admitted gadget geek. He attended the University of Houston and studied electrical engineering on a full scholarship.

Finance

39

Investor Demo Day for 2H 2022 Cohort of 22 Startups

De-risking Venture Capital Investment Venture capital statistics support that the majority of new technology startups will fail.

But at Softeq, we’ve created a new model that de-risks investments while improving founders’ chances for success.

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40

Mexico 2023

INTERVIEW

Ka r i n a Ojed a P R E S I D E N T, MUJERES INVIRTIENDO (WOMEN IN INVESTMENT)

What are the challenges women face when it comes to visibility in the investment industry?

MUTUALLY beneficial Mujeres Invirtiendo is a nonprofit established to champion the success stories in the sector, encourage greater cooperation with partners, and raise greater awareness of the benefits of gender equality within private capital industry in Mexico.

BIO

Karina Ojeda Valle is a financial lawyer committed to promoting the professional growth of women in the private equity industry in Mexico and is one of the founders and current President of Mujeres Invirtiendo. She is also dedicated to structuring financial transactions at Capital Indigo, an investment fund focused on private debt in Mexico. She has worked on structured finance transactions in both the public and private markets in Mexico and the United States. She is trained in money laundering and terrorist financing prevention and is a certified compliance officer from the National Banking and Securities Commission. Valle studied law at the Universidad Anáhuac and a specialty in banking and securities law from ITAM.

There is not enough representation of women in decision-making processes within the private capital industry in Mexico. This is reflected by the fact that there are not many women partners in investment funds. On the bright side, we are still a growing industry, which is why it is key that we focus on promoting a greater participation of women in every stage of investment processes and allow women to grow and lead investments to generate more diverse decisions that will end up making the business more profitable.

What is the reason for the low participation of women in the sector?

The private capital industry has historically been led by men around the world. It is also a cultural issue related to society’s structure. As a consequence, there is a gap in women’s education and professional formation because they are not attracted to work in the financial sector, let alone in the private capital industry. There is also a lack of policies in the workplace that benefit and make it easier for women to get involved and grow professionally in this industry. Nevertheless, women among the industry are seeing it as an opportunity to go and talk about this industry and specifically to give more visibility to the great women in the sector to not only have more role female models to look up to but also improve workplace policies with a gender equality perspective.

Why a company should focus on diversity in the boardroom, what kind of added value can it offer?

One of our core arguments is that having a diverse board or senior management in an institution not only has an ethical value but also makes the institution much more profitable. According to the first edition of the Report on Diversity and Inclusion in the Private Capital Industry carried out by AMEXCAP in 2020, by eliminating the gender labor gap an amount

of USD12 trillion would be added up to the global GDP by 2025 and USD0.8 trillion to Mexico’s GDP, which represents 70% of the national GDP approximately.

There is an important issue of profitability for companies, funds, banks, and any institution that have more diversity in their decision-making.

What projects are you managing right now, and what are you focusing on this year?

Mujeres Invirtiendo was legally created in 2020 as a non-profit organization in Mexico and was granted the authorization to receive donations by the main tax authority in Mexico in 2021. 2022 was a crucial year for Mujeres Invirtiendo, and it was fundamental to consolidate our community by hosting networking events among us, especially after the pandemic.

We have been doing activities since 2017 and even previously with this group of incredible women —Anna Raptis, Christine Kenna, María Ariza, Daphne Salinas, and Sofia Garrido—but it is very important to us to continue hosting events now in person to weave a network that actually provides and added value in our professional careers. The truth is that we are well on that path because we have more than 350 women affiliated to Mujeres Invirtiendo, and we are still growing. Second, as we grow the community one of our main objectives is to give visibility to the amazing women among it who are successful professionals and experts. Third, being part of our strategy and our brand mantra, in February 2022 we launched our Strategic Alliance Program based on three groups of people that could help us grow and really meet our goals: allies and sponsors; women leading other organizations and other associations with similar objectives; and key men who are convinced that collaboration will elevate the gender equality cause. Both women and men will benefit from greater diversity and having more gender equality in our industry. We invite people who can add to Mujeres Invirtiendo and vice versa. ✖

Finance

41

Image: NadyaRa

Rush hour in downtown Mexico City

42

Mexico 2023

INTERVIEW

M i g ue l M arco s REGIONAL COMMERCIAL D I R E C T O R ( L ATA M ) , EXNESS In what ways does Exness facilitate trading in LATAM, and how is it different from other brokers?

BETTER offerings Exness’ technological solutions help facilitate trading across different asset classes at lower costs and less friction.

Despite the fact Exness has been in the market since 2008, we are relatively new in Latin America, having begun our operations in the region about one and a half years ago. As a multi-asset broker, we offer a wide range of products for traders in different markets; however, what we pride ourselves on is our better-than-market conditions. Our goal in Mexico is to facilitate trading for people interested in asset classes such as forex, indices, energies, metals, cryptocurrencies, and stocks. Our technology allows our clients to capitalize on opportunities across these markets with lower costs, much more reliable pricing, and less friction. Some of our most innovative features are created in-house, and these include our unique protections against market volatility as well as our commitment to instant withdrawals, which allow our clients instant access to their funds throughout the day. Our primary mission is to become globally recognized as an ethical, tech-driven broker that always strives to do what is right by the trader. An important part of this is to increase our local presence at different events. We want to be close to our clients and partners in Latin America and improve their understanding of the markets and different platforms available.

Why is Exness’ offering geared toward professional investors and traders?

BIO

Miguel Marcos graduated in economics from the University of Salamanca. He completed postgraduate studies in financial markets and asset management at IEB. He has more than 10 years of experience in the brokerage industry. He currently serves as Regional Director (Latam) for Exness.

Our platform and offering are perfectly suited for traders of all skill and experience levels. We offer our clients access to the markets through financial derivatives i.e., Contracts for Difference (CFDs); however, trading with CFDs carries a certain degree of risk, which is the reason why we focus on the more experienced trader. There is a misconception

in the region that achieving profitability through online trading is easy; however, the truth is that it is a complex endeavor and a riskier one compared to more traditional investment products. While we cater to all traders, we prefer to target clients with experience in the market who can appreciate and capitalize on our offering and market-beating conditions. What drives us is to develop a reliable product with unique features that set it apart from the competition. We are mostly focused on the technological side of the business rather than the commercial side.

What is the company’s financial model, and how do you turn a profit?

Simply put, we make a profit from spreads. For every trade we execute for our clients, we charge a nominal fee.

These may vary depending on the market and instrument traded, but we are proud to offer the most stable and reliable pricing in the industry—all thanks to our technological innovations. Our partnership program is built to provide a platform that benefits all parties including our clients and partners. And we believe that our lower pricing translates to a higher client lifetime value and a higher return for partners over the long run. We work with partners that offer different services such as education or market analysis as well as partners that need access to the necessary technological infrastructure to service clients or manage funds. In general, our partners may have clients that are looking for more efficient solutions. Sometimes this may include consultancy, education training, coaching, or anything else that may be related to online trading and the financial markets. These partners are looking for a trustworthy broker to look after their clients and we make sure that they have the best experience possible. ✖

Finance

43

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$1102.5 million Client Withdrawals in Q3 2022

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44

Mexico 2023

INTERVIEW

Jul i o Es c a n d ó n MANAGING DIRECTOR, GRUPO FINANCIERO BASE

What economic advantages does Mexico offer over other countries?

YOUR specialist Specialists in FX and international payments, BASE is a Mexican financial group with 36 years of experience in helping international companies with operations in Mexico through expert advice and competitive solutions.

BIO

Julio Escandón has been Managing Director of Grupo Financiero BASE since 2019. From 2007-2019, he was CFO of Grupo Financiero BASE. He studied economics at Instituto Tecnológico Autónomo de México (ITAM) and holds a master’s degree in economics at Cambridge University. He attended the Chief Executive Officer management program at Northwestern University – Kellogg School of Management and the CFOs Executive program at University of Chicago – Booth School of Business.

Mexico is definitely growing, with a 2% estimated increase in GDP in 2022. However, there are some industries growing at a faster rate, such as the export sector, at about 18%. For us, that would be a great opportunity because we are in that sector, and we work closely with such firms.

Overall, Mexico offers great opportunities because of its political and economic stability, when compared to other emerging markets around the world. Moreover, the country has an advantage over other Latin American economies and the rest of the world because we are neighbors with the biggest consumers in the world: North America. This unique geopolitical situation allows Mexico to continue to take advantage of all the investments at a global level.

What projects is Banco Base developing in nearshoring, and what solutions does the bank offer companies wanting to enter the market?

Banco Base was born in the 1980s as a foreign exchange (FX) transmitter in Monterrey. Our specialty then was FX trading, as well as sending and receiving money for other firms. In 2011, we transformed into a bank because we realized our clients needed more products and services to enhance their performance and so we started with loans, deposits, and leasing. Many clients in Mexico need leasing because of tax issues, whereby companies can deduct these payments for re-leasing. We started to grow our offerings to those clients, focusing on those that need to handle FX internationally. For example, we can send money overseas in seconds, compared to traditional banks that take two to three days and charge a commission. We have been doing this for more than 36 years and have partners such as the Bank of New York and other major financial institutions in the US, Europe, and Asia. It is extremely important for us to remain agile and transparent so our clients can

have full visibility over where their money is at any moment. In addition, if, for example, a corporation in Mexico needs to send money overseas urgently, but does not have the funds that day, we can remit the amount in advance, and the company can repay us later; such services are highly appreciated because we understand the needs of companies. BASE can also do the reverse and collect payments for Mexican companies from their clients in the US, for example. Our value proposition is to provide the fastest transactional service and competitive offerings to solve your needs.

What investments is the bank making with regards to digital transformation?

We realized that fintech and many other companies are working on such transactions, and in the last five years we have invested in some spin-offs. We are investing in digital banking, so that we can not only provide the human side of the service, but also a hybrid digital service where customers can just go to our Base net and send money wherever they want. We invested MXN10 million on this project in 2021 and will invest more this year and the next. Digitalization is not just a trend or keeping up with the competition; it is about customers’ needs and making financial transactions as easy as possible for them. We do not have millions of clients, but about 30,000 clients around the world, and we do not want to lose our strong solidarity with them. We closed 2021 with a return on equity of around 20%. This year will almost be the same, including all our planned investments. In 2023, we expect similar results, with a greater market share and more clients. I am proud of our results, though I am prouder of our culture and people, what we stand for, and what we do every day. Many operations depend on us, and we work directly with major corporations from China, South Korea, the US, Germany, Italy, and many other countries that are interested in investing in Mexico. ✖

Finance

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INTERVIEW

helping HAND

Looking to invest in the local tourism and agricultural sectors in particular, Abanca Mexico has big plans for the country in the medium term.

What is your outlook for the current state of the banking industry?

Mexico has always remained attractive to the world; this has not changed. An important part is that businesses, bankers, and financial institutions continue to invest in the country. We support their growth and are growing together with them. Abanca has a great vision of both organic and inorganic growth. The important bet now is with the launch of Abanca Mexico. We intend to become an important bank in the world. Specifically, in Mexico, with the investment we want to grow by MXN10 billion in the next three years. In the first year, if we manage to grow the first MXN3 billion, we will have taken a solid first step.

Marco A n t o n i o S o t o MANAGING DIRECTOR, ABANCA MEXICO

country, and solid relationships with clients and the advice we give them are all extremely important. All that adds true value. We do not intend to compete with any bank; on the contrary, we view them as our partners. The client’s confidence in the lender is crucial. Customers will at least be aware of our lifetime bankers if they do not know who Abanca is because we only started the business in early 2022. This framework, which has been on the market for 30 years, has made things slightly easier for us. We have partners in other banks that help us with this; however, competition is not our aim. We want to engage in a market that is as big as the players.

Spanish bank with AUM of

€56B Will invest

10B

Mexican pesos in Mexico in next 3 years

What will be the primary focus for 2023?

In what ways is Abanca Mexico focusing in agriculture and tourism?

The banking sector in general has made a significant commitment to the tourism industry. The most powerful nation in the world is Mexico’s neighbor, and Riviera Maya receives 70% of its visitors from North America, who spend in dollars and are charged accommodation rates in dollars.

The tourism industry is, therefore, a wise choice.

We are also big fans of agriculture. To work on this, we need to start forming relationships with other organizations such as Fira, Nafin, and so on.

There are many opportunities here; for example, 95% of watermelon produced by local producers that is sold in the US is not found in Mexico. There are sweet and delicious Mexican watermelons sold in the US that no one in Mexico is aware of.

What is your primary differentiator or added value from other players that provide comparable services?

Everyone is talking about a digital world and technology; however, the specific business we are in continues to be personal and close to the client. I am about to celebrate 30 years as a banker in this

If we manage to convince companies in the first year, we can make the first MXN3 billion. It will be a strong sign for our parent company. That will mean more support and growth in the coming years. In our case, things are going great, and we expect the coming years to be better and see rapid growth. Many of our team members helped launch Sabadell in the first year of business banking, the goal was to place 2.5 million, and we placed almost 5 million. In the second year, we had 9,000. We are in a different moment with a different economy. But the market is there to support such growth. Today, there seem to be significant obstacles ahead. Such as the exchange rate in dollars growing. However, despite all that, the country remains attractive. Our company and all other companies share one intriguing trait. It is a fact that without a team-based foundation, no organization or business can flourish. At Abanca Mexico, we genuinely have a team that has risked and has ventured. We are group with the goal of expanding together with the organization. In the end, getting everything to work the way we want it to depends on the team. ✖

BIO

Marco Antonio Soto has extensive experience in the design, development, and execution of commercial strategies aimed at attracting new clients through incentive and leadership models. He previously worked as deputy general director at Banco Sabadell and regional director for the metropolitan area at BBVA Mexico. He studied business administration and has a master’s in marketing from the University of Anahuac.

46

Mexico 2023

INTERVIEW

F a b i á n F e r rari MANAGING DIRECTOR, GETNET

How did Getnet win the Platinum Award in innovation from Fintech Americas?

UNTAPPED potential Getnet has become a leader in payment solutions in Mexico, with innovative solutions for public transportation, merchants, and customers.

We won because we helped implement open payments in the mass transportation payment system, Metrobus, in Mexico City. This enables 1 million users per day to pay with their cards through contactless payment, making a significant positive impact on society. There is a sustainable aspect of this project as well— people save time, which is an enormous social benefit, and we also contribute toward protecting the environment because with this initiative there is less need for plastic.

In what other ways is Getnet working on promoting financial inclusion in Mexico?

Getnet, a PagoNxt company, is a great solution for payments from Santander Group. We have a great financial group backing this project. With the Santander group, we can make deposits to other banks and work with other players in the financial system. What we are doing is a game changer in the market and enables people in Mexico City to go from one place to another.

How many divisions does PagoNxt have?

BIO

Fabián Ferrari is Managing Director of Getnet México. He has a degree in economics with a specialty in finance.

He holds over 20 years of experience in banking, having led various departments within Santander, including corporate banking, treasury, and others. Over the past three years, he has been in charge of developing Santander’s strategy for acquisition and incentivized the acceptance of cards in the Mexican market, helping report double-digit levels of growth YoY.

PagoNxt has three important divisions.

One is PagoNxt Merchants Solutions, which is Getnet, offering clients payment services. Another division is Trade Finance with Ebury, enabling our clients to transfer money between Santander accounts from one country to another in a simple and quick way. The third division is Super Digital, in which we will launch credit cards into the market for the masses to bank all those who have not been able to obtain a card yet. We will also be releasing a product so all our clients with a debit card can pay for their purchases with installments. It is similar to offering a small credit to those with debit cards. In Mexico, there are 120 million debit cards and only 30 million credit cards. This represents a big market opportunity that we will take care of, giving people the possibility of buying something they previously could not, without interest.

What are the main differences between Super Digital and the existing credit cards in Santander?

“In Mexico, there are 180,000 clients already connected to the PagoNxt platform.”

The difference is the target market.

Santander reaches the high and classic markets, but there is also a massive bottom market. Super Digital aims to be a payment method for that sector.

How many users do you currently have on the PagoNxt platform?

In Mexico, there are 180,000 clients already connected to the PagoNxt platform.

This platform provides trade abilities and opportunities for merchants to send, for example, tips to their employees through a digital card. This is part of an ecosystem we are developing to serve businesses in the best possible way. We are also helping a variety of clients, from the professional who wants a card to an airline with international presence. For example, for professionals we have the Tap to Phone app, which they only have to download to their phones to receive card payments. For bigger clients, we have a payments center that can deal with their online shopping, the card receipt in POS, and their call center selling over the phone, even with AI. We want to be seen as the company that helps merchants thrive and sell more.

Apart from PagoNxt, what other trends do you see in the finance sector in Mexico or Latin America?

We are testing a concept of cryptocurrencies approval, which are used mainly in emerging markets where local currencies are not strong. Some users have decided to switch to crypto so we want to provide them simple ways of doing that or changing it to dollars. It is still something that we have to analyze and determine if it is feasible. We aim to help cities use less cash. We are also conducting tests on toll booths and other public places to pay with cards, and we will continue testing concepts, innovating and talking to key players to work on this, because in Getnet we have rooted in our culture to imagine, care, and simplify. ✖

Finance

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Manage your business with solutions tailored for you.

It´s easy with Getnet.

Getnet, a PagoNxt company, is a global acquiring franchise developed to create opportunities for merchants worldwide. It improves the simplicity, speed and safety of payments for merchants by means of gateways, risk management, processing, schemes connectivity and issuers services.

€112bn Total Processed Volume*

>35 1.3mn 2,300 countries with acquiring service

active merchants

employees

Find out more about our payment solutions in: Getnet.mx

*2021 figures

48

Mexico 2023

INTERVIEW

MAKING an impact

A leading Mexican private equity fund of funds and co-investment alternative investment management firm, Fondo de Fondos sees opportunities aplenty in the country and Latin America as a whole.

F eli p e V i lá MANAGING DIRECTOR, FONDO DE FONDOS

Manages a

$1B portfolio

Why did Fondo de Fondos decide to enter the venture capital industry?

We have launched new initiatives over the last year, and our venture capital part has grown considerably. We are in every new unicorn that has emerged, which I am pleased with. We operated in energy a little but decided to pause for obvious reasons, such as the drop in petrol prices. Following global tendencies, we launched a fund for impact investing and made the first close at the end of 2021. We will invest not only in funds that look for a market return but also in companies that want to make a social, ecological, and governance impact. They should not only comply with ESG criteria, but also value climate and social risks.

They need to look actively for a positive impact.

How attractive is Latin America as a hub for investment?

BIO

Since 2009, Felipe Vilá has led Fondo de Fondos, an investment vehicle created by four public development banks: NAFIN, FOCIR, BANCOMEXT, and BANOBRAS. Previously, Vilá served as CEO of HSBC Casa de Bolsa in Mexico. He holds a PhD in economics from the University of Texas at Austin (US).

Our interest area for investment lies in Latin America. We have a steady pipeline because there are funds in places such as Colombia, Brazil, Peru, and Mexico, which are pursuing adequate returns as well as taking care of social and environmental issues. We become signatories with some Mexican retirement funds administrators (AFOREs) for the UN for Responsible Investment program. We have also seen opportunities to create an investment vehicle to finance Mexican SMEs with the same positive impact in social and environmental purposes. There is significant interest from Mexican and foreign investors in technological innovation companies, and bigger funds that were never seen in Mexico before are entering the market.

They are constantly looking for investment opportunities in Mexican technological companies, and this development has changed our company.

Why is it important to widen the scope of financial tools available in Latin America?

The new initiative focuses on public investments, especially in publicly traded debt securities. For many years, the government used the legal reserve to finance its public debt but stopped 45 years ago. At the time, the stock market was a

huge financing source for SMEs, though this later stopped and was never brought back. If the stock markets started attending to smaller companies with short and medium-term issuances, for working capital or specific projects with a three to a six-year term, it would be an interesting financing source for these companies. SMEs represent the majority of companies. Even if their productivity is lower than large companies, they attend to interesting markets and have positive impacts on generating employment. As a consequence, there should be more financing sources than development and commercial banks and non-bank institutions. The investment vehicle that we will launch is a debt fund strictly related to the debt capital market.

In what ways are you further diversifying your portfolio in 2023?

In addition to the previously mentioned initiative, we will also launch the Fund of Funds Mexico Venture III. It is a fund of funds destined to invest uniquely in venture capital funds and jointly coinvest with them. We are a comfortable co-investor for fund managers. We do not want to compete with other funds.

How are you preparing for the post-pandemic era transition?

Now, for the change of administration, I expect some sectors to accelerate growth. In 2023, we expect to return to the level of investing we performed up 1Q2020. We are observing an acceleration in investments in technological innovation companies, though it is a complicated sector.

However, the energy sector is an interesting area for us to invest in over time. Private equity should be reactivated, though rescuing it will require a great deal of work. It is not only about Mexico; all of Latin America’s private equity is going through a difficult time. There is little interest from international investors, and most funds are having problems collecting capital to invest in Latin American countries. ✖

Finance

49

Image: Jacomergo

An aerial shot of the La Mexicana Park in Santa Fe, Mexico City

50

Mexico 2023

FOCUS Formalizing t h e fina n c ia l i n d us tr y

IN PRAISE OF THE SEE-THROUGH While Mexico’s economy is strong, financial practice and corporate transparency need tangible improvement to reap the higher hanging fruit.

MEXICO RANKS among the world’s 15 largest economies and second in Latin America. World Bank data for 2021 indicates a GDP per capita of USD9,926.42. Latam overall grew by 6.8% in 2021, having contracted 7% in 2020, while Mexico printed a GDP of USD1.293 trillion and growth of 4.8%. Another impressive figure is the nation’s 70% internet penetration rate, which bodes well for initiatives to expand the formal economy by raising financial participation.

This in a country where cash remains king, even accounting for 67% of online payments. Sector research reveals that around 60% of the population remains unbanked, although 94% of consumers use mobile banking apps or online banking services. Raúl Gallegos is the President of AMEXCAP, The Mexican Association of Private Capital, established in 2003 as a non-profit organization to foster the development of Mexico’s private capital and entrepreneurial capital industry. Speaking to TBY, he notes fierce competition from more formalized economies to woo the foreign investor. Yet Mexico, he notes, has scored well fintech uptake, the catalyst of financial participation.

Turning to the corporate world, one is struck by the fact that 95% of Mexican companies are family owned, with 90% run by a family member. Globally the number is 65% of companies. Such firms are often less transparent or are reluctant to go public, which in turn curbs capital market liquidity. And so the challenge is to reap… …THE WAGES OF RESPECTABILITY

Guillermo Cruz, US Managing Partner of Maquia Capital, believes in the country’s potential to the degree that “businesses in Mexico should compare themselves on a global scale [because while] most of us compare ourselves within Mexico, or within Latin America

[…] the sky is the limit.” He points out that Mexico, and Latam in general, predictably boast a vast deal pipeline because companies are cheaper to acquire than in the US, even though they might in actual fact have greater commercial potential. Meanwhile, Gallegos highlighted his organization’s focus on “promoting transparency and ethics, having the most professional managers possible, and conducting optimal interaction with investors to have the best industry we can.” Notably, AMEXCAP’s objectives include the generation of actionable statistical information.

TAKING STOCK OF THE MARKET

The fact is that Mexico’s stock exchange lags other markets in the region. World Bank data shows that in terms of GDP, equity market capitalization, while rising notably from 17.7% in 2003 to 33.5% in 2016, hugely lags the 100%+ of the US or Japan. The Mexican Stock Exchange, Bolsa Mexicana de Valores (BMV) ranks second after Brazil by percentage contribution to GDP. It has a market capitalization north of USD530 billion. The bourse’s integration to the Latin American Integrated Market (MILA) in December 2014, joining the Chilean, Colombian, and Peruvian bourses, transformed MILA into Latin America’s preeminent stock exchange.

Yet for the capital markets to reap the spoils of the wider economy, Fondo de Fondos (Fund of Funds) Managing Director Felipe Vilá stresses the need to better reach the investor. The firm champions productive investment in Mexico and Latam, notably to boost SME competitiveness. It also pursues a strategic plan to “develop and invest in private equity, venture capital, energy, infrastructure, and social and environmental impact funds.” Vilá notes that once, the “stock market was a huge financing source for SMEs, though

Finance

this later stopped and never returned.” He proposes that the equity market enable these firms to opt for “short and medium-term issuances, for working capital or specific projects with a three to a six-year term.” This would present an enticing source of finance for firms that ultimately account for the bulk of the economy.

MORE INSTRUMENTS MAKE MORE SOUND

Maquia Capital, which eyes managing a USD1-billion portfolio, assists Latam companies in joining the public market through special purpose acquisition companies (SPACs) that assist firms with the leg-work of listing “audits, governance, and so on, [all] in English.”

Cruz laments the fact that Mexico “has not recognized enough value in the capitalization of companies to make local listing attrac-

51

tive.” Meanwhile, “on the institutional side, there are few investors including pension funds due to the illiquid market,” he notes.

The prognosis, though, is hopeful. “We have had various cycles,” says AMEXCAP’s Gallegos, and today Mexico is “entering a different kind of phase, with what I consider a more mature industry.”

Mexico’s real estate investment trusts (FIBRAs), for one, play a role in raising liquidity through sizable property portfolios. Sector data reveals that these profitable instruments have seen annual earnings rises of 15% over the past three years, as revenues climbed 7.4% per year. As of August 2022, the Mexican economy had grown 5.7% YoY, exceeding estimates of 3.3%.

The race is on for the country to build confidence in its financial universe and enjoy the deeper liquidity pool it merits. ✖

PE/VC USD + $2.2

49

98

~782k

10

billion AUM

funds

coinvestments

jobs

vehicles

Fondo de Fondos is formed by 35 professionals in Private Equity and Venture Capital. The organization counts with the best international practices in Corporate Governance, with a Board of Directors with independent members and support committees (Investment Committee, Corporate Practices Committee, and an Audit Committee)

Capital commited per strategy 9

7

1

Capital commited per strategy

Number of companies per region

147

MEXICO IN FIGURES 1 USD$63.4 billion raised in capital commitments from 2010 to 2020 with a CAGR of 13% in more than 600 Funds. During 2020 there were at least 49

9

exit transactions, 45 of them successful, for an amount greater than USD$1.1

39

billion, thus highlighting the maturation process of the industry in Mexico.

33

49

Fondo de Fondos has invested in 1,114 companies across different emerging and developed economies, bringing a wide diversification to our investors, looking to find a link into México.

LATIN AMERICAIN FIGURES 2 Despite difficult macroeconomic conditions, fundraising closed the year at USD $7b raised across 51 fund closings for LATAM dedicated funds.

2020 was a record year for investments overall with USD$16.3b invested across 653 deals. It was a record year with USD$11.1b divested across 105

Contact information | T.+52 55 4433 4500 | contactopublico@fondodefondos.com.mx | fondodefondos.com.mx Data: Fondo de Fondos. As of June2022 | 1. Source:AMEXCAP 2020 | 2. Source: LAVCA 2020.

exits, largely driven by public markets activity.

Mexico 2023

Image: PICTOR PICTURES

52

TBY ANALYTICS: MEXICO 2023 FINANCE We posed a number of questions to our interviewees in the finance sector. These are their top responses.

What is your primary focus in 2023?

What is your outlook for the sector?

Very positive

19%

Domestic expansion

4

Positive

12

Consolidation

45%

Average

23% International expansion

13%

4

Digitalization Negative

0

Very negative

0

Finance

53

INTERVIEW

the next STEPS With the immense opportunity for insurance in Mexico in the coming years, Zurich is counting on growing its position further and expanding its presence in the region.

Marc Mart í n ez CEO, ZURICH MEXICO

Why does Zurich consider Latin America a strategic region for growth?

Zurich Group is a global enterprise with a footprint mainly in Europe and North America. These two continents account for 70% of the business. We are also in Asia Pacific and Latin America. Asia Pacific accounts for 10%, and Latam around 14-15% of the total group revenue. Insurance penetration in Europe and North America are well above those of Latin America and Asia Pacific. Therefore, the growth opportunity lies in those two latter regions. As such, the Zurich Group visualizes Latin America as a growth leader for the next strategic cycle, which is the next three years. Zurich Group is already the third-largest insurer in Latin America. So, when we invest in a geography or a country, we want to be in the top five position. My mandate in Mexico is to bring the company to the next level, meaning that top-five ranking. If I can summarize the strategy for the next year, the word would be together. We will work together with our distribution channels; that is a vital strategic community for us. Agents and promoters are important for us. We also work together with our communities. Zurich Group wants to be perceived as a high-impact brand, not only on the insurance protection side with families and companies, but also with communities, and regarding such issues as climate change and the less protected communities. In Mexico, we have been working with the Red Cross for a decade and the Zurich Foundation for nine years now in preventing floods. We have a Flood Re-

silience Program in Tabasco, which is highly needed, and which we extended last year to San Luis Potosí. We are having an impact for around 40,000 people, and will continue investing in the vital flood resilience program.

What specific opportunities have you identified in the Mexican market to position Zurich as the number five insurance company?

If you look at the Mexican market as an economy, how many countries in the world have over 100 million inhabitants?

There are 10, including India, China, Japan, Pakistan, Bangladesh, Indonesia, the US, Russia, and Mexico. Looking at those markets, for the majority of them the group is already among the top five.

And if you look at the ones where we are not, the most attractive market is Mexico.

Mexico is a large economy and a young country. In fact, the average age in this country is 33 years old. The insurance market has been growing consistently over the past 10 years. The market has also been well regulated since 2014, at the same level, with Solvency I and Solvency II, as the US and Europe. It is also a profitable market worth USD32 billion that is growing, well-regulated, and profitable. The cherry on top of the cake is that insurance penetration remains low.

Only 30% of cars, 10% of the houses and apartments, and 7% of SMEs are insured, which is why Zurich Group is investing in Mexico’s long-term prospects. There are two large groups of business: retail (meaning persons and families) and enterprises (commercial). Currently, in

Mexico, we are more weighted toward commercial with a 60% commercial and 40% retail split. In the next strategic cycle, we foresee the opposite; 60% retail and 40% commercial. That's a major transformation. This would allow us to better diversify risk. We currently have considerable capacity deployed to certain large customers, which is why we would favor more granular risk. Therefore, the overarching strategy is to rank among the top five in the market within the next three to five years. We would like to invest organically in the business, by which we mean in retail, SME, and the middle market. At the same time, we intend also to invest selectively with large corporate customers, leveraging our international capabilities such as risk engineering and international programs. ✖

BIO

With extensive experience in the financial sector and a 22-year career at Grupo Zurich, Marc Martínez has held various positions in different countries in Asia, Europe, and Mexico. He currently serves as CEO of Zurich Mexico. He came to Mexico in 2018 to occupy the position of VP of commercial insurance and later as VP of clients and distribution. Among other roles, he has served as claims manager in Spain, claims manager in Europe, regional director of distribution in Eastern Europe, VP of distribution in Spain, and head of operations for Asia Pacific commercial insurance. He trained as an industrial engineer, with a Global Executive MBA (GEMBA) at IESE Business School.

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Mexico 2023

INTERVIEW

Gus ta vo Ca n tú D ur án CHAIRMAN & CEO SEGUROS MONTERREY NEW YORK LIFE How did Seguros Monterrey New York Life become one of the most financially stable insurance companies in Latin America?

BIO

Gustavo Cantú Durán is Chairman & CEO of Seguros Monterrey New York Life (SMNYL). Prior to joining the company in 2014, he worked in different roles for Nextel México (now AT&T) for over 15 years, where his last position was COO. Before that, he participated in different international law firms and editorial boards and was a member of the board of directors of the Nextel Foundation. He has imparted lectures at both public and private universities and published various writing assignments.

The first thing to consider is Seguros Monterrey is part of New York Life. This creates a different environment regarding how we think about our purchases, because our main goal is to maintain the financial stability of the company and fulfill all our promises. We are conservative in how we invest our reserves, and we aim to take a longterm approach. We do this by pairing our products well to the currency in which the product is issued, which means we do not take FX risks in terms of our policy holders. In addition, Seguros Monterrey has strict policies and procedures regarding how we handle our investments and reserves. We have the highest credit rating in Latin America for any insurance company. Second is how we handle business. We are careful with our expenses, how we pay our commissions,

and how we interact with the sales force. We are excellent at managing and keeping operational costs at a reasonable level. This company was founded 82 years ago, and New York Life was founded 177 years ago. In this time, we have seen everything; we know how volatile the market can be and plan for that in mind.

What is Seguros Monterrey doing regarding product innovation, and how do you reckon with Mexico’s low insurance penetration?

We must understand what a low insurance penetration means. We should look at the penetration in terms of the population segments that require this protection or that want it as an alternative to the public insurance system. Some points of penetration are much higher than what we would expect, which makes for a competitive insurance landscape. The insurance business is competitive but there is still a long way to go. This challenges us to create products that reach parts of the population that require better insurance. They must be viable, usable products and something that provides real value to the customer. ✖

HP AD HOLDER ASESORES SENIOR

Finance

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INTERVIEW

sound fiscal ADVICE With its growing success in increasing insurance coverage slowly but surely in Mexico, Asesores Senior is now working on increasing its team size to cover the entire country.

S aú l R u i z MANAGING DIRECTOR, ASESORES SENIOR

How do you empower your team to pursue and achieve continuous annual growth?

Magic happens when we develop associates and give them trust. The associates are empowered to treat our firm as their business through our culture and philosophy. If one grows, we all do. There are three vital points to consider. First, they achieve without excuses. Second, we have a shark mentality, wherein if we stop swimming, we die. We are looking at how to grow and invest in these businesses. Sometimes we wonder how best to approach high-profile entrepreneurs.

The third point is “just do it.” In 2022, we registered around a 56% increase in sales.

We brought on 33 additional people into the company, and in 2023 we plan to hire a further 50. For 2022, we ranked third out of 200 MetLife commercial associates in terms of the added value we offer as brokers. Many factors qualify us, and we successfully retain talent, portfolios, and clients. In short, our associates will remain loyal to us if we teach them how to grow.

Why is Asesores Senior investing heavily in increasing its team size?

For two reasons. First, because we have grown our business by inviting more associates. Second, I dream of a perfect country of widespread insurance coverage. Social conditions would improve, as would school attendance rates. Fewer families would suffer health-related catastrophe and need to sacrifice their homes. More-

over, insurance coverage would improve personal safety substantially.

How can you combat the lack of importance given to insurance in Mexico?

We face the challenge of proving to Mexicans the value of investing in insurance and are also working to promote a culture of prevention. This can be challenging as even after a particularly challenging event people often forget how tough it was for them over time. A good insurance agent has to be committed to changing public misconceptions such as insurance firms not paying out.

What is the main added value of your Key Person program?

As the name says, it’s all about the Key Person and asking the question as to what the company’s future would be if they became incapacitated or even died? How many national and international companies have collapsed because such a key person passed away? What is the credibility of creditors, suppliers, clients, and collaborators if this key person is no longer there? The impact is profound. If the company thrives, how much does it cost in time and money to maintain? Independently of other people in the company capable of keeping it alive, this person is key to its survival. Who will take the lead and keep core ideas and vision alive? This is what we want to encourage companies to consider. This product that can ensure

continuity is insurance to mitigate the negative impact of the company leader’s demise. Capital insurance helps mitigate this risk, allowing a firm to reconfigure itself for continuity and consider the risks of incapacity that it could face.

Some people are optimistic, while others are more prudent, but how do you foresee 2023 panning out?

We foresee improved growth of at least 57%. We are distinguished by our qualified nature. We are an insurance broker that not only sells a product, but offers every service developed with our clients.

We support them fiscally and in other ways. There are many excellent national brokers, but what differentiates us is our work ethic and accompanying service.

Today we have over 4,500 clients and are keen to assist even more families and support our company by having people change their lifestyles. We want to invite many entrepreneurs to listen to what we could do for them. Our profile is people keen to change their lifestyle for growth. ✖

BIO

Saúl Ruiz is an industrial engineer with a specialty in business administration. He is an insurance broker and transforms corporate leaders into successful entrepreneurs. He is dedicated to increasing financial education in society.

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Mexico 2023

FORUM

INNOVATION These companies are providing users with new financial products and alternative avenues to invest for the growing Mexican and Latam markets.

Son ia Mich aca

D a n ie l Vo gel

I ñ gi o C as t i llo

FORMER REGIONAL GENERAL MANAGER, TRIBAL

CO-FOUNDER & CEO, BITSO

MANAGING DIRECTOR, UNICLICK, MEXICO

WE COMPLETED our hybrid debt in January 2022, Latin America’s first foray into hybrid debt featuring fiat and cryptocurrency. We are currently working on a variety of use cases. As with all of our other projects, we have created a section dedicated solely to blockchain and cryptocurrency. It is working on a variety of options. The first was recognizing that there is a significant need for enterprises to conduct payments and other transactions in this corridor between Mexico and the US, which we did through Stellar and Bitso, utilizing what we already had as part of the loan round digital currencies through USDC. Our clients do not need to know anything about cryptocurrencies, because we handle all of the backend work, leaving them to enjoy the benefits. The only thing they know is that it was completed in a timely and cost-effective manner. As a result, this was one of the first solutions we implemented, leveraging the debt we had at the start of the year. It is one of a growing number of solutions being produced around the world, using blockchain and in this new ecosystem. Although it is still relatively new in Latin America, there are numerous applications that can be developed.

WE STARTED the company in 2014. Some

THE LAST FEW MONTHS have been ex-

of our earliest investors thought Bitso would quickly become an important player in the remittances space, overestimating what the technology could do.

Many expected people to just switch to Bitcoin in one or two years, which obviously was not the case. However, when we look at where we are at today, we have processed billions of dollars in transactions and are becoming a meaningful player in the international remittances space. This is a great example of overestimating what the technology could do in the short term and underestimating what it could do in the long term. We just continue to work on the problems that need to be solved, and slowly and surely, many things fall into place, and suddenly we are on track to do billions of dollars in remittances on a yearly basis. When I look at the future, one thing that I believe we are underestimating is the power of crypto as a payment mechanism. There are not many start-ups trying to do crypto payments and so on. It is always unclear how things will end up looking, and you need to be creative in your approach and be conscious of external forces and adjust accordingly.

citing for Uniclick. We have been going a bit faster than anticipated, which is good news. There are the challenges of scaling up as fast as we need to, but it has been positive overall. Most of this scaling up has been done in our tech and product areas. We have also been growing our team at Uniclick. We started 2021 with only around 30 people but currently number almost 150. We are consolidating ourselves as a technology company at heart, and we have been able to really grow the business in every important metric. For instance, we have been growing our total loan portfolio and client base. We have also been doing a great execution in developing our product pipeline, so we are getting closer to becoming a one-stop shop for SMEs in Mexico, which is what we want to achieve. We also have plenty of products ready for launch. At the moment, we are focusing on a corporate credit card. It is a hot sector right now in the fintech environment in Mexico and Latam. More than just creating new clients, we are rolling out our product as an add-on to current loans or current clients.

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INTERVIEW

steady AND SURELY Having achieved double-digit growth in the last few years, Pluscorp has also managed to penetrate sectors and markets that were previously out of its reach as a result of its technological platform.

H arry S acal CEO, PLUSCORP

What investments has Pluscorp made toward transforming its portfolio?

Pluscorp made some incredible changes during the pandemic based on what we learned from it. Another thing we learned was to achieve more concrete goal, greater growth, and professionalism. The pandemic taught us that the financial sector is a prime and important industry in the world. What helped us survive this pandemic was government support, plus support from the financial sector. In addition, we were able to cope with the crisis by being on the side of our clients and with the support of our founders to obtain sufficient liquidity. Our growth doubled during the pandemic as we were more present with our customers. We made many incursions into markets that had contracted in financing, and as a result we managed to achieve more than double-digit growth steadily over the past two years. We focused on the main sectors of the market such as logistics, healthcare, services, and so on. On top of this, we as an institution made the decision to capitalize the business even more given the strong growth we were experiencing. When we decided to put in more capital and more strength along with the institutional decisions we made, we were able to expand our facilities. We were able to set up our own IT department and used fintech technologies, technological platforms, and tools to make our company more efficient, which resulted in the success we are seeing right now. We created a product called FastPlus that allows a person to enter their basic information, and in 10 minutes through a due diligence and rating algorithm that we developed in-

ternally, they will know if they can take out a loan or what loans can be granted.

What kind of credit do you grant?

Our business credits are already set. Right now, with FastPlus, our main product provides credit of between MXN200,000 and MXN2 million. It is focused on SMEs. Plus’ success, unlike other platforms, lies in the fact that we are the only platform that can provide simple credit as well as a pure lease. Those two products are doing well, and our portfolio will grow further. The great thing is that we are able to enter into markets in the provinces that were previously not within our reach. We have branches in Guadalajara, El Bajío, and we are about to open in the southeast. Our technological platform allows us to reach all regions of the country.

currently, and as a result prices continue to rise everywhere. However, in the next two years the situations will begin to normalize, with incredible changes. Now, we are working hard to become a sustainable and supportive company. We have an important inclusion program in the institution, where our corporate government and management has zero discrimination, and there is complete inclusion. The companies that will succeed in the future are those that are well prepared. We are also preparing ourselves to be certified. In 2022, the company also will receive positive ratings from Tolerancia Activa. ✖

What next steps is the company taking?

Right now, we are focused on growth and incursion and the creation of a franchise.

Being a public company with excellent ratings, a good credit history, and extensive portfolio, the next step is to develop a franchise. Our great corporate government gave us a clearer approach to decision-making. In truth, every company was negatively affected, but in the last year, we have improved on all our ratings by two notches. We have gone from negative predictions to positive expectations. Right now, we are experiencing organic growth with our sales capacity.

What do you expect will be the main trends in the coming year?

The world is now developing rapidly after being forced to come to a standstill for two years. That is causing inflation

BIO

Harry Sacal is an experienced entrepreneur in the finance industry, having founded PlusCorp over 25 years ago, a SOFOM specialized in credit and leasing. He has also overtaken high-level volunteer roles such as Administrative Director of the Memory and Tolerance Museum in Mexico City, which focuses on the consequences of indifference and discrimination through historical memory.

BOOST YOUR BUSINESS IN LESS THAN 10 MIN Working with sustainable & diverse businesses all over Mexico, guaranteeing the success of entrepreneurs in a 100% digital process.

(55) 5080 8181 contacto@plus.com.mx fastplus.mx Paseo de los Tamarindos No. 90 Piso 19 Torre 1. Arcos Bosques, Bosques de las Lomas, 05120 – Mexico City

Finance

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INTERVIEW

expert ADVICE Maquia Capital aims to help companies in Latin America join public markets through SPACs

Guille r mo C r uz U S M A N A G I N G PA R T N E R , M A Q U I A C A P I TA L BIO

Guillermo Cruz is a Harvard graduate and is currently the co-founder of two public companies, Maquia Capital Acquisition Corporation, and Benessere Capital Acquisition Corporation.

Additionally, he manages two private equity funds focused on venture capital, positioning himself as one of the leaders in the private equity industry in the country with more than USD295 million under management.

What trends has Maquia Capital identified in the Mexican finance market?

Latin American company that is on the financial service industry.

GUILLERMO CRUZ Unfortunately, our local market has not recognized enough value in the capitalization of companies to make local listing attractive. Some companies have been delisted because of this reason. On the institutional side, there are few institutional investors including pension funds, which are mainly the AFOREs. There is not really a liquid market that can maximize their value on the local exchanges. That was the original reason we started doing special purpose acquisition companies (SPAC).

These are incredible fit vehicles to take companies that have the right size to be public, but take them to an exchange or a public market where they can actually maximize their market cap and the value of their price per share. Our main targets are companies in Mexico and Latin America that are ready to be public.

Why do some investors show hesitance toward SPACs?

What strategy do you use to define where these SPACs will be listed? And how do you find the companies?

J er ónimo Pe r alt a M E X I C O M A N A G I N G PA R T N E R , M A Q U I A C A P I TA L BIO

Jerónimo Peralta is Managing Partner of Maquia Capital Financial Group for Mexico, and CFO of Maquia Capital Acquisition Corporation, a USD175 million SPAC listed in Nasdaq. He has extensive experience as an investment professional in high impact-investments and deep expertise of the technology industry. His most notable achievements include managing an eight-company portfolio, investing +USD180M and also serving as a member of the board of directors and as a trusted advisor and a guide for these ventures as they consolidate and grow.

JERÓNIMO PERALTA Our goal is to reduce risk by having a diversified portfolio including tech, health, energy, entertainment, mobility, and agriculture, among others. We mostly partner with the best managers who can execute and lead on any specific industry where we want to invest. We work with the strategy of a fund of funds, investing in the best management team specialized in certain industries.

GC In Mexico, there are not many SPACs. There are only two listed in Mexico on the local exchange. If a company is in the US sells USD150 million in revenue, they would not go the SPAC route and instead list directly. In Mexico or Latin America, however, the same company that makes USD150 million does not know how to list on an external market. It is tough as a foreign company, outside of the US, to go to the US and get listed. They need extensive preparation in terms of the financial side, audits, governance, and so on, and everything must be done in English. We function as a shortcut for these companies; we have the money, the people, and the listing.

JP There have only been a few people doing SPACs in Mexico or Latin America. Outside of the US and Canada, we already have three SPACs. We have the most SPACs in Latin America and Mexico, and anyone that wants to do SPAC will likely approach us to work together. We do our Due Diligence, and we co-invest with them. Entering the public markets is difficult. Many people have approached us because our track record on our listings; we have also participated on private equity investments, with different venture and growth investments, including one unicorn.

GC The SPACs are listed in the US, but

How close is Maquia to its goal of managing a USD1-billion asset portfolio?

the managers and main targets will be in Latin America. Our second investment was an agro-SPAC that we took public in Canada. This was the fifth-largest IPO in 2022. We are targeting an enormous producer of crops in Latin America that distributes mostly in the US and Canada.

We are also excited about the first investment of our fund, our Maquia SPAC who is targeting a tech company planning on finishing its business combination this year; this deal will be worth post investment around USD800 million. It is a

JP With a company that manages USD1 billion, you can use a back-to-back credit strategy in the US and use local loan financing at very low interest rates, which is very cheap money compared to our local markets. These are the benefits and access that you have when you are a company with more than USD1 billion assets under management. If we achieve all the goals of our strategic planning by the end of 2023, we will have achieved the USD1-billion AUM mark. ✖

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Mexico 2023

INTERVIEW

PAY day Macropay is making it easier to access quick credit, especially for those previously cut off from the system.

Guille r mo Osor io Rod r íg ue z FOUNDER & PRESIDENT OF THE B O A R D , M A C R O PAY BIO

Guillermo Osorio Rodríguez is an entrepreneur with over 20 years' experience providing telecommunications services. He is responsible for establishing the company’s short-, medium-, and long-term overall goals and specific objectives as Founder and President.

To begin, can you tell us about the business model that you use and how you are revolutionizing the retail industry with your services?

ALEJANDRO HERRERA We believe that

we are truly making a change in the retail sector. We are changing the traditional way of making telephone sales in Mexico, and with financial support and technology we now approve credits of between MXN5,000 and 8,000 in 15 minutes. A part of our business model is to extend credits and provide technology to those who have been denied it due to their financial situation, geographical location, or a general lack of access to such products. Credit cards are decreasing in volume and banks are approving credits.

This is our main business model and allows us to reach areas of 10,000 habitants and give these people the opportunity to purchase a smartphone. This way they can access digital platforms like Google and others, while students use them for online classes, which have been essential during the pandemic. Many companies unable to purchase laptops during the pandemic were nonetheless able to purchase smartphones, which benefited the work from home situation. This is how we helping people through the financing of smartphones.

GUILLERMO OSORIO For me the objective

of our business is to be different. The services extended in our stores are available to all, allowing those who would normally never enter a bank access to resources.

Nine out of 10 people leave our stores happy with their loan.

How can you assure clients make their payments and that the company will remain profitable with such few requirements?

BIO

AH There are different mechanisms.

We have a strong team that follows and manages the loans and we have the technology that manages different credit types such as a credit bureau. We also have access to the blacklist. With this combination of over 400 variables, we can analyze models and predict whether the telephone will be paid for or not

Alejandro Herrera Correa is a senior executive with over 20 years’ experience in business operations and management in both the retail and wholesale sectors, as well as in the restaurant industry and self-service businesses. In his seven years as COO of Macropay, he has increased business operations by 1,000%. He is currently CEO.

GO In each loan that we make the client sees an on-screen video of the finance system. They can see that if they pay in a certain way and stay updated with the payments then this can give them access to other credit loans.

A l ejandr o He r r e r a C or r e a CEO, M A C R O PAY

What plans does the company have to raise capital in the public market?

AH The idea is to issue long-short term debts. We have been working with BIVA for a year now and hope in the next semester to be able to issue debt. We are happy with the collaboration and have worked on many programs to build trust among stockholders, our clients, workers and the investment market.

GO We began the year by creating a presence. And then in the future we will launch a diversity of other activities.

AH Currently, our funds are private through national investment banks, and we have our own capital. We are undergoing expansion and ended 2020 with 120 stores and we started 2021 with 300 stores. As of today, we have more than 400 stores and we plan to end the year with 600. Our expansion plan is to reach 2,000 stores by 2025 and this is part of our strategy in regards to the future, as is the issuance of debt in stocks and the creating of a greater presence because these projects require considerable investment. Ours is a business of high growth potential and we could even replicate the model in other parts of Latin America or beyond.

What steps is the company taking to achieve a store count of 2,000 in Mexico?

GO Currently the objective is to open

2,000 stores in Mexico and become one of the highest sales points on a national scale. We have the system to do this but what we need now is the capital to achieve it. We have created a system, after many years of preparation, that allows us to open a new branch every 18 hours.

AH There is a whole structure supporting us into which many years of work have gone. We have many talents from different companies that staff branches in key locations. We have a lot of experience now in opening each branch and we well prepared to do so in terms of technology. Meanwhile, our Business Intelligence department with over 30 mathematicians oversees the metrics applied to each store, be they geographic or other variables. We also have an expansion department and are able to build a store of around 50 to 60sqm in 30 days. Being fast builds of low cost means that we can open a store every 18 hours. ✖

Finance

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Mexico 2023

INTERVIEW

INVESTING smartly Ch r i s ti a n H au s w ald t Á lv arez CEO, INVESTED

Invested is a financial wellness company that provides solutions in Latam such as financial wellness programs and financial planning models.

Why is it important to promote financial wellness programs in Mexico?

ployees is too big to be ignored.

Some companies around the world offer their employees financial wellness programs as part of their benefit offering; in Mexico this is not a common practice. We started working with companies on this many years ago, though with the pandemic, companies started focusing more on their people. In the last three years, companies have started to work more with us, and their employees are becoming more interested in financial wellness programs.

We see a great opportunity here. In Canada, for example, 50% of the middle class invest in the stock market compared to less than 4% of the population in Mexico.

Many people have a bank account though these accounts have limited resources.

They are not yet investing their money.

There is also a different culture. In Mexico, there are only a few companies working in financial wellness solutions, and they do not necessarily help people to use and invest their money in a smart way so they can reach their objectives.

In what ways can financial awareness help increase productivity and profit in companies?

What are the first steps when doing a financial evaluation of employees in a company?

BIO

Christian Hauswaldt Álvarez has worked in the financial industry for more than 20 years. He is an angel investor and board member of several companies in the fintech and healthcare sectors. He is the founder of Invested, where he is currently CEO. He holds a degree in business administration from Universidad Iberoamericana and a postgraduate degree in finance from EGADE. He continued his education with the digital transformation program from ISDI, the D1 program at IPADE, and the Aligning Strategy and Sales at Harvard Business School.

First, we run a simple and useful survey among the employees, and we give the company a big picture of how concerned its employees are about financial stress and many other indicators. With this, we create a program that has a hybrid approach. We work with technology digital content and tools we deliver with our financial wellness platform. At the same time, we also have financial planners and advisors who work with employees and meet some of the needs that cannot be handled with technology. In financial planning, we definitely need a hybrid approach. We have worked on technology for some processes that are complicated to do by hand, and we use human approach for other aspects. We work with many companies, including Vanguard and the Mexican stock market. Financial wellness for em-

We are pleased to be raising the level of awareness about financial issues. In 2022, we worked with more than 50 companies and conducted a survey about financial problems. We found that 80% of Mexicans face financial stress, and this 80% spend around 14 hours a month worrying about their financial issues. We help companies by providing the tools to work with their employees and create some solutions. We want to grow bigger and help more people.

We have spoken to companies in all the states of Mexico and want to create concrete solutions for people, companies, and the country. Some 70% of large companies in the US have such programs; this is one of the most valuable benefits for employees. We believe this will soon take off in Mexico as well. In 2021, we started working with a big Company in Mexico that is doing amazing things for its team. We started a program for 200 employees in the beginning. They were extremely satisfied with the content and financial coaching we provided, and the employees started to talk more about us and recommend this to everyone. We are now expanding our reach, having more than 1,200 employees benefiting from the program. right now, we are working to provide webinars to 1,200 employees of a company.

What are the next steps for the company?

Right now, we are working with more than 100 companies in Mexico, and by 2024, we want to enter other countries.

We have started working with some companies in Brazil and Colombia and plan to move up to the next level. We are not competing against financial institutions or other players; we are competing against other things that people use their money on. This is one of the problems: we are competing against the short-term mentality. ✖

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Image: Edgar Machado

A pedestrian shopping street near Zocalo in Mexico City

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Mexico 2023

VOICES FROM THE SECTOR

A lfo n s o S án ch ez MANAGING DIRECTOR, B A C K S TA Y What are the main growth opportunities in Mexico?

L u cio Me ndie t a

There is a great of movement in the market at the moment, such as mergers and acquisitions, but what is needed is funding. We help many Mexican companies to obtain funds to finance their working capital and exponential growth. For example, we have a client that had been in operation for less than a year, for which we obtained a USD4.3 million factoring line. We basically help companies to focus on their business, helping them to secure the financing required so as not to exhaust their liquidity, which usually causes companies to perish. That is why we do everything from simple credit to mergers and acquisitions.

MANAGING DIRECTOR, VIERGE GROUP

Do you have any expansion plans in Latin America?

What role does Mexico play in the strategy of the company?

Mexico is the strongest country in Latin America and the one with the most economic potential. We started Mexico’s operation, our latest expansion, back in 2016.

Currently we have presence with our own offices and locally established companies in Peru, Colombia, Venezuela, Chile, Mexico, and USA. Can you elaborate on the payment solutions that you seek to implement in Mexico?

What characterizes us as a group is the desire to always bring innovation to the Latin American market. Our solutions come from the US, Israel, Europe, and Asia as our main supplier. Europe and Asia are the most advanced countries when it comes to payments. For example, in China and Japan, people can pay with facial recognition, and it works perfectly fine. Right now, the market is trying to take that step, and we are moving that way. We have the technology, and it is easy to create an app that allows for different payments automatically. Currently, we have many projects undergoing. One of them is to provide fleets of taxi drives with a point-of-sale terminal POS) so they can accept card payments. In addition to increase their income by being able to carry out correspondent banking services.

With a population of 130 million, Mexico is such a big market. Therefore, we do not feel a need for expansion at the moment. We also have several customers that own companies both here and abroad, whereby we can secure their sales in other countries. We serve all kinds of companies, with one posting sales MXN2 billion every year and another of MXN20 million. We are present across the entire country.

Marcela F lo res P R E S I D E N T, LOCKTON MEXICO What issues in the Mexican market is Lockton helping to solve?

One of the main challenges is talent retention. The other is properly educating and training employees, both current and future ones, in new abilities. A company also needs to quickly adapt their environments and help employees gain these abilities. Companies that are now using AI to automate many things need to change the mindset and abilities of employees from manual work to other kinds of abilities and interactions. We have been recruiting and changing our value proposition in all the countries where we operate today in order to be a facilitator and consultant to understand the true needs of our clients and help them develop the different tools and strategies.

What are the main priorities in the local market right now?

We are working on being more consultative and behaving less like a broker. That is something that we have been working on; we handle many transactions for clients, though the important thing is to be closer to our clients. Lockton is truly becoming not just a broker, but a consultant that helps its clients with real solutions, that’s why out benefits division it’s called People Solutions it`s not just what we do but how we are focused on the people of our clients.

Finance

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F e r n a n d o d e Ab ie g a

What companies do you invest in, and what solutions do you offer for entrepreneurs?

We have a wide range of products, because we provide loans ranging from MXN300,000 to MXN40 million or even more. We have an extremely broad portfolio because we are brokers. We work with several financial institutions, and we have a wide variety of products. As a whole, our team has 22 years of experience in mortgages, eight years in SMEs, and about four years in insurance. The crisis with the pandemic greatly affected SME credit, and financial institutions withdrew strongly, not in mortgages. In mortgages, we grew incredibly by more than 30% in the first year of the pandemic and more than 40% in the second—in total more than 70%. This, combined with existing base, means we have one out of every five mortgage loans.

How do you differ from other players also entering the segment?

We were born different; we are the first SME brokers in Mexico, and that is where we stand out. We have a huge portfolio, and we are dedicated to providing service and making things happen in such a way that SMEs can have access to credit. That is our natural differentiator.

Di ego G arcí a CEO & FOUNDER, RD IMPULSORA DE NEGOCIOS What opportunities did you see in the market to start a credit company?

If we talk about microfinances and micro credits the product has been the same, at least in Mexico, for the past 20 years. However, people have evolved, and their necessities along with them. Approximately 80% of the people in Mexico are unbanked. Traditional banks are reluctant to lend those businesses money. It is astonishing that one of the most powerful economies in Latin America does not have adequate funding for new businesses. We thus decided to see how we could help solve the problem.

How many companies have you given credit?

Historically we have probably extended 3,000 credit lines. Right now, we have about 1,000 companies in our portfolio. We have about MXN200 million on loans. We started with the micro businesses, and it proved to be a huge hit. We are only a means to an end. Our loans are expensive. Why? Because they are short-term loans, and we bear a heavy risk. Ultimately, we lend money to people that nobody else wants to lend to. We work mostly with primary businesses because they have a high revenue. In addition, we work with two or three companies that work for big companies.

Image: quiggyt4

CEO, SOC ASESORES

SHARE OF THE POPULATION WITH ACCESS TO CLEAN FUELS FOR COOKING (%) SOURCE: OURWORLDINDATA.ORG 85

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SHARE OF PRIMARY ENERGY FROM FOSSIL FUELS (%) SOURCE: OURWORLDINDATA.ORG 93 92 91 90 89 88 87 '17

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SHARE OF PRIMARY ENERGY FROM LOW CARBON SOURCES (%) SOURCE: OURWORLDINDATA.ORG

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Image: Rodrigo Sarzo

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Green Energy & ESG

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CHAPTER SUMMARY

Green Energy & ESG

WHAT NEXT? t has been a quiet year for the renewable energy industry as projects stay on pause while the current administration continues to assign a low level of priority to the sector, not to mention the impact the pandemic had on investment. Amid this context, interviewees shared with The Business Year that many corporations are opting to maintain a wait-and-see mode for the rest of the president’s term, to keep capital from their investors safe from risk. One case was shared

by Forefront Power, a subsidiary of Mitsui & Co; “We developed utility projects at a smaller scale of between 10 and 15MW, but then with this administration, it became a challenge as all permits were put on hold,” shared Director of Business Development Pablo Rivero. The company was able to find an opportunity in next-generation projects of under 500kW, which is its current specialization.

Despite political obstacles, companies are still set on maintaing a long-term vision for the country, considering the potential it has to generate alternative energies. “Mexico has one of the world’s largest renewable energy potentials,” explained Israel Hurtado, President of the Mexican Association for Hydrogen (H2 Mexico). “It is part of the solar belt, which is made up of the countries with the most solar radiation on the planet. In addition, Mexico has a great deal of wind potential, particularly in Oaxaca, as well as enormous promise in

I

geothermal energy.”

The market is also focusing on diversifying the types of renewable energies available in the Mexico to compliment the portfolio of the country and assure energy security. One example is green hydrogen, an energy that Hurtado is set on promoting. “Green hydrogen is already being produced in much of the world, and the electrolyzers, which are the equipment that produces green hydrogen through electrolysis, are becoming more efficient and less expensive,” said the president of H2 Mexico.

Other companies are focusing on overcoming the challenges of the market by focusing on strengthening what already exists through technology. On this matter, The Business Year spoke to Solfium, a company focused on reinventing the customer journey in the solar energy industry.

“We operate in a market that is quite fragmented, with many players operating in this space, mostly focused on either industrial projects or residential and commercial ones,” said CEO Andres Friedman. “What we offer is an integrated turnkey solution for companies to decarbonize their whole value chain, starting with their own facilities but also including their suppliers, customers, partners, and employees. Our premise is that we need to accelerate the energy transition in order to mitigate climate change.” ✖

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INTERVIEW

SLOW and steady progress

With the growing interest in decarbonization around the world, the country has the potential to become a leading hydrogen producer globally with the support of the Mexican Hydrogen Association.

I s rael H u rt ad o P R E S I D E N T, M E X I C A N H Y D R O G E N A S S O C I AT I O N

Green hydrogen started being produced in Mexico at the end of 2022 Green hydrogen can be used to replace natural gas

BIO

Israel Hurtado has been head of the Mexican Hydrogen Association since late 2020 and is a seasoned veteran of the energy industry, having worked at Petróleos Mexicanos (Pemex), the Comisión Federal de Electricidad (CFE), Energy Ministry (Sener), and the Comisión Reguladora de Energía (CRE), where he was a commissioner from 2006-2012.

From 2014-2020, he was the first CEO of the Mexican Solar Energy Association (Asolmex).

Prior to his work in the energy industry, Hurtado was a state legislator in Nuevo León from 1994-1997, a federal congressman from 1997-2000 and the spokesperson for the Mexican Communications and Transportation Ministry from 2001-2004. Hurtado holds an MA in international law from the Universidad Autónoma de Nuevo León, a diploma in finances from the Tecnológico de Monterrey and a BA in law from UANL.

How much potential does Mexico have in terms of becoming a leading hydrogen producer?

Different international organizations have concluded that Mexico has the potential to become one of the world’s leading hydrogen producers. In fact, Mexico might have up to 64% lower green hydrogen production costs than other countries for different reasons. One is its ability to generate renewable energy. It is part of the solar belt, which is made up of the countries with the most solar radiation on the planet. Coahuila, Tamaulipas, is also home to the world’s largest solar power facility. In addition, Mexico has a great deal of wind potential, particularly in Oaxaca, as well as an enormous promise in geothermal energy. Renewable energy is a fundamental input in the production of hydrogen. Our geographical location is another important factor; practically the entire southern part of the country is the central part of the continent. We are part of North America, but close to and closely linked to Central America and South America. Then, there is the issue of FTAs. We have a Pemex with the US and Canada. The bloc has high levels of energy consumption, and it does not have all the renewable potential that Mexico has. Therefore, they can buy or import hydrogen from Mexico.

What steps are being taken to reduce the obstacles this energy faces?

Green hydrogen is already being produced in much of the world, and the electrolyzers, which are the equipment that produces green hydrogen through electrolysis, are becoming more efficient and less expensive. Furthermore, hydrogen has different uses: applications, mobility, industrial decarbonization, and energy storage. We have to spread information about hydrogen regarding what it can do and its applications to all the sectors that can benefit from it. Mobility, refining, industrial processes or petrochemicals could all benefit from it. The challenge is for everyone to know that green hydrogen has extremely competitive advantages. There are

about three colors of hydrogen. It does not mean that they are different hydrogens, because in the end, the atom is the same; however, depending on its energetic strength and production process, it is assigned a color. For example, gray hydrogen comes from methane, and that gray hydrogen costs between USD1.5 and USD2 per kilogram. After the process of refining gray hydrogen, blue hydrogen is produced. This reforming process does have carbon capture. Therefore, it is less polluting and produces less CO2 and emissions; however, it is still polluting because it comes from metal. And finally, there is green hydrogen, which is what we are mainly driving. It is better in terms of decarbonization, combatting climate change, and energy transition. Still, Mexico is not producing any green hydrogen yet.

When will production start in Mexico?

Mexico will start producing it by the end of 2022, but on a small scale. It will be distributed to the private sector, concretely to private companies that will install small electrolyzers to produce green smoke and replace natural gas in their industrial processes. They will install electrolyzers with solar panels on the roof of their plants. In this way, they will produce green hydrogen and, with that, replace fossil fuels. Green hydrogen costs between USD5 and 7, significantly more expensive than the gray one. This is a significant differential. However, the response from the private sector has been positive.

We founded an association in February 2021, and in just one year, we already have 50 members. It is a natural step toward hydrogen because everyone is interested in decarbonization. Mexico has great potential. For example, Tamaulipas has little solar power, but it has ports and a land border. So, that area is where the first source of hydrogen in Mexico can be constituted. I hope that by the end of 2022, there will be a company producing it the following year on a large scale. The association is making progress, doing away with all the industrial issues, costs, and mobility. ✖

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INTERVIEW

latent OPPORTUNITIES EDF Renewables has expanded its offerings to offer its clients a full complete product suite for onsite energy solutions including solar, battery storage, EV charging, microgrids, and energy management systems.

G erard o P érez G u erra VICE PRESIDENT & COUNTRY MANAGER, EDF

How close is EDF Renewables to launching additional projects in Mexico?

We are waiting to complete the consultation process for one of our projects that started after the pandemic broke out.

The project is located in two different municipalities of Oaxaca. Around 80% of the project will be in the jurisdictions of Unión Hidalgo in terms of the number of turbines that will be installed in that territory. The other 20% of the project will be in the jurisdiction of Juchitán, a municipality that went through a significantly prolonged period of restrictions related to COVID-19. The area of the Secretariat of Energy that oversees community consultations initiates the process in June, and if all goes according to plan, the goal is to finish it in about six weeks.

This pending phase consists of acquiring community approval through agreements in which the entire population meets, and a vote is carried out among the locals.

How is EDF Renewables readjusting the estimated cost of its project considering the increase in commodity prices?

Material prices have increased 15-20% and we are looking for ways to mitigate the increase cost to maintain profitability on this project.

Why did the company invest in acquiring companies that are dedicated to distributed generation systems in the US?

In the last six years, EDF Renewables has acquired two companies in the US that focus on distributed generation solar and storage business to meet the growing demand of corporate and industrial customers seeking cost-effective renewable energy sources. We also acquired PowerFlex that specializes in electric vehicles (EV) charging technology. Through the PowerFlex subsidiary, EDF Renewables offers a full complete product suite for onsite energy solutions to include solar, battery storage, EV charging, microgrids, and energy management systems. Additionally, in the US, EDF Renewables through a joint venture company with Shell has obtained the rights to develop and build one of the largest offshore wind power projects off the coast of New Jersey.

of the Sonora government in terms of its proposed photovoltaic park, which will be the largest on the continent. It will be 1,000MW, although they will start with 300MW initially. We also carried out some asset optimization and management operations for other wind and solar projects as an external provider; we operate and run it as if it were our own.

In fact, we have very important companies as clients that have placed their trust in us. We look forward to continuing the development of our projects in Mexico and finding new opportunities. Although the current government has the possibility and power to make changes and establish new rules, we believe they cannot be retroactive. New energy rules in Mexico can come into effect as soon as the government decides to change them.

Consequently, each company will determine if they can continue with those rules and their operations in Mexico. ✖

How is EDF Renewables committed to the development of projects in Mexico?

We were recently invited to bid on a Mexico City government project to install rooftop solar power in the supply center.

We have also expressed our intention to support in any way, be it experience, construction, or operation, the efforts

BIO

Gerardo Pérez Guerra has over 25 years of experience in the energy sector. He is the former CEO of Acciona Windpower.

He previously worked for Siemens Mexico for 23 years.

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Green Energy & ESG

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INTERVIEW

adding TRUE VALUE

Focused on creating a customer-centric business model, Solfium partners with key manufacturers to offer premium solar energy products at a competitive price.

What strategy does Solfium employ to differentiate itself in a market with many players offering similar solutions?

We are a technology company operating in the solar space, so we have developed a tech-based solution for the distributed generation market, which includes residential, commercial, and industrial customers, with projects up to 500kW. We operate in a market that is quite fragmented, with many players operating in this space, mostly focused in either industrial projects or residential and commercial ones. What we offer is an integrated turnkey solution for companies to decarbonize their whole value chain, starting with their own facilities but also including their suppliers, customers, partners, and employees. Our premise is that we need to accelerate the energy transition, in order to mitigate climate change. Solar energy is the cheapest source of electricity in Mexico, so there will be a day in which we will have solar panels in every roof. We have a tailored solution for each segment.

For residential and small commercial customers, our concept is to reinvent the customer journey, making it as simple for a customer to adopt and manage their solar system as it is to take an uber.

Our app is designed to be as easy to use as possible: users download the app and get an instant quote; we then schedule a technical validation, using a combination of software and an on-site visit with a drone to make it simpler for the customer to visualize how the system will be installed. We also offer financing options on the app. For larger commercial and industrial projects, we offer customized proposals, and then help companies deploy solar across their entire value chains. Our corporate sustainability dashboard then allows the company to measure their environmental impact, aligned with greenhouse gas emissions protocol, so that it becomes an important part of their sustainability strategy.

How does Solfium plan to simplify the value chain in renewable energy?

A n d rés F ri ed m an CO-FOUNDER & CEO, SOLFIUM

We partner with key manufacturers in order to offer customers premium products at a competitive price. We want to ensure we are truly creating a customer-centric business model rather than a traditional value chain from the manufacturer all the way to the end consumer. The other key component of our operational model are the installers, which we train and certify in order to provide a great service throughout the lifecycle of the system.

We also have financing partners to offer a menu of options to our customers that can suit their needs.

Our technology and platforms allow for the optimal integration of all the key players of the ecosystem so that everyone is focused on adding value to the end customer.

Creating a platform that encourages access to solar energy Launched pilot in 2021

What steps is the company taking to create the first ecosystem for solar energy in Mexico?

2022 was an exciting year for us because it is our first year of full operations. 2021 was our proof of concept and our launch, and we are now seeing exponential growth and a lot of excitement around our solutions. There is a massive opportunity in the market, and the regulatory environment is moving quickly in that direction. Companies now need to find ways to decarbonize their entire value chains, and addressing energy is a big part of their CO2 emissions reductions. We can help companies set up the industrial project of up to 500kW to automatically reduce their emissions. They can also recommend that all their employees download the app because more people are working from home or working hybrid. They are consuming electricity for work. By helping their employees adopt solar energy at home, companies are reducing their indirect emissions and compensating for their indirect emissions that way. We have created a tool to integrate all that. Companies now have a digital dashboard to measure where they are and project where they are headed. That is a huge tool for them to manage their CO2 emission reductions across their value chain. ✖

BIO

Andrés Friedman is Co-Founder & CEO of Solfium. He obtained his bachelor’s degree in economics and management from McGill University and an executive global masters in management from the London School of Economics (LSE). He was director of Bombardier in Canada, Mexico, and Germany, working in strategy, operations, logistics, and program management. He also led the development of supply chains for emerging markets, including Mexico.

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FOCUS Ren e wable e ne r gy p o l i c y

THE RENEWABLES BATTLEFIELD As the world speculates over a potential rewriting of the energy landscape amid the rise of renewables and rumbling geopolitics, Mexico has emitted mixed signals over reducing fossil fuels and the private sector’s role in the energy matrix.

MEXICO’S POTENTIAL FOR CLEAN ENERGY is formidable, its geog-

raphy boasting some of the world’s best wind and solar resources that remain in virgin territory. National Renewable Energy Laboratory (NREL) data for 2020 reveals that 40% of its renewable energy was derived from hydropower, 30% from wind, 21% from solar, and the remainder from geothermal and bioenergy sources. Solar has the greatest potential and could generate no less than 77% of new renewable energy additions over the coming decade. The Achilles heel has been Mexico’s inadequate transmission infrastructure, and NREL data shows that a well-managed renewable market could shave USD1.1 billion off Mexico’s production costs while inviting USD17 billion in new investment and generating around 72,000 jobs.

NOT FULLY CHARGED

Over recent years, Mexico taken bold strides toward opening up its energy sector to new modes of production and new models of business alike. The Program for the Development of the National Electric System (PRODESEN) sets out in black and white the annual planning of the National Electric System over a 15-year horizon, stipulating the national energy policy in lockstep with the National Development Plan (NDP) 2019–2024. Yet, its own findings reveal that the target won’t meet until 2031, seven years behind schedule. Meanwhile, official numbers put Mexico’s clean energy generation for 2021 at 86.27 terawatts (TW), accounting for 26.7% of total generation. Electricity demand is set to rise by 12.7% by 2024, which will require an additional 41.03TW of clean energy to meet the targeted 35% clean energy ratio. That marks a 47.7% rise from current levels. In this context, one must consider the controversial policies of incumbent President Andrés Manuel López Obrador (AMLO), who has backpedalled on key energy reforms of his predecessor… …ERSTWHILE PRESIDENT ENRIQUE PEÑA NIETO

Peña Nieto enacted the Electric Industry Law (LIE) and the Hydrocarbons Law (LH), opening the energy sector to free-market competition. Moreover, the renewable energy industry suddenly became one of the leading beneficiaries. Long-term electricity auctions would then garner around USD9 billion in investments for the renewable industry, raising production capacity and, by extension, reducing clean-energy prices. All promising developments, whereby names like Siemens Gamesa, Canadian Solar, Italian Enel Green Energy and Eletricite de France rushed to capitalize on Mexico’s untapped, solar, wind and hydro matrix. Peña Nieto also mandated the Comision Reguladora de Energia (CRE) and the Comision Nacional Hidrocarburos (CNH) to enforce asymmetric regulation between state and emerging private sector players to ensure state compliance with regulatory ob-

ligations for an equitable playing field. Indeed, by 2018, 45% of the country’s electric power was generated by private companies.

BUT THEN CAME THE ELECTIONS

Incumbent President López Obrador has followed his own playbook.

And upon assuming office in December 2018 his nationalist stance favored reinstating the historic market control of Petroleos Mexicanos (PeMex) and the Comision Federal de Electricidad (CFE). PeMex under the state’s wing has bloomed into Latam’s second-largest oil company after Brazil’s state-owned Petrobras. Government policy seemingly downplayed the alternative energy sector that depends upon foreign participation. Tellingly, Mexico added around 30% less renewable energy capacity in 2021 than in 2020 due to a 46% drop in new solar energy capacity. More than a dozen fully ready solar and wind energy projects are languishing in regulatory limbo. Small wonder that the primary obstacle to green energy is mistrust among investors.

US AND CANADA NOT AMUSED

Among other moves, pending auctions for new exploration and production licenses were suspended and over 100 previously awarded permits came under review sending shivers through the energy market. In 2021, the President modified the above-mentioned LH and LIE, ceding the government catch-all ‘discretionary powers to suspend permits of private companies for unspecified reasons of national security, energy security, the national economy or, where applicable, for violation of laws and permit terms.’ Eyebrows rose further as Pemex and CFE were authorized to assume control of facilities with suspended permits, implying nationalization by any other name. Cue corporate lawyers on speed-dial. Washington has labeled AMLOs energy policies discriminatory against US firms, claiming favoritism towards state-owned CFE. It argues that they contravene the USMCA free trade treaty signed by member states the US, Mexico, and Canada.

PRAGMATISM GAINS TRACTION

Yet, it is not all grim and following a meeting with President Biden in 2022 López Obrador confirmed that he would permit foreign direct investment in the solar energy sector, “…as long as they partner with the CFE.” This year he also green-lit a deal with 17 European-based companies enabling their investment in Mexico’s renewable sector under the same arrangement.

Not all deals are expected to materialize by the 2024 end of the current NDP, and Mexico clearly needs renewed momentum on its renewables. ✖

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FORUM

SOLAR ENERGY Given that Mexico has significant potential for solar generation and is still at a nascent stage, the market is predicted to be dynamic and competitive in the coming years.

Sant iago Villagom e z

Ka ti a Be r n a l

I v án R ey es

P ab lo R i v ero

CEO, ENERGÍA REAL

CEO, CITRUS

L AT I N A M E R I C A UTILITY DIRECTOR, LONGI

DIRECTOR OF BUSINESS D E V E L O P M E N T, FOREFRONT POWER

ENERGIA REAL’S DNA is real

FOR CLOSE TO A DECADE, CITRUS has specialized itself in offering industrial thermal energy solutions using renewable energy technologies.

CITRUS signed a framework agreement in 2021 with Swedish company Absolicon to acquire its production line in order to produce the world’s most efficient concentrated solar collector for the Mexican market. We plan to start production of concentrating solar collectors in 2023. As the system is completely modular, it can be easily expanded at any time. Its versatility gives us the opportunity to connect at any point in the hot-water lines at the company pending on the process needs. The CITRUS solar plant for thermal energy generation is designed to address the process needs of any application requiring hot water and/or steam for all industries. In order to mitigate the risks associated with the uncertainties around the world, more and more companies are opting to install CITRUS solar plants for thermal energy generation in-situ. We guarantee a constant, CO2 free supply of heat at a fixed price for up to 25 years.

IN 2021, LONGi’s global sales

FOREFRONT POWER is a subdivision of Mitsui & Co. It was created when the company acquired a division of SunEdison, one of the world’s largest solar companies. Forefront Power uses the model of a start-up but has the background and expertise of the previous company. Forefront is basically the arm of the solar power division. We lead the part of the smaller solar projects through Forefront, and Mitsui manages the utility scale solar projects, which is how we collaborate. Right now, we have a pipeline of over 150 customers. The company started four years ago. We had a different model at the beginning where we developed utility projects at a smaller scale of between 10 and 15MW. We then saw a new opportunity to focus on next-generation projects of under 500kW. And that is what we currently specialize in. In general, Forefront Power is always looking to grow, and we are currently doing research into mobility. We are heavily engaged in storage in the US, and we want to bring that business to Mexico, too, despite the current lack of incentives to do so.

estate, and its core business is onsite generation. Some of the founder shareholders and I come from MIRA, and we were looking at the energy solutions we could offer to commercial and industrial properties. Distributed energy emerged as one of the primary solutions. The interesting part of Energia Real’s business model is that it not only offers a tailored energy supply solution that is renewable and saves money, but also understands how companies operate. Our main distinguisher is that we offer power purchase agreements (PPA), which are long-term contracts. In shopping malls, for example, Energia Real can occupy the roof for up to 25 years but sells energy in the short term to the occupants. We take on the risks together by investing in energy sales in the property, making it possible for them to monetize their roof and/ or parking. We use the same strategy as a real estate fund, but for energy sales. We offer clients a range of financed solar solutions, along with savings and data that will increase their energy efficiency.

performance, market share, and brand influence ranked it first in the world, with its total shipment volume of domestic and exported modules exceeding the second place by more than 10GW. Normally, we manufacture modules, but we also manufacture wafers, which is the main raw material from which solar modules are made. Latam is an important market for us. We entered somewhat late, but still managed to acquire a number of utility projects at the end of the tender. We have already executed several utility projects on large-scale solar farms.

Msssoreover, we understand today’s challenge concerning Mexico’s energy policy. The energy policy for the distribution-generation market, mostly addresses smaller systems for C&I, rooftops, residential, and commercial projects.

Many companies have seen a swift return on investment while, at the same time, energy tariffs are rising. This particular segment is currently generating considerable business for our company while we await the return of large-scale projects.

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Mexico 2023

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Green Energy & ESG

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INTERVIEW

making A DIFFERENCE Biobox is reinventing the wheel with its innovative recycling machines to offer rewards for recycling via partnerships with over 2,000 partners.

E d u ard o B u s t am en t e CEO, BIOBOX

What is Biobox’s business model?

There are four key factors about Biobox’s operations: the environment, the government, the community, and the private initiative. The environment is on the losing side, and it is up to us to look after it. Biobox uses a solid business model for Latin America with this technology, known as “reverse vending machines.”

We try to raise awareness among our customers and the community that each bottle, envelope, or container in their hands is worth money. These machines have been operational for many years now, mostly in Nordic countries in Europe, where the business model of these machines was a financial subject.

In these countries, reverse vending machines work well as it helps you get back up to 80% of the taxes you pay for PET; however, having this technology in Latin America was impossible because there was no such a tax here. What we did was a reinvention. We made sure the business model was not based mainly on the waste we received due to the inexistent tax, and it could not be based only on recycling—at least not in the first stage.

The coming years will be more important in terms of the amount of waste we get. Right now, we based our model on marketing where we can have brands advertising and involving themselves in the initiative. This way the brand can also participate by rewarding the action of recycling.

What are your expansion plans in Mexico and Latin America?

One of our features is that we have our own hardware and software, which al-

lows us to adapt to any market and trademark. No matter the challenge wherever we go, we can make it through just by owning the technology, both hardware and software. Our goal is to be in 17 countries in Latin America, and we have an agreement to be in Spain and grow a team from there. Today, we are in discussions with the National Football League (NFL) to deploy machines in the US. We are also in talks with the Mexican Football Federation about doing something with the league here as well. There are growth plans for both Mexico and other parts of the world, so we can raise awareness everywhere. With such partners, we can achieve many things and make a real change. These last two years have been difficult, and we had to watch our cash flow carefully. We only recently revived our stalled plans. There are now also new Biobox models to gather more solid recyclable waste. We have solid synergy between the recycling classes, major brands, and entrepreneurs. It is not only about working with large corporations, but also having the opportunity to make real changes if we work together. For 2023, we are already working on agreements for other countries such as Chile, Guatemala, Costa Rica, Colombia, and Canada.

How are you updating the model that Biobox uses?

Each Biobox machine is connected to the internet, which allows us to monitor them from an office. One of the changes we will do this year is to make every machine digital, so they will stop using printed advertisement on the sides. Even

though a major part of what we print is on recycled paper, this is a positive development. Users have to download an app called Biobox Innovation, and the machine will have a touch screen, with a QR code to scan. We will also know more about the person recycling, and we can reward them according to what they use or their user profile. In this way, we can be disruptive about the kind of rewards we provide; for example, users can top up their phones, pay for services such as electricity, water, gas, or other services like Spotify, Netflix, and so on. We have more than 2,000 agreements and partnerships with companies where users can also receive coupons and other benefits in return for recycling. ✖

BIO

Eduardo Bustamante is an entrepreneur and specialist in high-impact sustainable projects. He has a degree in international business from UDLAP. Bustamante is founding partner, CEO, and a member of the board of shareholders of Innovation Box Group. He raised more than MXN100 million for the Biobox project and has several recognitions from ONU, Ted Talk, Banorte, and NewCo. He has also participated in various acceleration programs including BBVA, Momentum New Ventures, Endeavor, and Plastic Solvers.

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B2B

advanced analytic technology as well as data sciences and cloud computing to provide the technology platform to manage natural gas in the energy transition.

We play an important role in supporting natural gas provider to make their gas infrastructure safer, reliable, and environmentally friendly, while help them to reduce in O&M costs.

What main challenges do your customers face when it comes to optimizing energy?

terly meetings with the management team of our clients to explore opportunities and sector developments, and not just in Mexico.

AC It is a case of information overload.

When the renewable energy market took off, it was easy to be confused by the plethora of rules, regulations, and different participants. Now, the question is who, what, and how do I choose? How do I know this is ultimately good for me? The role we play at Edison is to help them see what is best for them, not only in terms of GHG reduction, but also financially because ultimately, it is a company we are talking about. We have to help companies realize savings despite potentially higher initial costs. This is the case due to the various procedures involved such as changing or investing in new equipment. For example, we help firms figure out how much they are going to save at the end of five or 10 years in pursuit of their global objectives.

What role does Mexico play within your international business strategy?

What companies are you working with in Mexico?

MALVIN DELGADO Mexico is an energy hub with a great deal of fossil fuel and gas activities. Picarro’s core business is the development and commercialization of specialized technology for advanced analytics solutions. Methane emissions measurement and advanced leak detection solutions for the gas industry with a focus on energy is one of those.

The energy transition will take time and will involve a great deal of effort. In the meantime, we need to find a way to complete the process effectively. Natural gas is the answer to for three main reasons.

It is abundant, cheap, and produces low emissions when properly processed.

Natural gas is the natural alternative to be used in this energy transition; however, we need to understand how it must be treated and processed. Picarro is focused on this direction in order to be part of the energy transition. Our company uses

MD We have identified and targeted com-

A l b ert o C ampos

M a l vi n D elgad o

SENIOR ENERGY MANAGER, EDISON ENERGY LLC

DIRECTOR, SALES & CLIENT M A N A G E M E N T, PICARRO

ADVISORY With various renewable energy regulations, technologies, systems, and participants in the market, these advisories help companies and entities make the right choice and reach their individual objectives.

How does the company provide database solutions, and why is this an added value?

ALBERTO CAMPOS Currently, we work with many companies in the automotive, food and beverage, and plastics sectors in Mexico. We are the energy advisors of those companies. We help them reach their goals in terms of saving money acquiring energy and gas, having zero carbon policy, reducing GHG emissions or seeing how to attain renewable energy and the many ways that they can do it.

We are focused mostly on the automotive, food and beverage, and plastics sectors, though we also work with other industries. We designed a global platform called Insights, whereby our clients have a comprehensive business overview.

For example, a client that has a global presence can identify their contracts in Spain, how they are being invoiced and how much they spending on gas or power. They can see what strategies they are using or how Edison helps them reduce their consumption compared to previous years. They can also learn how much they are saving with these strategies and what else they could be doing along these lines. We hold monthly and quar-

panies that produce, transport, and distribute gas. We have spoken with companies such as Jaguar and government entities like Cenagas that transport natural gas. There are also companies such as Naturgy, ENGIE, Gas Natural de Juárez, and IEnova that distribute natural gas.

Many companies, in fact more than ever, are responsible for producing, transporting, and distributing natural gas today.

Companies need to be fully aware about how much natural gas they are releasing into the air and that it is a super pollutant. Government entities are now supervising the degree to which these companies are affecting the environment.

However, they need a tool to identify, measure, and correct their natural gas emission. Picarro has been in Mexico for one year now and in that time has identified at least a dozen key clients. ✖

Green Energy & ESG

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INTERVIEW

effecting CHANGE Tolerancia Activa is dedicated to implementing sustainability and compliance with an ESG criteria in companies that want to obtain quality and competitiveness certifications.

J es s i k a S lo v i k FOUNDER, T O L E R A N C I A A C T I VA

What main gaps in the Mexican working climate has Tolerancia Activa identified?

I noticed that there was a great deal of internal disorganization, especially in terms of the work environment in Mexico and matters in the workplace with gender equality and sexual, religious, or age discrimination; however, thanks to the globalization Mexico is experiencing and especially after the pandemic, companies today are ready for a change.

For example, there are certifications and foreign funds that are helping create this push. When I saw that companies were looking for these certifications that give their brands credibility, I realized there was an important opportunity to intervene and change work environments from the inside. We could take advantage of the entire implementation to reward people in their day-to-day work culture.

In what ways can the NOM-035 certificate be a step forward in human resource management?

In 2016, the government implemented a new standard called NOM-035, which measures business and psychosocial risks. I find it interesting because the government could not implement it properly and unfortunately did not have the capacity to follow up on the compliance with the standard; however, the general vision of NOM-035 is positive for companies, because they make a self-diagnosis of what is happening in the governance within the company. Then, there are issues of psychosocial risk and emotional stress that many of their peers and collaborators are having that influence their

productivity and day-to-day operations.

CEOs and COOs of companies were not taking into account how important the well-being of their employees is on a daily basis. Now, with auditors coming to check companies randomly, they have start paying attention to what is happening. What motivated us with NOM is that companies did it as a duty, filling up the paperwork and uploading it to the NOM platform. Tolerancia Activa has a model that goes beyond just fulfilling a duty: we implement NOM-035 so that that culture of psychosocial risk is infused in all those companies through certain workshops.

This creates an incredible cohesion of teams and provides 80% productivity benefits as soon as employees begin to experience being understood by their bosses in the psychosocial aspect.

What sectors are you focusing on for your pilot projects?

Our pilot project was done within the financial environment since banks are already broader structures and are actually looking for such certifications. We wanted to start with SMEs, and by focusing on smaller financial institutions, we had to pay more attention to SOFOMs, which manage important financial models. They have much smaller work environments, where we felt we could have more interactions. Our first pilot was with Pluscorp, and we started by aligning it with this approach, we wanted them to implement the ESG. We explained that it would need to have an action plan where it must have sustainability, it must measure risks and future plans, and it would work on three axes: responsibility to

the environment; the need for external boards, which many SMEs do not have; and be aware of its social responsibility.

These three elements need to be aligned to make companies that are inclusive and ethical and thus more competitive at a national and international level. Actions such as these can help establish a prestigious brand for future operations.

This comes not only from the inside with its employees, but also from the outside, which is what we can touch. If a SOFOM, for example, lends money, it should not lend to a company that will destroy the water supply in Mexico. In its quest to issue green bonds, it was also looking for certifications, which is important in the financial sector to receive support from financiers. Tolerancia Activa has a positive influence while working with laborers in terms of sustainability and human rights, regarding education, their social responsibility, and their communities. It is important in all companies, including SMEs that may have 30 employees, to have a vision of social responsibility. ✖

BIO

Jessika Slovik is the founder of Tolerancia Activa, part of the founding team of the Museum of Memory and Tolerance, and director of Social Action. She has a master’s in human rights and graduated from Universidad Iberoamericana with a degree in visual communication and graphic design.

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TAKE A walk Introspecta was born with the aim of creating spaces for reflection and personal containment in nature via hiking experiences.

J u a n Pablo N avar r o CO-FOUNDER, I N T R O S P E C TA BIO

Juan Pablo Navarro, co-founded Grupo Introspecta five years ago with the belief that human connections can save the ecosystem in which we live. Since then, he has traveled thousands of kilometers on foot throughout Mexico, from Chihuahua to Oaxaca, in a business model that promotes the creation of entrepreneurship in the Mexican countryside, so that communities can stay to protect their territories.

Seba st ián Pe ñalva O r ozc o CO-FOUNDER, I N T R O S P E C TA BIO

Sebastián Peñalva Orozco studied economics and mechanical engineering at Tecnológico de Monterrey. He later he completed an MA in philosophy at the University of Edinburgh. He has collaborated on human capital projects in more than 15 different industries in Latin America for companies with 15,000 employees.

Why did you decide to create Introspecta, a brand that specializes in creating spaces of reflection in nature for companies?

JUAN PABLO NAVARRO Introspecta was

What are the benefits for a company in investing in experiences like the ones you offer for its employees?

SPO According to Gallup, 90% of the

born from our own experience. It started as an intuitive process that invited us to explore the structures that supported our beliefs; the way we worked, the places we did it, our perception of work, and the way we related to ourselves. The process was relatively simple. We marked a route through the different natural landscapes that Mexico has to offer, and we found community tourism projects that would host us along the way. These projects provided us with a bed, hot food, and other amenities. Once on the route, we would enter the forest for hours, walking and creating spaces for conversation and presence. At first, going out into the woods became a container for challenging our own ideas. This space was a window through which we could observe parts of ourselves that we didn't know existed, and it helped us to be more in touch with ourselves.

world's workforce is emotionally disconnected from their workplaces. Labor culture strategies have transformed from being just one of the activities that human resources departments manage to being a strategy led by the general management of companies. During the last part of the previous century and the beginning of this one, the strategies to solve this disconnection were limited to "effective communication" and "conflict resolution" workshops and other small tactics that solved the problems for a few weeks, only to reappear in other forms almost immediately.

SEBASTIAN PEÑALVA OROZCO Today, there are entire methods hosted by universities like MIT dedicated to finding out how states of awareness and presence in nature alter our thoughts and the way we interact.

These types of methodologies are already used to provide new answers to complex problems, both individual and systemic.

But at that time, it was just a path, our desire to be out there, to walk, and to know that something inside of us was moving.

Slowly, we began to include more people on the journey, inviting diverse people to experience these increasingly better-curated spaces. The intuitive process was slowly refined until we took the best of our previous experience and put it at the service, not only of organizations, but also of enthusiastic individuals; teachers, engineers, CEOs, and artists, who were looking for these spaces to be able to reinvent themselves.

Today, these natural spaces have very particular narratives, processes, and intentions. We design them for the public or for custom groups, and we adjust the containers to host entire organizations that seek to improve their personal, cultural, or innovation processes. Through these journeys, new relationships are being created, new ways of relating, and new ways of conceptualizing how we do life through business.

JNP Today, we know that there are deep-

er layers involved. This allows us to create safe spaces to explore those layers and to be able to observe the structures or thinking paradigms that generate these discomforts. The spaces we create are ideal for reaching this depth in an organic and natural way. It is the companies that have had the audacity to delve into their organizational structures and their thinking paradigms that have managed to connect with the roots of their problems and solve them in the form of sustainable structures for the organization. These findings are almost impossible to unveil locked in the convention center of a hotel for a few hours in the middle of a city. Instead, it is necessary to suspend routine and routinary thinking to find systemic and disruptive ways to transform the organization. By walking, we are activating parts of the brain that are not stimulated in everyday life.

At the same time, we relax those parts of the mind that repeat the same behaviors over and over again. Our methodology is an experimental journey through some theories present in Scharmer's Theory U, the Presencing Institute, stoicism, and systemic configuration, among others.

It combines dialogue with the ability to be present, and the deep belief that the answers to the big questions are already within people. Nature has become the safe place to discover, engage in dialogue, and transform through experience. ✖

Green Energy & ESG

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FORUM

FOUNDATIONS Working to assist specific causes and groups, these foundations in Mexico play an important role in the communities and regions they are based in.

Fe r nanda Pe nich e

M i g ue l Á n gel L ap o rt a

A d ri an a C as t añ ed a d e R i v e r a

MANAGING DIRECTOR, FUNDACIÓN CMR

N AT I O N A L D I R E C T O R , WORLD VISION MEXICO

P R E S I D E N T, FUNDACION ADRIANA C A S TA Ñ E D A D E R I V E R A

THE FOUNDATION SEEKS to address childhood malnutrition in children aged zero to six years living in poverty. We address childhood malnutrition and anemia, which results in inadequate physical and neurological development due to the lack of the necessary levels of hemoglobin in the blood or because their cells cannot absorb the food’s nutrients. On one hand, we battle malnutrition. On the other hand, we strengthen and train the organizations we work with. We are not interested in simply providing a dietary supplement for temporary improvement. Rather, we want to see continued improvement over time, regardless of our presence, or that of any other organization. We have organizations through which we distribute food supplies though always together with a nutrition workshop, focused primarily on children—the main beneficiaries—caretakers and parents, and teachers in kindergarten and centers of early learning. We hold workshops that address subjects such as nutrition, and healthy habits. We want to teach children the benefits of a healthy diet for the long term. It is important for parents or main caretakers to have a clear vision of how to ensure food security for the children and the family.

WORLD VISION in Mexico is almost 40

WE ASSIST various foundations and dif-

years old, and on a global level, is one of the three largest foundations. We are present in over 100 countries. We define our strategy to encompass 4 million children and teenagers by 2024. We focus mainly on the young, but we are aware of the importance of catering to youngsters over 18 years of age, which is something we have learned during COVID. We are worried about Mexico in terms of early childhood because, during COVID, 5 million kids dropped out of school. Education is vital and the challenge is to keep kids in school in a contained environment, because this way, apart from learning, we have a less violent society.

Our objective is to connect people. We want to help those who want to help.

We have been in Mexico for 18 years, implementing a sponsorship program where donors adopt a child monthly. We are working to establish partnerships to adopt a community, not only a person, and contribute with a specific action for the entire social group. As we connect donors with communities, we are looking to connect businesses with the country’s many necessities.

ferent causes, including children with cancer and homeless people. We also collaborate with governments and foundations to fight human trafficking. We started in Colima first, as I am originally from Colima, and we later expanded into Mexico City. We organized a global event with a well-known brand, and a portion of the proceeds were donated to various foundations such as Caritas. In fact, we plan to hold a raffle and donate some items to the government of the State of Colima. There are also homeless people here; therefore, we want to acquire some land to build a shelter for them. I work for a non-profit organization called Ponte en mi lugar. Typically, we always work in collaboration with other foundations, and we join forces and hold events together. I also work with another foundation, and I went to the Capitol with them. We also held an auction in Miami, where several artists generously made donations, and a portion of the proceeds was used to combat human trafficking.

We have also worked with a Colombian foundation that gathers donations from businesses. We always welcome anyone that wishes to assist and collaborate with us.

An oil platform pictured in the Gulf of Mexico

TOTAL DOMESTIC ENERGY CONSUMPTION (KTOE) SOURCE: ENERDATA 190 185 180 175 170 165 '18

'19

'20

'21

REFINED OIL PRODUCTION (KT) SOURCE: ENERDATA 50

45

40

35 '18

'19

'20

'21

NATURAL GAS CONSUMPTION (MCM) SOURCE: ENERDATA 80

74 72 70 68 '18

'19

'20

'21

Image: Brian McDonald

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Energy

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CHAPTER SUMMARY

Energy

GAS RISES he impact of the Russian invasion of

on the global energy supply T Ukraine opened the world’s eyes to the importance of having a resilient local supply chain.

In that regard, energy players in Mexico share a strong consensus on creating a regional focus for the development of Mexico’s energy network, taking advantage the USMCA agreement, which celebrated its two-year anniversary in 2022. The market also showed strong interest in modernizing the electricity grid and investing in natural gas to replace the need for coal and offer lower-cost energy.

With this in mind, TC Energy made headlines across the country by announcing a record-breaking partnership with CFE, Mexico’s state-owned electric utility firm, to speed up the development of natural gas infrastructure in the country with a USD4.5 billion pipeline. This announcement positioned Canada as the second-largest source of foreign direct investment in Mexico, replacing Spain.

“The advancement of natural gas, which replaced coal, underpins the electricity system in both Canada and the US, which is why they can now look at significant investments in renewable energy,” said Jennifer Pierce, President of TC Energy. “Mexico is

in a different position; the government is trying to modernize the electricity grid and promote more clean low-cost energy in regions of the country that have not been part of the prosperity message.

There is a great deal of development in Mexico in the north, more than in the central part of the country; however, much more is required in the south,” she added. The partnership also serves as proof that collaboration with the public sector can be successful as TC Energy has lauded the overwhelming amount of support it has received from the government to develop this project.

Companies throughout the supply chain are making sure to not miss a beat in supporting the needs of the industry as investment continues to be directed toward gas. Players are strengthening their capacities and bringing international standards to their operations. “The rise in energy demand in Europe is creating an incredible need, especially for gas. Everybody must be ready to improve their efforts, and the business is set to improve because of the demand for gas and oil in Europe, the US, Mexico, and Asia,” Giuliano Cacciatore, Managing Director of DG Impianti, told The Business Year. “This is the moment for Mexico to increase exportation,” he concluded. ✖

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TREMENDOUS opportunities Riding on its success in bringing natural gas infrastructure to Mexico in the last few decades, TC Energía is now focusing on advancing a strategy to complete infrastructure development in across the entire country, especially the south.

Partnering with CFE to develop

$4.5B Southeast Gateway Pipeline

BIO

Jennifer Pierce is President of TC Energía for TC Energy Corporation. She joined TC Energía as senior vice-president human resources in 2019.

Previously, Pierce was an executive with TransAlta and held a series of progressively senior roles. Previously, she was director of investor relations for Nova Chemicals and vice-president, strategy, performance management, investor relations, and communications for Provident Energy Trust. She previously held leadership roles in communications, strategy, and planning at Duke Energy and Williams Gas Pipelines. Pierce has worked internationally with energy companies in Chile, Argentina, and Brazil.

She began her career working in legislative affairs and public affairs at the Interstate Natural Gas Association of America (INGAA) in Washington, D.C. She has an MBA at Rice University, as well as a master’s degree in political administration from George Washington University and a BS in communication sciences from Boston University.

Why should energy security be viewed as an issue that requires a regional solution?

When thinking about energy security and the energy transition, we need to think about it from a continental point of view. There is a tremendous opportunity to promote greater North American energy security and integration of our natural gas markets.

Natural gas is a cornerstone of both the Canadian and American markets. The advancement of natural gas, which replaced coal, underpins the electricity system in both Canada and the US, which is why they can now look at significant investments in renewable energy. Mexico is in a different position; the government is trying to modernize the electricity grid and promote more clean low-cost energy in regions of the country that have not been part of the prosperity message. There is a great deal of development in Mexico in the north, more than in the central part of the country; however, much more is required in the south. For 30 years, we have been part of bringing natural gas infrastructure to Mexico to strengthen the electricity grid. Now, as part of our investment in partnership with CFE, we are advancing a strategy to complete infrastructure development in the central part of the country and bring gas to the southeast. CFE is investing in natural gas combined cycle generation, which is critical to providing energy transmission reliability and, subsequently, industrial growth. What I see in Mexico is a transition that is fit for purpose for this country, and it could give it an advantage. There is a tremendous opportunity for renewables in this country once we get the grid working.

In what ways are you working with CFE to further develop energy infrastructure in the country?

For the last 85 years, CFE has been the country’s electric utility, and we have been a provider of service to CFE for almost 30 years. We have built several other pipelines and served CFE with gas in the

J en n i fer P i erce P R E S I D E N T, TC ENERGÍA

central and western parts of the country, as well with our offshore pipeline. We have also become partners in the TGNH Southeast Gateway pipeline system, which includes our Tamazunchale pipeline and our Tula-Villa de Reyes pipeline, which is currently under construction. We have received a final investment decision to build our second offshore pipeline that will bring natural gas from the Tuxpan area down to Veracruz and into Tabasco. It is a partnership whereby CFE will own equity, the first time the Mexican government will have equity in a private company. This project will bring gas to a region that does not have a reliable source of natural gas and will bring tremendous social benefits.

The Southeast Gateway is supposed to be in service in May 2025, and we are currently working on land acquisition and permits. We have ordered USD2 billion worth of pipes and have suppliers set up in Tamaulipas, Veracruz, and Tabasco. There is a great deal of activity now, and it is a tight schedule.

What are the most important factors behind a successful partnership with the public sector?

There are three things to look for. One, you have to have strong fundamentals. The supply growth or demand growth in Mexico is tremendous. Electricity demand in the southeast alone will grow 10% per year. The second thing you need is a good contract. We were able to work collaboratively to negotiate strong contracts with CFE. We took a collaborative approach to look at what we both need.

We need something we can finance while it needs something that can stand the test of an audit and a regime change. The third thing is the support of the government. We invest in Canada, the US, and Mexico, and in Mexico we have had overwhelming support from this government at the state and federal levels to advance this project. That is absolutely critical. Those three things all happened to line up, and we were able to advance our partnership. ✖

Energy

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INTERVIEW

a new FUTURE bp is working on not only moving from oil and gas to resilient hydrocarbons and low-carbon energy, but also focusing more on customers and products.

A n géli ca R u i z S E N I O R V I C E P R E S I D E N T L AT I N A M E R I C A & HEAD OF COUNTRY MEXICO, BP

Why did bp decide to transition from an oil company to an integrated energy company?

What are the country’s main advancements in energy security?

First and foremost, our new strategy is going to transform bp into a different company. We have been an international oil company for 111 years, and in February 2020 we launched our strategy to become an integrated energy company.

We started implementing this in 2021. It has not been an easy journey, because this impacts our entire strategy in terms of how we will deploy this in Europe, Southeast Asia, and Latin America, which includes Mexico. It also includes setting some objectives for 2030, 2040, and 2050 to get to net zero and, most importantly, following through with how we deliver those objectives. One of our aims is to take care of the environment and have a social responsibility policy. In two years, we have made great progress. We cut our operational emissions by 35%, and our oil and gas production reduced by 16%.

Low carbon energy projects have grown by 400%: we are on track with 4.4GW brought to final investment decision by the end of 2021 and 24.9GW in the pipeline (offshore wind—21% of GW in pipeline and solar—79% of GW in pipeline) with 2.2 billion of investment in 2021. By 2030, we will have developed 50GW of renewable energy generating capacity.

Bioenergy is also part of this, and we are growing our portfolio by 18%. Besides, EV charging points are up from 7,500 in 2019 to more than 13,000 today. Our aim is to install more than 100,000 charging points globally by 2030 and be closer to our customers. The message here is that we will move not only in oil and gas to resilient hydrocarbons and low-carbon energy, but also focus on customers and products.

As a global company that operates in over 75 countries, we see Mexico and Latin America as a region. Transborder integration such as the US-Mexico or Brazil-Argentina regions is critical for governments to be able to provide energy security. bp is a reliable partner to work with to create regional energy security. For instance, this strength allows us to work in partnership with Pemex and have successful projects, such as the ones that Hokchi has, where we own 50% of the equity. Those upstream projects are operated successfully by our partners Pan American, and we are currently producing 20,000bpd. Regarding president AMLO’s projects that seek to generate energy security—Dos Bocas refinery and the purchasing of the Deer Park refinery—bp fully supports these projects. Companies like bp and other majors could support local demand in a way that Pemex feels comfortable to do while these projects are at full capacity and beyond, adding great value to our national oil company and consumers.

What challenges does the country face in strengthening its energy market?

Number one is rule of law, which is fundamental. Second, it is also important not to have noise around, because when the noise arise, investment becomes silent. Third, strong regulators. Regulation and measurements are key, because regulators are closely linked to rule of law and the implementation of public policy.

Thinking about the country’s future, we need to deploy a solid energy policy not only for old energy sources like hydrocarbons or gas but also the new ones, for

example, green hydrogen and even CO2 pricing or license to operate, which is another key part. Then, there is reliability of any commodity such as fuel, diesel, or jet fuel. We can come in and strength Pemex ensuring that everyone has access to fuel. We have a strong position in the retail business, having about 500 retail stations. It is all about reliable, clean, and affordable energy, which requires solid regulators and the ability to deliver the product. Together, if we invest in infrastructure and understand the ideology, private and public companies can successfully work together. ✖

BIO

Angélica Ruiz assumed the position of Senior Vice President Latin America & Head of Country Mexico in 2020, part of the global leadership team. With a career spanning more than 16 years in the energy sector, she has vast experience working in different countries developing upstream, midstream, and renewable energy projects. Before joining bp in 2018 as Head of Country Mexico, Ruiz was vice president for Latin America and managing director at Danish power company Vestas. Prior to that, she served as finance director and commercial strategies director at UK-based Petrofac.

She earlier served as managing director at Mexssub.

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AREAS of interest

With potential opportunities in mining, oil and gas, and energy, GDI is bullish about its prospects in the region and Mexico in particular.

G i aco m o B o n fan t i CEO, GDI

Gas is an important first step in Mexico’s energy transition

What is your company’s new vision having recently completed its restructuring?

We were formerly focused on pipelines and mainstream facilities, including storage terminals for gasoline, pipelines for oil and gas, and infrastructure needed to build underground infrastructure.

Part of the vision is to develop this trenchless division into an international entity. We are looking at working on oil and gas pipelines, drainage infrastructure, and power cables for electricity generation. GDI has identified an opportunity for underground projects in the energy and mining industries, as the world is currently focused on reducing the environmental impacts of the sector, and such projects can minimize the impact these developments have on the planet; however, providing clean infrastructure is particularly challenging. During COVID-19, we took the time to create an alliance with top global companies in the sector. As a consequence, we are now extremely well equipped to be a trenchless EPC for the region in the short term.

Which international markets are you focused on entering?

BIO

Giacomo Bonfanti is CEO of GDI. He has expertise in market development, contract management, and strategic initiatives.

GDI is focusing on markets in Latin America, a region that is attractive for the oil and gas industries.

We specialize in creating connections between the sea and the land, which often features projects such as urban drainage. We are prospecting work

in Colombia, Mexico, and Panama and are evaluating projects in the US. Drainage is also a solid opportunity for international growth. However, in 2023, there will be many local projects, mainly in the southeast of the country. We are keen, for example, to expand our mining operation, as new mines will be developed in the coming years with the arrival of greater stability. Most contractors do not own their equipment, while GDI does. We have a plan to develop these mines in the short term. For example, the delivery time for key mining equipment is about 54 weeks. We have equipment, we have people, and we want to move fast.

What are the main advantages Mexico offers the energy sector?

North America has the advantage of being compromised of three countries, while Europe has a lot, each having a different fiscal regime and one central bank. Their gas comes from sources with certain geopolitical tension. Meanwhile, we enjoy energy stability (compared to other regions). Mexico shares a big part of the gas reservoir of the region. We predict that most of the energy transition will involve gas. The war in Ukraine will also have an effect on renewables, but we believe renewables will be on the back burner for the time in Mexico as the country has major issues to deal with when it comes to security and equality. ✖

Energy

FP AD HOLDER GDI

WE ARE A GROUP WITH OVER 20 YEARS OF EXPERIENCE IN

CONSTRUCTION PROJECTS FOR THE MINING, ENERGY AND INFRASTRUCTURE INDUSTRIES, AS WELL AS

PROVIDING TRENCHLESS SOLUTIONS WORLDWIDE.

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FOCUS Na tu r al gas

THE TRANSITION Natural gas seems like an ideal steppingstone in Mexico’s transition to green energy, but where can it be sourced it from?

MEXICO IS A HUGE ECONOMIC ENGINE with a huger thirst for energy.

With a population of 130 million and a USD190 billion manufacturing sector, Mexico needs a whopping 283 billion kWh of energy each year. This is secured from a variety of sources, ranging from old-fashion hydrocarbons to the country’s only nuclear reactor on the Gulf Coast and trendier solar installations in the deserts of Coahuila.

There is no denying that there is much room for improvement in Mexico’s energy portfolio. The Laguna Verde nuclear power station was commissioned in the early 1990s, and its nameplate capacity is no more than 1,620MW. Although the country is a pioneer in the LATAM region in adopting solar energy, the current infrastructure may not be enough to meet the demand.

“In 2020, the installed capacity of Mexico’s clean energy plants, such as hydroelectric, geothermal, wind, photovoltaic, and bioenergy, was 29,512MW and by December 2021 there was an installed capacity of 30,812MW, which represented an increase of 4.4%,” according to the US Department of Commerce. It is believed that the growth is mainly coming from “hydroelectric, wind, and photovoltaic solar power plants.”

The 4.4% growth in the space of only one year indicates that Mexico is indeed making an effort to reduce its dependence of fossil fuels; however, a country the size of Mexico cannot have an overnight transition to green energy. Indeed, a sudden restructuring of the energy portfolio is not only impossible, but also deeply unsustainable: insisting on a sudden transition can throw the energy sector off-balance, causing huge costs for the system which will, in turn, be a burden on the country’s resources.

Natural gas is an excellent steppingstone in the context of Mexico: it is reasonably clean-burning, cost-effective and accessible—of which more later. And Mexico has a robust natural gas infrastructure, including gas-powered electricity plants. Natural gas accounts for over 60% of electricity generation in the country, which makes it “by far the most prominent source for electrical power generation in Mexico,” according to Statista. But where does Mexico’s natural gas come from? With proven gas reserves of no more than 16tcf (roughly 1% of the global reserves), Mexico is admittedly not a major producer of natural gas. New discoveries, however, are being made, especially off the eastern coasts of Mexico. Around 20 major on-land and offshore oil and gas pockets were discovered in 2022 by the national oil

firm, Pemex. And the LATAM nation’s natural gas output has been modestly growing throughout 2022; however, Mexico’s main source of natural gas is still pipelines which cross the border from the US. Some 80-90% of the country’s demand for natural gas is met through imports from its northern neighbor. Exports have increased in 2022 at West Texas border, with the pipeline carrying over 1.6bcf per day in the spring and summer of 2022. This is an all-time high in the pipeline’s history, showing a 12% increase, month-on-month.

While defending a pragmatic view toward Mexico’s gas imports from the US, Warren Levy, CEO of the Mexican oil and gas company, Jaguar, told TBY that “The continued evolution of the government policies here [is] to a more pragmatic understanding that Mexico has an opportunity which can be taken advantage of which is the connectivity with the US gas market.” There are more than one new pipelines between the two country in the planning stage or even under construction. For example, “The Yuma II project developed by US-based EPGN and Mexico-based Grupo Clisa will add a second connection point at the border,” according to BNamericas. And why not? Although some have criticized Mexico’s reliance on natural gas imports from the US, claiming that it contradicts the country’s policy of self-reliance, the fact remains that the US and Mexico have strong bilateral ties. A scenario in which the US would curb the flow of energy to its southern neighbors is extremely unlikely, especially as that the American industries also depend on nearshoring their operations to Mexican contractors. Reliance on natural gas imports from the US, therefore, is in fact increasing the nation’s energy security, rather than putting it at risk.

In keeping with Mexico’s current policy, the country is encouraging investment from countries other than the US, as well. It is not only American companies which are coming to the sector these days.

The Qatari oil and gas company, GDI, for instance, cites Mexico as an attractive market. The company focuses, among other things, on “pipelines and mainstream facilities, including storage terminals for gasoline, pipelines for oil and gas, and infrastructure needed to build underground infrastructure,” which are all of utility to Mexico’s energy security. By diversifying the presence of foreign investors in its natural gas sector, Mexico—a country with little reserves—will be able to rely on the more-or-less clean natural gas during its transition to green energy. ✖

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making A DIFFERENCE

Established in 2014, Jaguar E&P works on onshore mature fields exploration, production, and operation with a team of talented collaborators.

How close is Jaguar to doubling its gas production by the end of 2023?

For the past few years, we have been focused on getting sufficient exploration work done to ensure that we could extend all of our blocks into the incremental exploration period, which we have now done. We have nine or 10 blocks extended for another two years in the additional exploration period, and one is still pending. Since we achieved that at the end of 2021, we have shifted gears to be focused more on development activities, and we are currently drilling development wells in the northern part of the Burgos Basin with one rig. We currently have about 25 million cubic feet (mcf) a day of capacity that can flow but are working on pipeline permits to get roughly half of that production flowing. Going forward, we have three parallel objectives for the company. One is development activities in the Burgos Basin. We now have almost 0.8tcf of proven gas in the Burgos Basin that we can work on. We are looking to develop the activity in Burgos to take our production to a plateau of somewhere between 50mcf and 70mcf a day and sustain it there for a number of years. The second track is exploration activity, and continuing to explore in all ten of our blocks. Then, finally come our commercialization activities which include expanding our virtual pipelines. We want to be more aggressive in being able to disconnect gas production from the need to have existing infrastructure in the area. This is particularly valuable for remote operations, or for gas that might otherwise not be commercially viable to produce. We are looking to broaden that out extensively over the next six months to a year.

What steps is the company taking to diversify the type of clients in its portfolio?

We are looking to continue selling to Pemex on one hand, but the growth of our production will

W arren L ev y CEO, JAGUAR E&P

go mostly to third parties. It is central to the existence of the company to focus on areas where we can have a positive impact and move gas to end consumers with a positive social and environmental impact. We want to displace dirtier fuels with cleaner gas not just in areas that are connected to the regional grid, but also in remote areas where the other options might be burning diesel or biomass. Getting gas to those consumers is where the virtual pipelines come into play, in particular, and in some ways we are more excited about the 300,000cf a day we sell to a chili farm than we are about the 10mcf a day we sell to Pemex. What really motivates us is working with people who need gas to be able to do things more efficiently or more cleanly.

Gas supplies most of its gas from Texas, which brings risk of supply issues Natural gas is more widely accepted as a green energy source

Is Jaguar EP looking for additional investors to meet its goal of producing 10% of Mexico’s natural gas?

We are looking to raise more money through a combination of Mexican and international sources that can provide the type of financing that we need to build infrastructure, gas plants, pipelines and the like. And we are also open to talking to partners on our exploration acreage where bringing in partners particularly that have complementary expertise to ours is something that we have been interested in.

And now that the market is somewhat stabilized in terms of healthy pricing for gas and oil, we are starting to see companies have available capital to look to deploy elsewhere after two to three years of limited liquidity in the market. This allows us to accelerate things. We don’t necessarily need the investment but it allows us to do things more quickly, grow faster, and become relevant sooner than we would have been able to if we were limited to our own capital sources. The country has been underexplored and underdeveloped, and that now is the time for gas to come front and center for the future of Mexico’s development. ✖

BIO

Warren Levy is CEO of Jaguar E&P. He has extensive experience in developing natural resource companies for over 24 years in more than 20 countries. He has contributed strategically to the economic growth and development of the industry in Latin America in executive positions in companies such as Estrella International Energy Services, Schlumberger, Pentanova Energy Corp, and President Petroleum. He has also been a board member of several oil operators and oil services companies such as Miramar Hydrocarbons, Montan Energy, and Quad Energy.

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Gi ul ia n o C acci at o re MANAGING DIRECTOR, DG IMPIANTI

How does the collaboration between Italfluid and DG Impianti benefit your portfolio?

CENTRAL role DG Impianti strives to create greater value for Mexico and play an important role in increasing and improving energy production.

The collaboration is based on the acquisition of DG Impianti by Italfluid in early 2022. Italfluid was already a partial owner of DG Impianti and decided to acquire 100% of the company because DG Impianti is an EPC contractor with many years of experience that has expanded its business globally in the last few years. Italfluid intends to include EPC services and management in its portfolio. Right now, in Mexico, I cover the position of Managing Director of Italfluid Mexico and DG Impianti Mexico, where we operate a global service company for all types of equipment used to implement production offshore and onshore. DG Impianti is an EPC contractor, so many times engineering is also part of our services. We do our best to offer a strong portfolio and opportunity to cover as much of the client’s needs as possible.

How do you help international companies enter the oil and gas industry in Mexico?

Our business practice is always to work with international and private companies in the private sector. This has been the case since the start of DG Impianti that goes back to the end of the 1950s. One of our most important clients is ENI. We also work with Total, Repsol, and so forth. We also continue to work proudly with HOKCHI in Mexico. We are currently engaged in a project with ENI Mexico. The idea is to continue to work for it and continue to improve ourselves for further growth in Mexico. We are always open to working for other clients, which is already happening.

We are starting also an engineering project with FIELDWOOD Energy What is your perspective on the current state of the oil and gas sector?

BIO

Giuliano Cacciatore has over 17 years of experience in the oil and gas sector in Europe, North and West Africa, and Israel. He has previously worked in companies such as Schlumberger and General Electric. Cacciatore specializes in advising foreign companies companies enter the Mexican market.

Mexico wants to improve production both in gas and oil. To achieve this goal, the state will need further collaboration with the private sector. This includes further exploring Mexican assets that already exist in the country, such as offshore platforms or onshore fields. I am sure 2023 and 2024 will see improved production in Mexico, which means more business for all companies involved in the supply chain as well. I am confident, too, that the future will see

“We do our best to offer a strong portfolio and opportunity to cover as much of the client’s needs as possible.” the implementation of a better plan for the oil and gas business in general.

How can Mexico strengthen its gas production capacity?

Over the past 10 years, the technology being used around the world for the use and production of gas have served to improve the supply chain. There is no reason why Mexico cannot achieve this as well. The collaborations between the private sector and government must go in the same direction. The Mexican oil and gas sector can use the know-how, knowledge, and experience of companies that have led the world over the past 50 years. Mexico is a vital country for the production of gas and oil. With the experience of both global and local companies, Mexico can play a great part in this movement. There are also digital opportunities available today using software for better production solutions.

What new solutions or products are you pursuing?

We always try to be one step ahead in terms of early production, or make available equipment and technology to start production as quickly as possible. For example, occasionally an offshore platform may be ready to produce, while on land, the facility to receive this production is not yet complete. We can offer temporary solutions to start oil and gas production.

For one, the return on investment will be much faster. And at the same time, you are improving national production. We are the operator of the technology that we implemented for HOKCHI Energy in 2020. We helped it achieve an early production of 10,000bpd, while its facility was still under construction. This is one of our best technologies, although we also work on several other technological aspects. ✖

MASTERING ENERGY Executing projects in challenging locations for over 50 years.

Villahermosa - Torre Méndez & Pagés Avenida Gregorio Méndez #1311 Departamento 607 Col. Nueva Villahermosa C.P. 86070

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B2B

ability, and service. This is exactly our strategy and it has proven to be quite successful.

Why will gas play an important role in Mexico’s energy transition?

Vla dimir o de la Mora

Al d r ic h R ich t er

PRESIDENT & MANAGING DIRECTOR, GENERAL ELECTRIC

MANAGING DIRECTOR, BERGEN ENGINES

ENERGY With the growing need for power and clean energy all over the country, energy companies that are able to offer their expertise and the right products and solutions will see great demand in the coming decades.

What did the company decide to implement several changes to its structure?

VLADIMIRO DE LA MORA We have been in the market for 100 years, and Mexico was one of the first international offices that we opened. From there, we have been building a successful business for us.

We started about 100 years ago with hydro plants in the center of Mexico before participating in the liquefaction of gas for transportation, trains, and then aviation in the 1960s. GE also implement the nuclear technology in Laguna Marathon, the only nuclear plant in Mexico. Its two reactors are GE reactors. In 2018, we announced the company’s main business focuses: power generation renewables, healthcare, and aviation, and in 2021, we announced the new era of GE with three new companies with extremely bright futures: healthcare, aerospace, and anything related to the energy transition.

Each of the companies will have their own logos. There will be three factories, one service center, and one engineering center. We have close to 5,200 employees in the county. Mexico is an important market for us and will continue an

important on for the three independent companies. We are managing this separation process in phases.

Why is it a good time to invest in energy efficiency in the Mexican market?

ALDRICH RICHTER Even under uncertain times, we still believe in Mexico. That is the first point and an important statement.

Potential in Mexico is growing in time, as there is an increasing need for power. It is the right time for an OEM like us to invest in our business because Mexico’s economy needs to grow and sooner, rather than later.

Several external factors are adding to Mexico’s competitiveness, such as the nearshoring effect, which will bring many companies from Asia into Mexico to be closer to the largest markets, mainly the US. We believe that it is the right time to invest in our capabilities, build a state-of-the-art service center located in Querétaro, and improve our overall ability to be successful in the market. This is unique to our company strategy.

Many of our competitors are withdrawing from the market; however, we believe we can be a market leader by offering our customers the best technology, efficiency, reli-

VDLM Gas generation in Mexico is close to 50% of total generation. Another advantage is the competitive gas prices from the US. With the USMCA agreement, we need to start looking North America as one bloc. Currently, close to 50% of the energy produced in Mexico is produced with one GE equipment. We are focused on gas generation, transmission, and distribution, and nuclear. The energy transition is accelerating, though at the same time, the base generation is needed. There will be days with insufficient wind or sun generation, and the country needs what we call base generation to support the demand. That is where gas generation is a positive complement to the renewable business. We can generate electricity with the new technologies, with a high efficiency and limited CO2 emissions. And also, we are working on different technologies to capture the emissions of those generated by those plants.

Which industries are you collaborating with and how do you work in oil and gas?

AR One thing unique about our company is that we have a great offering regarding our power portfolio for Mexican and Latam customers. We have a portfolio of gas and liquid fuel engines, ranging from 3MW up to 12MW per unit. We can build power plants with capacities up to 200MW or even 300MW. Most of our mid- and large-scale customers in Mexico, ranging from paper mills, the petrochemical industry, and any general manufacturing industry, have projects ranging from 10MW to 50MW, which is the sweet spot for our technology. We offer the highest efficiency for medium-speed engines in the market. Hence, we can basically support any customer in need of power, from 3MW up to 300MW. It is a wide and broad offering and most of our projects are related to cogeneration. It is not only the electrical efficiency that we are proud of, but it is also taking advantage of exhaust thermal energy that we recycle into steam to ensure up to 95% efficiency on our projects. ✖

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new areas OF INTEREST

An international contractor with a presence on four continents, Bonatti has diversified from the construction of pipelines to other areas in oil and gas, hydrogen, and water.

Why did Bonatti decide to launch its regional operations in Mexico?

Mexico is a key market for Bonatti’s international strategy. It was the first country in the Americas where we opened operations 10 years ago.

Bonatti started to work in Italy over 75 years ago, then mostly in North Africa and other countries in Europe. We still do business in all those markets.

Mexico proved to be a resilient market and a great launchpad for Bonatti’s operations in other countries in the region. Bonatti is now working in the Americas, and we are actively pursuing projects in Panama, Colombia, and Peru. We are set to move on opportunities in other areas in Central and South America. We always look at international markets because of the nature of our core business: contractors go where projects are. We have proved to be competitive based on the knowledge and experience of our personnel and our strong asset base (technology and equipment); our people have worked with the company throughout their lifetime. Our research and development department develops in-house spearhead technologies for the construction of pipelines. We have also expanded into other areas aside from pipelines, mostly in the oil and gas. Bonatti came to Mexico because of the huge expansion cycle implemented over the past 10 years for the natural gas network; that was the main focus 10 years ago and is still the most relevant portion of our revenue.

What kind of opportunities has Bonatti identified in hydrogen?

We are an active member of the hydrogen industry associations both in Mexico and Chile. Projects in Chile are closer to sanctioning stages, while in Mexico they are still at an early planning phase.

We hope we will be able to announce our participation in some landmark projects in the near future, as we are heavily betting on industry growth.

We also have a number of hydrogen and carbon

G u s t av o B lej er GENERAL MANAGER AMERICAS, B O N AT T I , M E X I C O

capture-related projects in Europe. Bonatti is trying to become one of the companies behind the momentum in the sector. As contractors, we heavily depend on our customers and the developers creating those opportunities, but we can play an active role by supporting our clients in pre-feasibility studies, design, and cost estimation. Hydrogen and water are the two areas set to grow the most and where we can participate and contribute with tremendous value.

What is Bonatti doing in water treatment in Mexico?

At the moment, there is no framework for private water projects to take place in Mexico. We were recently awarded an EPC project in Chile for the design, development, construction, and startup of a system to bring water from the ocean to a mine play in order to substitute the use of on-shore waters for the mine production. We will stay close to the mining industry in Mexico as gradual adoption should start taking place in the mid-term.

Whether for human consumption, agricultural activities, or other industries requiring fresh water for their production, we are prepared to help grow the infrastructure for water desalination, transport, and delivery. We have put together a team of people with deep expertise in designing and implementing water projects. This includes not only working with technology for desalination, but also designing for the utilization of salty waters if required, which has a number of implications in terms of corrosion, material specifications and so on. The long-term vision for Bonatti is to be a key participant in those two markets. Hydrogen as a substitute of a share of the oil and gas market, and water projects in terms of attending needs that are growing and a demand that will eventually come.

We eagerly await the development of a regulatory framework in Mexico that will push private investment into accelerating the development of those water projects. ✖

Identified opportunities in water treatment and hydrogen for the future Presence in over 22 countries

BIO

Gustavo Blejer started his association with Bonatti in 2021 and currently holds the role of General Manager for the Americas, from where he works with teams in Canada, Mexico, and Chile. He was part of the TransCanada (now TC Energy) team in charge of pipeline network expansion projects in Mexico as director of engineering and construction for the region. He has held various operational and commercial positions in Mexico, Canada, Argentina, and Italy. He studied at the faculty of engineering of the National University of Rosario. He holds a master’s degree in science of management from Stanford and a diploma in project management from Berkeley.

He also obtained a diploma in energy law from the Escuela Libre de Derecho.

FIVE LARGEST MINES

BY PRODUCTION (2021, MMTPA) SOURCE: GLOBALDATA Buenavista del Cobre

73.35%

Peñasquito

35.91%

La Caridad

35.83% 22.7%

Herradura

15%

El Coronel

MINERAL RENTS (% OF GDP) SOURCE: THE WORLD BANK 0.6

0.4

0.3 '17

'18

'19

'20

Image: Foto Para Ti

0.5

Mining

93

CHAPTER SUMMARY

Mining

DIG, INTERRUPTED ith minerals used in everything from

panels and cellphones to electric W solar vehicles, mining is often thought of as the backbone of the industrial world. However, there are concerns over the capacity of the sector to meet rising demand as the world’s biggest mines near depletion and there are not enough new projects to ensure the supply of essential minerals such as silver and copper. “There is an ever-increasing demand for copper not only because of the electrification of society, but also due to the additional uses for copper in the biomedical space and things like that,” said Steve Robertson, President & CEO of Infinitum Copper, in an interview. “At the same time, there is a looming supply crunch, and we have not been able to find the same amount of deposits that have been found historically. As a matter of fact, the discovery rate has dropped dramatically, and in a year or two, there will be a significant supply deficit.”

Companies are aware of the time crunch between supply and the need for more investment in exploration, but interviewees also shared with The Business Year that there is not enough support from the government in Mexico. It is important to promote a public policy that incentivizes investment in the sector and the reactivation of the granting of mining concessions is a top priority, according to the Mexican Mining Chamber’s (CAMIMEX) 2022 report. “Without certainty, investors are unwilling to operate mines in Mexico.

These lost streams of national and international capital end up going to operations beyond Mexico,” shared Karen Flores, General Director of

CAMIMEX. “We have talked to five governors from the country’s main mining states of Chihuahua, Sonora, Zacatecas, Durango, and Guerrero, and the plan will stimulate the sector, recover international competitiveness, and reactivate the mining industry.”

In response to the lack of certainty, companies are taking advantage of the positive reputation the Mexican mining industry holds in Latin America to expand, share expertise, and diversify.

“When it comes to human talent, Mexico has a significant advantage over Latam, though on the issue of legal certainty, countries such as Bolivia are better,” explained Carlos Silva, CEO of Santacruz Silver Mining. “Here, there is a strong degree of uncertainty; we do not know what will happen tomorrow.” This has proven to be an unexpected opportunity for the Mexican market as companies are seeing success in their expansion plans.

“Mexico has a great reputation for providing a quality workforce," shared Armando Lucero, Director of Operations of Globleexplore. “Over the years, we have been requested by many of our clients to go to other countries such as Colombia, Ecuador, Guyana, Brazil, Chile, and Peru.”

Despite the circumstances, Mexico remains an attractive market for investors as it holds projects like Cananea, the third-largest copper mine in the world, and companies are amping up exploration in the hopes of finding the next Cananea. “There is a great opportunity to discover mineralization in Mexico. Much more can be done to find new deposits,” emphasized Robertson in an exclusive interview with the Business Year. ✖

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Ka r e n F l o res GENERAL DIRECTOR, MEXICAN MINING CHAMBER (CAMIMEX)

What is Mexico’s role in the international mining panorama?

DEFINING the roles Camimex, as the representative of the mining sector, continues to liaise with the relevant authorities and ensure the industry complies with regulations and environmentally friendly practices.

BIO

Karen Flores has 14 years of experience in the mining industry, working in both the public and private sectors. In 2019, she was appointed General Director of Camimex, the first woman to occupy this position in the history of the organization.

She actively participates in various business organizations as counselor & president of the Committee on Inclusion and Women Building Businesses in the Chamber of Commerce of Canada in Mexico (CANCHAM). She is an active member of the Association of Mining Engineers, Metallurgists and Geologists of Mexico and part of the founding group of Mujeres WIM México, a subsidiary of Women in Mining International. She is currently a Director of the Canadian company GoGold.

Mexico is an eminent mining country.

Camimex presented its annual report, which found that we represent over 90% of the mining-metallurgy value at a national level. And at the international level, Mexico ranks among the top 10 globally in the production of 17 minerals, being the number one silver producer and in the top 10 for gold and copper. Currently, Mexico is facing certain challenges mainly because of the pandemic and its effect on the global economy. However, mining has played a crucial role in economic reactivation.

In what ways does Camimex represent the interests of the mining industry?

The Mexico Mining Chamber represents more than 90% of the mining-metallurgy national production. We are governed by the chamber’s regulations, but are affiliated with private initiative. We have built a communication bridge between authorities, the government, and the business sector, protecting the interests of the mining industry. Some of our projects, framed by the president in the presentation of the annual report, are aimed at working together with authorities to create a work plan. We have talked to five governors from the country’s main mining states of Chihuahua, Sonora, Zacatecas, Durango, and Guerrero, and the plan will stimulate the sector, recover international competitiveness, and reactivate the mining industry. Some tax incentives are important as well, because the mining industry is subject to the highest taxation in the country.

Over the past seven years, according to data from the Secretary of Finance and Public Credit, the mining industry has paid over MXN240 billion in taxes. This is equivalent to about seven times the budget of a state like Zacatecas, or more than three times the budget for a state such as Sonora. These taxes not only include income tax, which every industry in the country has to pay, but also additional rights that the mining industry has to pay.

Our data on the industrial sector and the

levels of taxation faced by each industry as a percentage of GDP reveals the mining industry contributing the most, at over 14%.

This is solely in terms of income tax, and if we add the aforementioned rights the figure rises above 16%. Part of our projects includes trying to standardize information with the authorities for decision-making that supports the mining industry.

Apart from taxes, what else could you do to stimulate investments?

The reactivation of mining licenses would be fundamental. I also think legal certainty is essential, because without certainty investors are unwilling to operate mines in Mexico. These lost streams of national and international capital end up going to operations beyond Mexico.

What is your vision for Camimex?

The Mexico Mining Chamber is the chief entity representing the mining industry in the country. We represent responsible mining, operating to the highest safety and environmental standards, and we care about national development and the well-being of the more than 600 communities in which we operate. We employ over 3 million families with salaries 37% above the national average. This is an industry that is not just boosting Mexico’s economy but also improving the well-being and life quality of Mexicans. Camimex will continue these efforts going forward. We are a large mining family, working handin-hand with our partner organizations, associations that represent professionals, and the mining clusters representing the grocery chain. We all have the same vision of a responsible Mexican mining industry that can continue to grow and advance the country. One of the chamber’s projects has been to be open to information exchange.

Our database is publicly available allowing people to appraise the statistics and do their own math based on official data.

We will also continue with our work and reporting on the industry and its progress regarding sustainability in a spirit of full transparency. ✖

Mining

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INTERVIEW

better WAY FORWARD

With the mining sector in need of reforms, FRENTE is seeking to play a central role to consult with lawmakers and ensure the best interests of its colleagues.

What kind of impact is the law on profit sharing having on the mining industry?

The labor reform on outsourcing included changes in profit sharing, which I do not believe is a good move. The reform was approved in April 2021, and I, as a deputy, opposed it. The reform changed the criteria for profit sharing among employees in Mexico, which used to oblige companies to share 10% of the profits among employees, and now it is much less. The Constitution, in Article 123, talks about profit and authorizes a threeway commission that defines the percentage of 10%. It is integrated for workers, companies, and the government. Therefore, it does not make sense to have a labor reform that contradicts the Constitution. Everyone in Mexico knows that the Constitution cannot be overruled by a secondary law, and we all felt that it was unfair. Where would this money go? They said they would distribute MXN104 million, but only MXN22 million was distributed, or 80% less. We are pushing on this secondary law to be in line with what is established in the Constitution. Although the Constitution does not state the commission percentage, we should be able to define it if it is 10%. This was a big hit for companies that divided their profits with their workers.

What is your view on the mining sector in Mexico in general, and do you see more investments or growth?

We have seen fewer investments; there is uncertainty, and companies do not have legal security. The energy law did not affect the Chamber of Deputies. This brought with it the push for a reform of the mining laws on lithium and other minerals such as gold, silver, and copper. This situation is not new. The decree says that the subsoil is part of the nation, and the president decides whether or not to give the authorization to mine.

There is a direct correlation between metals prices and investments. Miners have discovered that

C arlo s P av ó n C am p o s G E N E R A L S E C R E TA R Y, N AT I O N A L U N I O N O F M I N E R S A N D M E TA L L U R G I S T S ( F R E N T E ) & F E D E R A L D E P U T Y, P R I

lithium in Mexico is attached to a stone that is hard to process, and we have to do many studies to separate lithium from this stone. Every plant is different. Mexico has many minerals, but they are all attached to something else. Plants need to be built for this class of minerals to be extracted onsite.

Why should the public sector consult with workers before implementing reforms on labor laws?

The laws are not always revised to help workers; sometimes, they harm them. I always remind the Chamber of Deputies that we never consult with the workers. To fully understand, they would have to be a worker in the mining industry. The chamber should consult more with workers to know and understand exactly how these reforms will impact them. Many thought that they would be in favor of them, but they are not. The labor reform is dispersive and allows the authorities to set criteria that do not comply with the laws but are based on personal opinions. Every judge has different criteria. We will wait and work with deputies and senators to have more defined laws.

We will see if a law authorizes the change. Everything that a worker should do is now being done by a employment center. Outsourced people were used to other conditions and benefits. In syndicates, we have stability and security for outsourcing. It was their decision.

What projects is the union focusing on?

We are focused on getting the law respected for the worker and complying with the labor reform, rather than with the criteria. Our goal is to make the employment center understand that we cannot continue with the criteria that they create. We should comply with what the law establishes. All the laws created are then based on criteria. This no longer makes it a law but rather the opinion of the person that handles them. ✖

Mining contributes to 8.3% of national GDP Industry offers some of the best paid jobs in the country

BIO

Carlos Pavón Campos is one of the few union leaders in Mexico who was previously a miner.

Originally from Zacatecas, he is the leader of the SNMM FRENTE, federal deputy of PRI, and president of the National Union of Mining, Metallurgical, and Metal-Mechanical. His main objective as a mining leader is to make occupational safety a way of life among colleagues, ensure job stability, and improve the economic incomes of FRENTE members. Gender equality and respect for women has also been an achievement within the union he directs.

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IMPRESSIVE numbers Ca r l os Sil v a CEO, S A N TA C R U Z S I L V E R M I N I N G

What differences do you see between the mining industries in Mexico and the rest of Latin America?

Santacruz Silver Mining has seen great success in its mines in Bolivia and Mexico and is now working on building up its profile and gaining recognition globally.

When it comes to human talent, Mexico has a significant advantage over Latam, though on the issue of legal certainty, countries such as Bolivia are better. Here, there is a strong degree of uncertainty; we do not know what will happen tomorrow.

The difference is huge. Otherwise, they are all the same; we have excellent laws, and the technology is the same. The type of mining and the method of exploitation are also similar. Bolivia and Mexico’s geologies are remarkably similar, though the potential there is greater. In Bolivia, there is much yet to be discovered. Here, everyone has their little piece. There is a great deal of industry here, and it has grown significant in recent years in terms of investment. Bolivia offers great potential, and there are many possibilities for excellent grades, even for minerals. There are copper possibilities there, though the regulations must be amended to allow exploration.

What steps is the company taking to maintain profits?

Our profits are impressive due to the acquisition in Bolivia. Companies can develop more through acquisition. We are focusing on three axes, starting in Bolivia.

Strategically speaking, we are focusing on the safety and well-being of the people, productivity in all operations, and growth—not only in production but also in people, communities, our families, and the entire company. We are currently implementing in Bolivia what we have done in Mexico to be a model of socioeconomic recovery that focuses on both business and social. We also work in communities and have great relationships. Wherever we go, we must respect and assist the locals because these are their customs and beliefs. Both the laws that safeguard them and the ones that safeguard us must be followed.

BIO

Carlos Silva Ramos studied mining engineering in the University of Guanajuato and received a master’s in finance from ITESM. He founded Carrizal Mining in 2009 and is now CEO of Santacruz Silver, after completing a successful merger in 2019. Santacruz Silver operates in Zacatecas and San Luis Potosí.

Regarding the issue of production, what investments have been made to put these Bolivian mines’ capabilities into practice?

As an investment, we are releasing the planned investments to renew some equipment; however, everything else is focused on increasing efficiency in the pro-

“With Bolivia and Mexico, we expect to see additional growth over the next four years.” cesses, such as reviewing all the activities and marking the priorities. In Mexico, we are also investing in growth, though right now we are already reaching our capacity.

We will continue to expand or explore our deposit in order to ensure solid production and maintain business as usual.

What further markets are you aiming to conquer?

We have been expanding lately, and this is likely to continue. With Bolivia and Mexico, we expect to see additional growth over the next four years. The two operations that arrived need to be precisely optimized. The best price for each mining must be guaranteed, and we will continue to monitor opportunities in 2023. There is potential in Peru, though it is a politically complicated country with a traditional mining sector where we could explore something else. By acquiring operations that are working, we get to optimize them.

If we start with exploration, it may take longer, and we will have to spend more money on it. In terms of exploration, we will invest in Mexico, specifically in Zimapan, and Bolivia. Our equipment is better suited to expanding our current explorations. In Bolivia, we have a mine that we could put into operation in the medium term. The project is done for now, and we are conducting feasibility studies.

What are the primary goals of Santacruz Silver Mining?

The goal is to keep expanding. We also want the proper credit for our efforts because they are not being reflected. In 3Q2022, we generated 4.8 million ounces of silver equivalent, which is an important number in the region. There are many other companies that are more famous but produce less than us. Therefore, we want to work on gaining recognition from the stock market so that Santa Cruz receives the value it merits and can provide fair dividends to its shareholders. ✖

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B2B

St e ve Robe r t son

Joh n M. Darch

PRESIDENT & CEO, INFINITUM COPPER

CHAIRMAN & DIRECTOR, SONORO GOLD CORP

MINING

of exploration done on it in the past. It is hard to find such projects, and we are reaping the benefits of that now. With our exploration program, we are finding increasingly high-grade mineralization over large distances; it appears as though it is a large system. It is at least 210km wide by 5km long, and a lot of work is needed to fully define where the mineralization lies. Currently, the more we explore, the more we find, though it is too early to determine the start of production yet. We are still in the exploration phase and working to finalize the boundaries of the entire system. We are advancing the project quickly and hope it will not be too long before we are able to start making projections.

What differentiates you from other junior mining companies, in particular in Mexico?

The rich deposits still being discovered in Mexico offer the country a great opportunity to advance further and become the investment destination for mining companies.

What are your expectations when it comes to the supply and demand for copper in the coming years?

How would you rate the performance of gold and silver prices in 2022, and how has this impacted investment in mining?

STEVE ROBERTSON I have been in the copper business in my entire career and have never felt better about the supply-demand dynamics. There is an ever-increasing demand for copper not only because of the electrification of society, but also due to the additional uses for copper in the biomedical space and things like that. At the same time, there is a looming supply crunch, and we have not been able to find the same amount of deposits that have been found historically. As a matter of fact, the discovery rate has dropped dramatically, and in a year or two, there will be a significant supply deficit. People should pay more attention to Cananea, as it is the fourth-largest copper mine in the world. It is just to the north of us at the other end of the state.

There is a great opportunity to discover mineralization in Mexico. Much more can be done to find new deposits, especially ones like Lito, which are the smaller, high-grade deposits. It is more exciting to look for them.

JOHN M. DARCH It is somewhat disap-

pointing the way gold is performing; however, there are many factors influencing this, not the least being the US having a strong dollar at the moment. In addition, there is a high level of uncertainty in terms of interest rates. The gold price will likely hover around this level until we receive a firm direction from the Federal Bank in the US as to where it sees interest rates going. Will they stop the climbing interest rate and ease the inflationary pressures? If not, many countries might go into a recession. If that happens, that is when I expect to see some developments with gold.

How has your project in Sonora, La Adelita, advanced?

SR It is a fantastic project in a wonder-

ful spot, Sonora State, which is known to be a significant contributor of copper to the national product. It is an exciting project that has not had a large amount

JMD The difference between Sonoro and the majority of junior mining companies is that we actually have a business plan.

We have the five essential components of a successful mining company. First, we have a group of highly experienced engineers, geologists, financial people, and so on, each with some 35 years of experience and successes in the past. Then, there is the immense potential of the project.

The third component is that the owners, insiders, and management all have a meaningful investment in the company.

The senior executives hold about 20-22% of the company. We have considerable investments in the company, and each time we have a private placement, we always fully subscribe. The business plan is also important, and that is where we stand out from many of the junior companies who are heavily reliant on a major company acquiring them; we do not. The last essential component of a company is the ability to raise funding, and we have demonstrated this even in the most difficult of times. The fact that we can do it at a premium to the market is a clear indication that we are set apart from most of the juniors. When an investor looks at our company, they should be able to identify with any degree of due diligence the people, project, ownership, and the fact that each person in the management has a substantial interest in the company, well over USD1 million each, which puts us in good standing. ✖

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Mexico 2023

Image: Nailotl

The mountainous landscape of Copper Canyon, Chihuahua

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FOCUS Mi n es o f t he fu t u r e

THE LONG RUN Mexico’s mining industry has become more regulated and nationalized in recent years, but foreign companies are still welcome, especially those that contribute to the digitalization of the industry.

THE GROWTH OF MEXICO’S MINING SECTOR began to accelerate

around 2015, hitting a YoY growth rate of 10% in 2017. The sector miraculously did not suffer much from the pandemic and touched an all-time high growth rate of 23% in 2021. All things considered, things have been going well for the sector in 2022, as the mining of silver and semiprecious minerals continues.

Precious and semiprecious metals account for almost half of the country’s USD2-billion mining sector, which includes gold, silver, cadmium, mercury, and manganese. Mexico has been recognized as the world’s leading producer of metallurgical minerals and is currently the world’s number-one silver producer, with a production of 197 million ounces in 2021.

There is a rich tradition of mining in the country dating back 500 years ago, with the country’s terrain well suited to mining. Streaks of minerals can be identified across mountain ranges such as Sierra Madre Oriental, Sierra Madre Occidental, and Sierra Madre del Sur. This abundance of natural mines is due to the terrain’s unique geology and high levels of tectonic activity.

Mining activities are mainly concentrated in the northern states of Chihuahua, Sonora, Zacatecas. In addition to local mining companies, some 250 international upstream and—increasingly—downstream mining companies have flocked to Mexico in recent years.

Upstream activities, including exploration and production, must be carried out within Mexico’s concession system. Exploration concessions are usually issued for six years and cannot be renewed, while production concessions are valid for 50 years and renewable.

Obtaining a concession requires clearance regarding environmental issues, health and safety, and sustainability. As such, some have pointed out that issuing new concessions has slowed down in the country. The mining authorities, however, argue that the regulatory requirements set by Mexico for issuing concessions is what any responsible government would expect from foreign companies.

All that said, “the US has a strong presence in Mexico’s mining industry with thirty-two companies, led by Newmont and Coeur Mining, having operations or significant investments in the country,” according to the US Department of Commerce. And the surging prices of minerals is drawing even more companies to the country.

The industry enjoyed over USD2 billion of FDI in 2021, and there is a good chance that 2022 will be another good year for the industry,

with the Ministry of Economy reporting FDI of USD610 million in metallic mining in 1Q2022.

Foreign businesses contemplating the country’s market must be aware that Mexico has a strong local mining sector. Companies such as Grupo Mexico, Fresnillo PLC, and Met-Mex Peñoles dominate the metallic ores sector, with market share of over 75%. Given the tough competition in the supply sector, foreign firms are more drawn to niche segments such as technology-assisted exploration.

Indeed, certain companies coming to Mexico are focusing on exactly that: the digitalization of the industry and the applications of technology in mining. Companies such as German conglomerate Siemens offer digitalized solutions that can make mining more efficient. “There is a great deal of curiosity in the [Mexican] market and a high level of engagement. There are many pioneering companies and CEOs willing to ride the wave of digitalization, while there are others that prefer to wait and see,” said Siemens’s Alejandro Preinfalk to TBY. Nonconventional minerals such as lithium form yet another niche segment of the market. Although the upstream segment—including the mining and extraction of lithium—was nationalized in 2022, foreign companies can invest in the processing of lithium and battery production. The global demand for lithium has been on the rise with the advent of electric cars, and Mexico, within proven reserves of over 1.7 million tons, is well-placed to be part of this emerging supply chain.

In the coming months, industry leaders are likely to shift from their current half-hearted adoption of digitalization to a complete embrace of digital technologies, because with operational costs going up as a result of inflation, automated solutions can increase efficiencies and cut down on costs. Although digital solutions may seem costly in the beginning, they will more than pay off in the long run.

As for controversies regarding the issue of concessions, putting checks in place is not inherently detrimental to the sector. Obtaining environmental permits, promising to steer clear of indigenous lands, and observing strict health and safety rules are now standard practices across the mining industry in the developed world. So why not in Mexico? However, the streamlining of the permits and more transparency in their issuance will surely be appreciated by foreign mining firms keen to enter Mexico’s market. ✖

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Mexico 2023

INTERVIEW

STRATEGIC partnerships

Helping international brands to enter the Mexican mining industry, Mountar is working to offer a package of products and services to increase its value to customers.

Growth of over

30% in 2022

Juan Carlos Mazón is an industrial and systems engineer from Tecnológico de Monterrey with an MBA from Thunderbird School of Global Management in the US. He is a partner member of the board of Mazón Salazar Hermanos, founding partner of Mountar and AP Drilling, founding partner of Distribuidora GPR, and founding partner of Comercializadora Mazfe. He has been a member on different councils, such as the Cruz Roja Council, Tecnológico de Monterrey Sonora, CRIT Hermosillo, and Patronato del Asilo de Ancianos Juan Pablo II.

MANAGING DIRECTOR, M O U N TA R

How has Holding Minero performed this year?

companies wanting to enter the mining industry?

For us, 2022 was a year of growth and development, and in 2023, we expect a larger market share and more corporate agreements. Our group, Holding Minero, includes both AP Drilling and Mountar. As a holding, we have maintained our presence in all our previous contracts. We have seen an improvement of around 30-40%. Right now, we are also starting to become involved with the transportation industry, building a terminal, through Transportes GPR, a third company that will become part of the group in 2023. This company will commit itself to improving logistics services.

To this date, we rely on five international strategic partners collaborating with us, one of them being CR Mining, from Australia, and Wearpro, a company from Tucson, Arizona, that supports us by promoting their products and services. Based on the potential development in Mexico for Wearpro, it is keen to expand their position here. We have an excellent relationship with them making a great team, helping to simplify processes for our clients through this collaboration. Wearpro specializes in manufacturing pins and bushings for all kinds shovels and loaders, which we promote through Mountar. Everything is a package deal, and it makes sense to work together making it a one-stop shop to provide end users a reliable product and service.

What are Holding Minero’s expansion goals when it comes to AP Drilling?

BIO

J u an C arlo s Maz ó n

When it comes to AP Drilling, we have achieved success in Mexico, due to our high-quality products and value-added service. Our analysis and deep knowledge have optimized our business model and allow us to offer integral drill steel solutions, optimizing mining companies and contractors’ core business. Through its technical service along with a high-quality product and a continuous improvement strategy, AP Drilling position itself as the industry leader in drill steel cost per meter, drill steel management and decision-making data. In a current global scenario, in which uncertainty and bottle necks in supply chain is a daily challenge, AP Drilling offers supply chain solutions for drill steel, inventory and warehousing, creating certainty in regard to supply and cost stability.

In what ways does Mountar collaborate with international

What are your expectations for 2023?

As a holding we have different goals for each company: Mountar and AP Drilling. With Mountar we are working on our market share growth, but as a holding company, we are always open to new companies and clients that can help us in the coming year, especially Wearpro and CR Mining. We are open to all new companies that we can help to enter the Mexican market. For our short-term plans, we are always open to new ideas. We are set to continue promoting the same product that we have had for the past three years, plus this new partner that we have, and maybe in 2024, we will start looking for a new company or venture. When it comes to AP Drilling, we seek to continue positioning the company in the market and its capacity to become a strategic partner for clients. ✖

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FORUM

SUPPLIERS With the local mining sector ramping up, these suppliers offer solutions that not only enable mines to operate more efficiently but also maximize safety and minimize their impact on the environment.

Fra n cisco Mor ale s

G il b e r to M a r tí n e z

R i card o G u t i érrez

R am ó n L u n a

MANAGING DIRECTOR, PROFUMISA

MANAGING PA R T N E R , B AT R I N S A

DIRECTOR, M I N E P R O T E C T L ATA M & GENERAL MANAGER, MEXICO AND CENTRAL AMERICA, HEXAGON’S MINING DIVISION

MANAGING DIRECTOR, SPM

WE ARE PROVIDERS to the mining industry and all the related sectors, such as the control system. The mining sector did experience challenges, but 2022 was a good year for us. Everyone has to adapt to the new ways of working and mining. We also help mining projects comply with ESG standards. We often work with forest operations that grow trees indigenous to the various regions and plant them in the local areas. We also work with water irrigation risk systems.

What characterizes us is our close work and influence at each mine, as we seek to make each project as personalized for the client as possible. When the project is finished, we continue to assist and provide the services needed. We stay in close contact at all times and deliver timely service. We are a family-owned company of modest beginnings. We have worked in different markets like Peru, Colombia, Chile and Mexico, which has allowed us to learn a lot about the sector and how to work with leaching systems.

ORIGINALLY, Batrinsa was a

ONE OF THE MAIN reasons Mexico is a strategic region for Hexagon is the willingness of mining operations to test new and disruptive technologies. This flexibility has allowed us to grow our market share over the past couple of years, with technologies focused on all stages in the life of a mine from mine planning operations, to safety, and autonomous solutions. Many mines are in remote areas, but mines are successful at equipping their operations with the necessary communications technology required to utilize various solutions from diverse providers. Mexican mines do not cut costs when it comes to investing in communications networks. Most mining companies have their own private networks, whether it’s a WiFi or a mesh network. They can also use LTE networks and usually deploy their own.

There are no real issues with that, at least in Mexico. Many of our hardware solutions contribute to this process.

WE ARE MANAGING more than

product marketer, but the market led us to manufacture equipment and large components that were not available in the past. Now, we have a plant of 2,500sqm for the manufacture of transporters and have acquired 5,000sqm of land to expand. Now, people are not interested in buying a roller, or a meter of material, but rather a solution to a problem. Many times, this problem beyond the client’s scope of capability. When we talk about cargo transport, we think about trucks, trailers, and things like that. Here, we are talking about transporters and belt conveyors, which are machines that take materials from point A to point B on a flexible belt. There are 3,000 different models for each application. We have engineers with considerable experience and are constantly training ourselves. Since we make tailored products, we must train the people who are going to operate them. In our offers to our clients, we include staff training for the operation of the equipment.

a digital transformation; we need to move forward with technology and communications. We are implementing many new systems such as database services, digital capture services, and information capture services. The software is already extremely developed and allows us to speed up the processes significantly and make calculations that are much more accurate, practical, and operational. We therefore have to be at the forefront of that in order to provide the best service to our customers.

SPM dedicated to the entire chain of mining exploration services. Fortunately, the excellent service we have provided to our clients, rather than expanding the portfolio of services, has allowed us to expand our client base. We have already collaborated on the discovery of more than 15 million ounces of equivalent gold, which is a significant figure for us as a service company.

Blvd. Jesús Garcia Morales No. 52c Col. El Llano, CP 83210.

Hermosillo Sonora, Mexico

SALES CONTACT

Jorge Munguía 6626909940 ventas@apdrilling.com.mx

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INTERVIEW

En r ique G u i n ea CEO, HANKA

What logistical advantages does Hanka have over other explosive competitors in the mining industry near the state of Sonora?

SOLID reputation Using more technology and analytics, Hanka is able to finetune its operations to increase overall productivity and lower the costs of blasting in mines while protecting nearby communities.

The explosives industry is regional, mainly because it is heavily restricted by many laws and regulations; however, I expect growth in the future even though precious metal prices have been falling slightly; there is still great business for everyone involved in mining. It is important to remain close to your customers not only in terms of logistics, but also in terms of the ability to provide just-in-time service and having a large amount of storage. We have plenty of capacity and can guarantee three months once we enter into a contract with any customer. We have a clause that guarantees clients will not encounter any problems with availability of products.

This is something that we worked on from the beginning of the pandemic and is also the reason why we are regional and we will remain regional. We have a solid reputation, not only because of our people, but because of our working teams. The way we like to work with any mine or customer is by creating partnerships. We did this right from the beginning in the 1990s, getting involved with our clients and becoming a part of their team. We also do that with our own suppliers, and this has been a successful strategy for Hanka. This is a style of teamwork that we are very much used to and has been a great asset for the company.

What steps is Hanka taking toward becoming decarbonized and implementing ESG principles into its processes?

Working with Yara, our business partner, we both hold the same view and are heavily involved in sustainability. We also consider safety to be our working license.

All accidents can be prevented when you have a core of people who work hard to prevent accidents. We have three transportation companies, one that works in the US, and the other two in Mexico, and

we have not had an accident in more than 35 years. In Mexico, there is no entity that measures such statistics, but in the US, all that information is public. Anyone can see our qualifications and successes there. We have also made progress toward becoming a decarbonized company, and in three or four more years, we expect to be zero carbon. We have invested large sums of money on solar energy. We are also looking at generating energy from biomass both from agave and cactus. We can collect a large amount of such biomass from adjacent cattle and pork farms. We are able to do many things with sustainability there.

We are working hard to become carbon zero, decarbonized companies.

How do you use data and analytics to increase the efficiency of your explosives?

All the data and equipment help with that.

We have topographic equipment as well as drones and fragmentation analysis equipment, which in single blast provides a large amount of data and pictures. We are able to develop 3D models that we can see. We can even simulate blasts with a high degree of accuracy, which helps us to plan and make improvements when required.

Electronic detonators now provide a large amount of information and ensure a more precise blast, as well as GPS capabilities, so you know exactly where they are and the exact distance from one point to another.

All these help us plan better and give us the opportunity to make minute adjustments and look how productivity if affected. In the end, all this translates into savings in the downstream and even beyond that.

All these allow projects become more productive, earn higher profits and savings, and protect nearby communities from possible dangers. By analyzing millions of bytes of data over many months or years, we are able to finetune and design the best blast for such a geology. It is a fallacy that just putting more explosives is best; that is definitely a thing of the past. ✖

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INTERVIEW

excellence FIRST

VMX provides the best solutions to its clients to help them increase their productivity and ensure safety above all else.

A d ri án Márq u ez MANAGING DIRECTOR, VMX MINEPRO

What factors have helped the company succeed considering its recent entry in the mining market?

What investments is the company making toward diversifying the segments it operates in?

We were always investing in technology (management, quality, equipment) and training our human resources. Our customer service and innovation are two important factors that have helped position VMX successfully within the mining industry.

We also invest to ensure the materials are always available to be able to serve our clients. We have had constant growth and solid results despite the global difficulties. Mexico is a developed country, though technology is always lacking. It is behind in terms of mining compared to Chile or Peru regarding technology, and our mission is to help bring the best of international technology to the local market. In 2022, RSM4 (reliability, service, and maintenance), our local company in Panama, started operations.

We have four companies operating in Mexico and are growing in terms of the segments we work in, such as oil, steel, and gas. We want to focus on primary sectors used in all operations. Gas is extremely important, and we already have agreements with different companies. We support the management of gas usage in mining operations. For example, there is equipment that supplies gas and manages it appropriately, which would work with a software to tell the user what equipment it is loading, who is managing it, its total consumption per day, how much gas we are losing, and so on. There is usually a 10-30% loss each day, and with this technology we seek to reduce this to 4%. We are using technology from Gilbarco, with whom we have an alliance.

We are also present in the energy sector and work the same way we do in mining. We are focused on mining, electricity, and gas. We want to continue to support our clients and provide them with solutions. We do not want to be providers, but rather allies. We differentiate ourselves by giving our clients exclusivity. For example, we sell products to Peñasquito that we produce especially for it. Among our own clients, we have a large market, and this is because they trust us. We are still growing in different lines of work. We always focus on helping our clients grow in productivity and availability. They take us into account when forming their business strategies, and this is not only in Mexico but Panama as well. Our focus is to help them increase their productivity. Even our competitors such as Caterpillar and Epiroc take us into account and look at what we do. Sometimes, we surprise ourselves with the solutions we are able to provide. We have an excellent strategy because we continue to provide different solutions to our clients. ✖

How did you enter the Panamanian market?

We originally had an investment intended for Peru and are in fact setting up RSM5 there at the moment. Everything originated from a meeting we had with the client, First Quantum, which was extremely interested in our working style and our people. It decided to invest in a company, and we committed to it, delivering a solid company in Panama. There was a big research process on its part, but it all turned out well in the end. Peru is still on our horizon, and we are working closely with Grupo Mexico, one of our biggest clients. It demands a great deal from us, which drives us to be even better. All operations from Grupo Mexico in Peru are run by us, and we sell it the products from here.

However, it wants a company to support it in Peru the same way we do here. We plan to be legally established there by 2023 and start operating by 2024.

Presence in Mexico, Panama, and Peru Focuses on primary sectors

BIO

Adrián Márquez is the Managing Director at VMX MinePro. He is an industrial engineer from Instituto Tecnológico de Sonora (ITSON) with over 12 years of experience in sales and key account management. Adrian has held business management positions within the mining industry and he is also an expert developing sustainable strategies.

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Mexico 2023

WE

ARE

• For the Union, security is synonymous with prioritizing and having a responsibility and a commitment to all mining families.

• Dialogue, trust and good understanding are great allies in our labor gains.

Guaranteeing job stability is a main axis in the Union.

• In the Union, gender equity isn’t an aspiration, it is a reality, the same rights and obligations for all. We welcome women in our mines.

• Mining is an activity that has evolved, day by day it transforms itself to preserve nature and make great contributions to humanity.

• Worker’s rights are not renounceable, they are an act of justice, in them there is struggle, history and effort: Carlos Pavón Campos.

E

L

FR E NTE

contacto@snmmfrente.org.mx Somoselfrente somoselfrente.org.mx

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Image: stacyarturogi

108 Mexico 2023

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INTERVIEW

more TO ACCOMPLISH Globexplore is banking on its up-to-date equipment, know-how, talented team, and spotless reputation to expand further across the region.

A rm an d o L u cero D I R E C T O R O F O P E R AT I O N S , GLOBEXPLORE

What type of new technology are you investing in?

We have to serve our industry, especially given its need for the highest requirements of safety, productivity, and efficiency. We have always kept our fleet at a maximum age of five years, which is how we have been able to sustain higher levels of productivity and safety. We are currently working with other suppliers to come up with drills that use combined technologies of fuel power plus battery, or else go completely battery operated.

We are at the stage of developing zero-emission equipment. While at an early stage, we are confident of achieving this swiftly. We also decided to rush the production of an EV drill in order to start upgrading the fleets. We have a strong, multi-disciplinary team and a solid cash position to realize this. We are trying to devise battery-operated equipment. Our board members have different industry backgrounds, which helps us think outside the box. We understand the clientele better to provide them with a better service. We employ many young people with fresh ideas, which is important when coming up with a better understanding of what the clientele is looking for and what a project needs. Basically, we create drills suited for various operations and clients.

What differentiates your in-house system from other software used in the mining industry?

It is an integrated system. It controls all of our operations but more than being an MRP, it allows live-tracking of every operation. We are also working with systems like Starling, for example, to have

live internet external operations on the drills so we can receive data from the drills in real time. We control everything from drilling parameters to employees, users, and angles of deviation. Every KPI important to this type of business is controlled live. That gives us an edge because we can take actions and decisions immediately, which we aim to provide to our customers for better immediate decision making.

What are Globexplore’s expansion plans in Latam?

Over the years, we have been requested by many of our clients to go to other countries such as Colombia, Ecuador, Guyana, Brazil, Chile, and Peru. We were focused on potential clients and large companies that accept and share the same values as ours. For example, we recently started operations in Colombia because one of our major clients requested that we supply them with a better service that what it was getting there for a significant project. We need to prove ourselves, which we do by bringing in both great employees and equipment. That is how we follow clients and potential projects that might become the next big thing. Since we have some of the largest ports on the Pacific, close to our headquarters, we can load a container and ship equipment to Colombia in a single day. We also have a strong logistic department that understands operational requirements and has been flawless in serving us. That is how we have been able to serve those countries. Canada, the US, and Mexico are major partners, so buying goods and equipment, importing,

and shifting are not a challenge. Ecuador is probably the second market we will enter. We have interesting opportunities in Argentina, Brazil, Guyana, Suriname, but the next market will be Ecuador.

What is your perception of the Mexican mining industry and the rest of Latam?

As with every part of Latin America, we are going through a socio-political shift.

Mexico has a great reputation for providing a quality workforce. The overall perception of Mexican mining is positive, though it faces the same challenges as any other market. It is part of the resilience of this industry to drive through those challenges in order to thrive. For over past decades, Mexican companies have focused on thriving locally. However, the goal is always to go north into the US and Canada. Many clients are asking me to become active in the US, and even Canada. ✖

BIO

Armando Lucero got his start in the drilling industry in 2006 and has held several field and management positions in his career. He is a professional engineer and holds a degree in industrial and production applications. He has several years of experience in the areas of operations, maintenance, logistics, and administration. He has spearheaded the company’s growth into specialized drilling services such as True ManPortable and deep-hole drilling, among others.

Water Electronics

A PREMIER MULTI-INDUSTRIAL COMPANY

Protection

Innovation enabled by our leading technologies

Next Generation Automotive

Industrial Technologies

Industry

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CHAPTER SUMMARY

Industry

KEY ROLE ndustrial sectors like the chemical, automotive, and manufacturing markets have long played a key role in the well-being of the Mexican economy. And the fragments created by the pandemic and supply chain disruptions have proven to be an accidental gold mine for these well-established industries within the country.

“Mexico represents a great opportunity not only for Siemens, but also for the industrial market overall because of the struggles in supply chains, especially for products coming from Asia,” said Alejandro Preinfalk, President & CEO of Mexico Central America and the Caribbean at Siemens. “To prepare for the incoming flow of interest, companies are amping up investment in technology and innovation to avoid missing the beat,” he continued.

In the chemical industry, companies are both actively diversifying and divesting from strategic industries. “At Evonik, we continue to strengthen our focus on specialty chemicals, and sustainability is a backbone of Evonik’s purpose and strategy, setting the frame for next-generation Evonik,” said Martin Toscano, President of Evonik. He continued; “In Mexico, we are keen to pursue certain specific activities to expand our capabilities, including more applied technology and eventually R&D activities to satisfy an increasing local demand by our clients, supply chain excellence, and more added value regionally.” Dupont, a 220-year-old company also announced important changes in its structure by

I

divesting a large share of its mobility and material business, proving the strong interest in the sector to align its focus to the needs of the market.

Automotive is undergoing its own share of change as players react to the rising demand of electric vehicles in the US and await the eventual arrival of this trend locally. “The whole world is gradually moving from combustion engines to electric and hybrid vehicles,” said José Zozaya, President of the Mexican Association of the Automotive Industry (AMIA). “As one of the leaders in exporting cars, ranked fifth worldwide, Mexico must be ready for those changes and ensure its facilities have the capabilities to produce such technology,” he continued. In exclusive interviews with the Business Year, companies such as Lexus, Mazda Motor, and Nissan shared aggressive goals to create zero-emission operations and investments being made toward the production hybrid and electric vehicles. But many also agree that the arrival of the electric vehicle craze in Mexico will not be quick as it requires more investment in infrastructure.

“There are three aspects to this issue: the client, the government, and the company. Governments have not yet rolled out electric recharge stations on a national level,” said José Román, President & CEO of Nissan Mexicana. “Mexico already has around 700, though there is still a long way to go. Electrification is not the number-one priority of any Latin American government,” he concluded. ✖

Mexico 2023

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VALUE ADDED TO GDP

BY MANUFACTURING SECTOR (USD BN) SOURCE: STATISTA

209.92

2017

2018

213.79

2019

214.21

2020

193.72

2021

210.33

GDP BY SECTOR (2021)

3.84% Agriculture 31.87% Industry 58.44% Services

Image: Dubo

SOURCE: STATISTA

Industry

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INTERVIEW

growing ITS FOOTPRINT With Mexico becoming one of its major growth markets, Siemens is investing more to increase capacity as well as develop the next generation of leaders.

A lej an d ro P rei n falk PRESIDENT & CEO, MEXICO, CENTRAL AMERICA, AND THE CARIBBEAN, SIEMENS

What are some of the main challenges that your customers are facing in Mexico now?

tomization as a key trend, whereby every customer wants their own product; however, it all needs to be manufactured cost effectively. Then, another challenge is the timeframe, and we are shortening the development gaps between when we first develop a product and when we manufacture it. That is called the digital twin of the product and the digital twin of production, where we design virtually before implementing in real life, which saves a lot of time and money. We have been doing this for years, and now we have launched with Siemens Xcelerator the industrial metaverse, particularly for B2B, or the industrial market. With this, companies can increase productivity, find flaws in the system, or fix problems in the manufacturing lines. They can even look to determine when the machine was working fine, what happens before a failure, and even predict future developments in the industrial metaverse. This is all based on a physics-based simulation of the real facility—a digital twin of exactly what one can find in the facility. Another trend we see is a scarcity of talent, especially digital talent. That is one of the reasons why we are focusing heavily on education. In this matter I have been appointed president of the Commission Mexico 4.0: Innovation and Industrial Digitalization of CONCAMIN. It is a great honor to lead that effort nationwide. We are contributing significantly as a company, and it is now more amazing with the endorsement of CONCAMIN and the support of chambers, companies, and industries nationwide.

The main challenges are increasing efficiency and doing more with less and with fewer resources. We see mass cus-

What next steps is the company taking in the market?

Why is Mexico one of the major growth markets for Siemens?

Mexico represents a great opportunity not only for Siemens but the industrial market overall because of the struggles in supply chains, especially for products coming from Asia. We foresee that the trend in nearshoring will continue to increase. Mexico is one of the major growth markets for Siemens globally, which is great news, and we are investing in enhancing our local footprint. We announced our most recent investment, a new facility for plastic injection in Monterrey that we are building to source our circuit breaker factory next door. This will create roughly 500 new positions and hires for technology-intense roles in addition to our 1,600 new hires during the pandemic. This is a major endeavor and significant investment for Nuevo Léon and is sign of confidence in Mexico. This would represent not only an increase in headcount but also in digital talent, which is something we are driving nationwide. We have been on a strong growth trajectory in the last few years.

We are targeting the entire industry sector and infrastructure, namely sectors that require automation and digitalization such as automotive, F&B, chemicals, pharmaceutical, oil and gas, and electricity, among others. In infrastructure, we target power distribution, solutions, smart buildings, and also mobility solutions like trains and subways, which are part of our growing market.

We are looking at a strong boost in the adoption rates of automation, digitalization, and electrification in the market globally. We see a strong trend in developing the industrial metaverse as an ecosystem and also the switch from an ego-system to an ecosystem. We have to work along to make sure this drives transformation. Also, we see a trend in nearshoring and Mexico becoming even more important, given the global bottlenecks, logistics, and geopolitical tensions that might emerge. Mexico will continue to be an important location for most global and local companies. We are highly optimistic about moving forward with Mexico as a key location for global corporations and in providing services to other countries outside of Mexico. ✖

BIO

Alejandro Preinfalk has an extensive track record of more than 20 years at Siemens globally. Since 2020 he has been CEO & President of Siemens Mexico, Central America and the Caribbean. He has held various management positions in Costa Rica, Germany, Russia, Guatemala, and Mexico. He is president of the Commission Mexico 4.0: Innovation and Industrial Digitalization of CONCAMIN, vice president of the National Chamber of Electrical Manufacturing (CANAME), vice president of the Mexican-German Chamber of Commerce and Industry (CAMEXA), member of the Executive Council of Global Enterprises (CEEG), mentor in Endeavor, and advisor of Alliance for Integrity. He is an electrical engineer from the University of Costa Rica with courses taken at Harvard, MIT, Stanford, and the University of Michigan.

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M a r tín T o s can o P R E S I D E N T, EVONIK

What steps is Evonik taking to further strengthen its portfolio and support the transformation of the Mexican market?

NEXT generation growth Evonik is pursuing various initiatives in Mexico to further expand its capabilities, including more applied technology and eventually R&D activities, to meet the demands of its clients and add more value regionally.

At Evonik, we continue to strengthen our focus on specialty chemicals and making sustainability the backbone of Evonik’s purpose and strategy, setting the frame for next generation Evonik. We see profitable growth and assuming responsibility as two sides of the same coin: the key growth driver, which is our handprint, and saving resources, which is our footprint.

In this case, we aim to reduce our footprint in all our sustainability focus areas with measurable set of KPIs in place: fight climate change, drive circularity, safeguard ecosystems, and ensure health and well-being. Next-generation technologies will lead the way for footprint reduction.

In Mexico, we are keen to pursue certain specific activities to expand our capabilities, including more applied technology and eventually R&D activities to satisfy an increasing local demand by our clients, supply chain excellence, and more added value regionally. We are part of the North American business platform of Evonik Industries, where we have a strong and robust manufacturing network, and certainly our competitive advantage regionally. Our role in the Mexican market is to be highly agile, competitive, and efficient through our supply chains to Mexico. As a company in Mexico, we also benefit from an extensive number of free trade agreements in place where we of course also leverage Evonik’s own global network.

What main growth opportunities has Evonik identified in its sectors of operation?

BIO

Martín Toscano has over 20 years of experience in general management, sales and marketing, business administration, operations, and supply chain. He has worked in multiple regions and countries, including Argentina, Brazil, the US, and Germany. Before assuming his role as President of Evonik Industries de México, he was VP & Regional Head of Latin America for the nutrition and care segment as well as regional business director for the animal nutrition line at Evonik Industries in São Paulo.

Mexico is a regional and global platform for manufacturing mainly to support export markets. In this respect, evidently, there are business lines that have a much greater specific weight for us locally that are highly connected to manufacturing and exports, and other business lines that are indirectly benefiting the economy by increasing investments in the country and creating a positive social impact while generating jobs. The automotive sector accounts for probably more than 15% of our sales in Mexico. The animal protein and

nutrition business is another example, as is agriculture. The personal care industry shows a potential for substantial increase in per capita consumption. In economies like Mexico, there is a direct correlation between income and the level of spending on food and personal care. Meanwhile, the manufacturing sector indirectly also has a positive impact on the Mexican economy.

Increased income levels among the employed translate into greater disposable income for a more diverse food basket, with greater consumption of protein or products, whether personal care or home care. Clearly, Evonik has considerable direct or indirect participation in the wider economy.

What could be done to promote the development of Mexico’s industrial sectors?

The current trends are setting the ideal scenario for Mexico to capture and capitalize further growth, such as shifting value chains globally, more sustainable supply chains, the nearshoring and China+1 agenda and the human capital. A growing market size for the chemical industry to support those trends, the geographic location and free trade agreements of Mexico, and hopefully a clearer strategy together with local authorities on renewable energy and sustainable practices. Human capital, diversity and inclusion, social impact of investments for a more robust Mexican society play also a key role.

How likely is Evonik to maintain its growth levels in 2023?

Even during the around 3-year pandemic, we have observed highly positive results in Mexico, beyond the mere price or financial dimensions of our business and volume growth. Markets will eventually normalize the supply and demand dynamics of the chemical industry, and we will be able to benefit from the significant volume growth of our business over the past three years. I therefore expect substantial growth in 2023. From the point of view of investment and growth, as far as production, manufacturing, and the various industrial sectors are concerned, we are in a more resilient position than in the past. ✖

Industry

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INTERVIEW

much MORE TO DO

As part of its ongoing transformational strategy, DuPont has divested parts of its business while simultaneously strengthening other areas where it sees greater growth opportunities in a more uncertain world.

What steps is DuPont taking to further transform itself considering its 220-year history?

During this time, we have gone through various transformations. What we are doing right now is completing the process. For a long period of time, DuPont was seen as a chemical company, but we are no longer that. We are today a premier multi-industrial enterprise. That is why the last step in that transformation is the divesting of a big portion of our mobility and material business and selling to Celanese Corporation. The transaction will give DuPont USD11 billion in cash to be invested in our future. We are also analyzing our next step, which will involve further acquisitions at the appropriate moment. Regarding the Laird acquisition deal, for one, we have already completed the integration of their performance materials unit to our electronic business and are in the process of completing the divestment of our M&M, which is a material business to Celanese.

The largest piece of the material segment is engineering polymers and represents the 50% of our revenue in Mexico.

With what business segments will you be replacing the 50%?

Mainly electronics, but also there are other opportunities, for example, we have our business of water management. Currently, DuPont is the leading company in the world in terms of technologies for purified water. Today in North Mexico, for example, we are seeing a shortage of water, and indeed there is great potential for water purification in Mexico where water availability differs greatly by region. Our technologies are also put to great use in Africa for many communities. In terms of safety protection provided by our products, we are talking about medical, fire department, and the

R am o n Mari s cal L eal P R E S I D E N T, D U P O N T L AT I N A M E R I C A

security services. For example, one of the most famous products used by the police is Kevlar. This is a product in strong demand in Mexico, not only for security market, but also automotive is a great opportunity for us. Mexico is the fifth-largest auto parts producer in the world. Each car produced in the US has at least one auto part made in Mexico and generally more than one. A full 70% of our business comes from auto.

Sold M&M business segment to Celanese for

$11B

What are going to be DuPont’s main priorities for the next year in Mexico?

First, we need to offset and manage the current situation of logistics and raw material availability. Despite higher costs incurred by companies, they are unable to fully reflect this to the customer Instead, you need to improve your productivity and optimize your cost management in order to maintain a good service level and high product quality. And meanwhile, firms are wondering what will happen if the world slides into recession. The key is to be prepared, continue to serve our partners and customers cost effectively, and increase our productivity, while also being prepared for any turbulence in the political and economic spheres, which could potentially happen. Ultimately, Mexico is firmly linked to the US economy, and anything that occurs there will be felt here as well. Meanwhile, while Europe recoils at an inflation level of 7%, it’s worth recalling that Mexico and other Latam countries deal with that level in a month and have been doing so for years. Therefore, we are resilient to such economic challenges. Our focus needs to remain on good management of our productivity and systematic assessment of potential opportunities in the market. Latin America is still an emerging market, and we will continue to register double-digit growth. ✖

BIO

Ramon Mariscal Leal is president of DuPont Latin America. In tandem, he is director of Latin America for DuPont's water and protection business. He began his career at CEMEX as chief of sales for construction companies, and later joined DuPont in 2006.

He has a degree in finance from the Instituto Tecnológico y de Estudios Superiores de Monterrey. He holds a master's degree in business administration with honors from the Instituto Tecnológico Autónomo de México and a master's degree in business administration from Tulane University in Louisiana. He recently completed the Senior Business Management Program at the Instituto Panamericano de Alta Dirección de Empresas, in addition to having finished the Senior Management Program at Harvard Business School.

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INTERVIEW

SPECIALIZED products M i g ue l Vald i v i a COMMERCIAL DIRECTOR, TRADE CHEMICALS & PRODUCTS (TCP)

What growth opportunities have you identified in Mexico and in which sectors?

With almost 50% of its business focused on the cleaning, detergent, home care, car care, and additional market, TCP saw 100% growth in Mexico in the last two years.

We have seen opportunities for growth in the agricultural part and have been able to direct our efforts there because there are many things being done in Mexico in terms of specialized products such as berries, chili, and other products that growing in popularity worldwide. The company has therefore been growing mainly in that sector. Another strong point has been the area of detergents and disinfection, and with the pandemic we saw significant growth in the past two years. Even though sales have fallen slightly, we still see growth prospects in this sector. In terms of food, in Mexico there are now more processed foods, which is why we have also grown in that sector. We have also grown in the pharmacy sector, as there are now many new items that cater to the trend of looking after one’s health.

What challenges is TCP facing in the development of new products?

The rising cost of raw materials means there were historic increases never seen before, mostly due to the increase in the price of freight from China and so on. All this has been normalized, though the costs of production now are more than double what they were before, which is why we have not invested in developing new products. In the area of disinfection and detergents, we have a R&D laboratory, and with the shortage of raw materials, we are developing products that replace or complement what we already had, especially after the pandemic. Sales have fallen in recent months, but we are still working hard in that sector.

BIO

Miguel Valdivia is a founder of TCP, where he has been working since 1999.

He holds a bachelor’s degree in business administration and general management from the National Autonomous University of Mexico.

Does the growth in international investment in the local industrial area represent a growth opportunity for you?

We have concentrated mostly on Mexico because there is still more to go in terms of our market reach. We have exported to the US, Central America, and South America;

however, we have not directed our efforts to export. In the past two years, we grew 100% in two years in Mexico due to the pandemic, and although it has normalized somewhat, that growth did not drop, but rather was maintained due to clients seeking us out for different reasons. When they work with us, they saw that we had other products, and we have been capturing such clients and selling more products to the same customers. Before the pandemic, we were working on our ISO 22000 and ISO 9001 certifications, and after some delays we are now close to getting certified. Our priority has been Mexico and on getting certified, and later we will be able to turn to international markets or work with larger companies in Mexico with the certification.

What are your main goals for the coming year and your growth targets for 2023?

In 2023, we expect to grow 15%. For 2022, we predicted 10% growth, but at the end of the first semester we grew by 15%, so we expect to close 2022 with 18-20%. For next year, we still have not defined it, though it might be around 15-20%. We plan to achieve this through certification and, second, hiring more sales personnel for certain areas such as agriculture. We have also hired someone for the cosmetics sector and are betting on growing in that market. With our ISO 22000 certification, our boosted sales force, and the acquisition of more transportation equipment, we expected to emerge stronger in 2023.

Our main objective remains retaining our current business and then looking for other new businesses. About 50% of our business is focused on the cleaning, detergent, home care, car care, and additional market. We were among the fortunate ones that benefited from the pandemic, and our 23-year history in the industry and all our contacts also helped us to obtain raw materials that were scarce. That was why we were able to achieve excellent results in the last two years. ✖

Industry

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FP AD HOLDER TRADE CHEMICAL AND PRODUCT (TCP)

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INTERVIEW

ADDING true value

Aiming to be a company of innovation, Dow is proving how it can add more value to society via chemistry and sciences, including encouraging the younger generation to pursue careers in STEM. V eró n i ca P érez P R E S I D E N T, D O W N O R T H L AT I N AMERICA REGION & COMMERCIAL DIRECTOR, INDUSTRIAL SOLUTIONS B U S I N E S S , D O W L AT I N A M E R I C A

Investing to boost STEM education in Mexico Increasing capacity of its plant dedicate to automotive industry

BIO

Verónica Pérez is a chemical engineer from UNAM and holds an MBA. She has also participated on the board of trustees of the faculty of chemistry at UNAM, the National Association of the Chemical Industry (ANIQ), and in the organization United Way-United Fund Mexico. She has been recognized as one of the most powerful women in Mexico and Latin America thanks to her leadership work at the head of the business and contributions from the front of the chemical industry.

What strategies did Dow use to incorporate resilience into its operations?

My first year in my current role was mainly managing the pandemic while keeping competitiveness and maintaining the health and wellness of our people. In summary, our main objectives were the well-being of our people and understanding this market dynamic with new markets and opportunities. We also began to understand the limits of the value chain in this process. We emerged from the pandemic stronger in terms of the understanding our people and the market.

How do you see the industry growth in Mexico in comparison to other Latin American countries?

The north of Latin America needs more attention in terms of strategies to capitalize on its proximity to the US and Canada. Another key point is that it is not only a region of exports but also a region that can potentialize the capital income of the regions.

This means bringing value chains and agreements that meet the terms of the Andean region in terms of production and transparency. Within the region, we have seen how areas are working to boost exports as well as better distribution of value within the region. We are also looking at the type of investments we need to make to ensure we can attend to these export markets as well as the domestic market. These are the main common objectives of the region for Dow to focus on. In relation to growth in Mexico, one important thing we are doing in terms of innovation is ensuring we are reaching out to the best talents in the country to boost innovation. We work in different dimensions and are extremely active with universities. We are investing in a program called FIRSTRobotics that encourages interest in science from a young age. We have 10 teams, one of which only comprises women, and this allows us to demonstrate our passion for science and encourage the younger generation to pursue careers in STEM. Another important point in Mexico is looking at how

we can work on having a significantly higher impact on the community. Through our partnership with Jaguar TCS Racing, we participated in the Mexico City Prix race of the Formula E circuit. We use such projects to demonstrate the value of science, for example in the automotive and sustainable mobility markets and that we are working in collaboration with others to improve people’s lives. We also have important projects in relation to the needs of the community to participate and resolve matters. We work actively with plastic and recycling in an aim to create a circular economy. We have many projects with organizations where we can include minority groups. These are some of the different areas that we are working on with the objective of giving more value to chemistry and sciences with our vision to be a company of innovation for the client.

What investments will you make in Mexico to expand the company’s presence and its production capacity?

First, we are strengthening our development laboratories, which are extremely important in order to have the agility and focus needed in the innovation process. We are active in terms of initiatives needed for the country to bring in more investment. We need to make sure that the bases of this—the use of energy—has the needed competitiveness and sustainability. In Mexico and the Andean region, we are analyzing and determining what we need to keep investing through new business models. We are always working with recyclers to understand how the chain can advance at a higher pace. We have a plant in Tlaxcala dedicated to the automotive market, and we are looking on how we can keep meeting the requirements demanded by the industry. In Querétaro, we have a plant dedicated to construction and paint, which is a sector that will grow further in Mexico. Our plants in Toluca and Cartagena have been successful and demonstrate that our investments are in line with our plans and allow us to grow with them. ✖

Industry

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INTERVIEW

innovation HUB 3M’s highly specialized plants in Mexico produce 15,000 various products across its extensive portfolio that are subsequently distributed nationally and exported to over 23 countries.

F ern an d a G u arro H ern án d ez PRESIDENT & CEO, 3M MEXICO

What role does Mexico play in 3M’s international strategy?

2022 was important because it is 3M’s 75th year in Mexico. We are pleased with what we have achieved so far and the impact we have on the development, evolution, innovation, and economy of the country. We have almost 10,000 employees in Mexico and four manufacturing plants, one in San Luis Potosí, one in Ensenada, one in Monterrey, and one in Ciudad Juarez. We have the innovation center, where we are today, which we use to showcase our solutions and products to different markets and invite clients, students, and the general public here to learn more about science. One of our main goals is to change lives through science and solve the key problems that the world is facing. We also have an R&D center in San Luis Potosí. Over our years in Mexico, we have registered 239 patents, which confirms how important innovation is for us. We are among the top 10 subsidiaries whereby the value that we offer globally is huge. We are extremely happy with what we do for our country and the potential and development of M3 on a global scale.

Is Mexico an important export hub for the company?

In Mexico, we commercialize more than 15,000 products from a massive portfolio. We are working with four major business groups, industrial and safety, transportation & electronics, consumption, and healthcare. Within these four business groups are 23 different industries. 3M is interesting for the sheer scope of its solutions offered. We know our science can help in solving multiple problems because we are not focused on just one area or industry. Our four plants

export to 23 countries, which means we reach practically every continent and are part of the economic engine.

How much of your production stays in Mexico and how much do you export?

We have plants that are for national and Latin American consumption, while other plants mainly cater to the North American market and some of Europe and Asia. The strategy depends on the location and specialization of the plant.

Our plant in San Luis Potosí specializes in fibers, personal protection, and respirators; however, during the pandemic, we tripled production to meet the increased demand. We also have abrasives and adhesives and tapes. In San Luis de Potosí, we are also an important hub for the automotive industry. Bajío is a strategic zone, and we are present there. At our plants in the north, such as in Monterrey, we are more focused on water and air filtration. Ensenada is a hub for the aerospace industry, and again, is why we have a plant there. The Juarez plant is focused mainly on consumer market, notably air filtration, and also on our brand products such as Scotch-Brite, Post-It, Command, and Micropore. The plant also focuses on some of the automotive industry, with abrasives, among other products. These plants are highly specialized, depending on their geographic location.

What main scientific trends has 3M identified in Mexico?

We have a study called State of Science Index, now in its sixth edition, that involves surveying 17,000 people in 17 countries. It has found that 75% of Mexicans between the ages of 18 and 24 believe in science. However, this group of

people knows there is a lot of misinformation in the media and social media.

We have committed to becoming part of this generation by providing information through data. In this study, we also talk about STEM equality, since more than 90% of people believe this is necessary.

In 2021, we commenced an analysis of megatrends with the participation of thousands in Mexico and found three major megatrends. One is the new paradigm, namely the new way we interact with others using technology and virtually. Another trend has to do with AI and augmented reality, which has become workaday since the pandemic. The last trend concerns sustainability. It is clear how valuable the impact on green economies is and how the sustainability factor of a product is decisive for consumers. ✖

BIO

Fernanda Guarro Hernández joined 3M in 2020 as corporate affairs execution and management director and assumed the role of President & CEO of 3M Mexico in 2022. She is a supply chain executive with 20-plus years of experience in all aspects of supply chain, the management of highly complex projects, and business analysis. Her career was spent in companies such as DuPont, Monsanto, Sanofi Mexico, and Merck.

She won the National Logistics Award in 2017 and the Exceptional Women of Excellence in Business Award from the Women Economic Forum in 2022, as well as President of the United Way Mexico Procurement Committee from 2021.

Guarro Hernández holds a bachelor’s degree in business administration from Universidad Anáhuac and a master’s degree in supply chain management from EOI in Spain.

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INTERVIEW

An g e l Pr o añ o SALES & MARKETING DIRECTOR, T H E W E S T E R N S TA T E S M A C H I N E C O M PA N Y How has the company evolved over the last 50 years, and how has it applied this experience to the chemical sector?

GREAT chemistry Western States has come to be known as a touchstone in the centrifuges industry and has plans to expand its presence even further in Mexico.

BIO

Angel Proaño holds a degree in business administration with more than 15 years of experience in global sales, operations management, and quality procedures and has held several different positions such as president, general manager, and executive director in US and foreign companies. In 2017, he assumed his current position. His extensive career has helped him to create the perfect network in Latin America to position Western States as the leading company and key service provider for chemical and pharmaceutical centrifuges.

Western States started manufacturing centrifuges for the sugar industry for the separation of sugar crystals from a substance known as massecuite in the final stages of the production process.

Because of the high quality and success of these machines, the company subsequently became popular all over the world. Western States quickly became known as an expert in centrifugal separation. We started developing and researching several types of processes where separation or extraction was part of a production process. We have manufactured high-grade centrifuges for over 100 years, supporting customers by allowing them to customize our equipment to meet their requirements. We work in different aspects of the chemical industry, for example with condiments companies such as Ajinomoto and Tyson. We also work with Pfizer, Shell, Dow Chemical, and other companies that use centrifugal forces for separation to produce specific products. One of our topfive customers in the US is Ingredion, headquartered in Chicago. We actively support the operations at its production facility, and all its centrifuges are Western States machines. Our market share in the US is extremely important with continual growth over the last 50 years.

Western States even expanded into the multinational operations of these corporations. Our clients who had the experience of working with Western States in the US helped establish us in different countries like Mexico. For example, we have our machines in operation with Ingredion in Mexico, and we are currently exploring different projects with ADM and Hershey’s at their locations in Mexico. Hershey’s uses our machines in every plant worldwide.

What industries does Western States target in Mexico?

We target every industry that needs some kind of separation and are proud of

our line of chemical and pharmaceutical centrifuges. Our extensive catalogue of centrifuges in multiple sizes and capacities are perfect for use in R&D labs up to large-scale production. There are many chemical companies in Mexico that will benefit from our expert separation service, and we plan to approach these companies and explore how we can support them. Western States has a lab in the US for companies that are unsure if centrifuges can play a significant role in achieving their goals where we perform tests to assure those clients that our machines will meet their needs. We engage with the customer as part of our service to help them to trial their products in our facility. This has worked out extremely well for us for several years, and we look forward to offering this service to potential customers in Mexico. Western States is a solid partner for companies looking to diversify their portfolio and move up to the next level. We have established a position in Latin America in the chemicals industry. We have service technicians set up for all those countries, so there are no issues with assisting customers when they need after-sales service. I am excited to see many opportunities and benefits for us when Western States continues to expand in Latin America. We want our customers to be assured that they have a partner in their supplier who they can depend on, therefore we strive to maintain our safety stock of common parts to help keep machines running smoothly for many years. Our team is quick to respond and help in any way possible.

What are the main priorities and goals for Western States this year?

Our main goal for Mexico is to continue to grow Western States’ exposure in varying industries where centrifuges can ease production burden. A part of this goal is to get in touch with the big players in the industry; we need to push further to start building our network by reaching out to those companies with which we already do business in the US and which also have offices in Mexico. ✖

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FORUM

CHEMICALS The industrial chemicals sector has had its share of ups and downs the last few years, with extreme supply chain shortages as well as heightened demand for other sanitation products.

Ricar do Le compt e

Al e ja n d ro B as t erra

To n y S arraf

CEO, PA S A

MANAGING DIRECTOR, A LTA N A , M E X I C O

V P & M A R K E T H E A D L AT I N AMERICA NORTH, ECOLAB

AROUND A THIRD of the materials we

THE INDUSTRIAL COATINGS INDUSTRY is extremely strong due to the three main government projects going on in 2022 with the new airport, the Dos Bocas refinery, and Tren Maya. Our customers are having increased demand for their products due to these megaprojects.

Therefore, we are seeing an increase of our additives to produce the coatings.

We will benefit in 2022 from those projects. We are small players in the plastics sector, but we are trying to grow. The three main areas that we play in the plastics industry are thermoplastics, PVC, and thermo sets. They have been doing great during the pandemic. There have been many developments regarding the recycling of plastics, and we also have some products that help the processes. There is a great deal of investment in recycling, and Mexico is one of the leading countries in the world in terms of recycling with many different companies, suppliers, and products going to recycling. The entire process varies from company to company and technology to technology, and the challenge for us as suppliers is to find one solution to every problem. We need to look into the products that the customer is recycling and come up with solutions with different mixes of additives.

ECOLAB has a presence in over 170

need for our products derives from Mexico, but for the remainder we depend on commercial associates from around the world in the US, Canada, Germany, Italy, Spain, China, India, Indonesia, and Japan. In the last few years, we have been careful to minimize the risks of reliance on a global supply chain. Our product is highly specialized and comes in small quantity. We do have larger competitors, but overall our industry is small. Today, most construction chemicals producers are not met directly by manufacturers, and instead we depend on third-party intermediaries. But even they are severely limited today due to sea and ground transport limitations, especially the lack of drivers. We also depend on logistical channels, and since there is a shortage of paper, cardboard, and plastic film, we have suffered from that too. Therefore, what we are now doing is maintaining a good relationship with our regular providers and overall pursuing a win-win situation. We have worked on the Santa Lucía Airport and the Dos Bocas refinery through distributors, and currently provide our products to the state health sector, social security, the education sector, Banco del Bienestar, and the National Guard.

countries, serving more than 3 million clients globally. In the case of LAN, a geographical region that includes Mexico, Central America, and the Caribbean, we have five manufacturing centers, three of which are in Mexico. We have invested significantly in R&D; our investment in new technologies accounts for almost USD200 million every year, and our company across the globe holds over 10,000 patents. Our offer consists of complete hygiene and disinfection programs and tools that facilitate water and energy savings and efficiency in over 40 industries where the consumption levels of key resources is critical. Few firms in the industry offer such a comprehensive service that spans industries such as tourism, F&B manufacturing, and energy generation, among others. We facilitate a company’s operational efficiency and productivity through solutions, technologies, and protocols that identify savings and curb the waste of resources while protecting people and the communities where we operate. As global economies start to reopen, they will still require our services because health and safety concerns remain and have become critical.

We need to maintain safe, clean, healthy operations and especially within key industries for Mexico, Central America, and the Caribbean such as tourism.

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INTERVIEW

DOING it better

Deloitte is banking on its laboratories for Industry 4.0 manufacturing, where clients can experience the process with exponential technologies, AR, digital printing, and digital twins to increase Mexico’s competitive advantages.

Man u el N i eb las A U D I T PA R T N E R , DELOITTE

Local steel companies should be a priority in the country

BIO

Manuel Nieblas has a degree in accounting from Universidad Nacional Autonoma de México and from the IPADE senior management program. He is audit partner at Deloitte with 29 years of experience working at Deloitte mainly for the automotive, manufacturing, and consumer products industries.

He has worked on the audit of material subsidiaries of public companies, provided advice on the registration of international business acquisitions, and supported the offer and placement of capital and debt instruments in Mexico and abroad. He was appointed Deloitte Mexico’s Manufacturing Industry Leader in 2013.

How competitive is the manufacturing industry for Deloitte in Mexico compared to global standards?

To start with, Mexican manufacturing is extremely competitive on an international scale. With regards to global competencies, Mexico is usually in the range to 40-50th place. Deloitte has been conducting a study on international competitive manufacturing every three years named Global Manufacturing Competitive Index. According to our last study that we conducted in 2016, Mexico was ranked eighth globally in manufacturing. If we talk about its competitive advantages, Mexico’s proximity to the US is the main one. Another is the low costs of labor, especially in manufacturing. The third advantage is that most international manufacturing is about meeting market demands, but the local market is also important, and Mexico has a large domestic market. This represents an opportunity for a company that wants to invest in Mexico to not only think about exports but also the local market. The fourth advantage is Mexico’s commercial treaties with 45 countries, including the US and Canada.

More than 70% of its manufacturing production is exported to the US. Furthermore, new relationships with Asian countries being built in the last few years makes Mexico’s position even more interesting because that means new markets. Those are the main competitive advantages Mexico has from the manufacturing point of view.

What technologies are missing in the automotive industry in Mexico?

It is difficult to specify just one. We practically have needs across the entire production chain. For example, the steel required for the automotive industry is not produced in Mexico. Mexico has large steel companies, but the specialization level needed for the industry is so high that only a few local suppliers can produce this steel. A clear solution would be to invest in a steel company that can produce first-level steel for the industry so Mexico can stop buying it from Japan or South Korea. There

are many components and car parts still being imported from other countries. The interesting thing here is to have the right characteristics so that a foreign investor would invest in Mexico. It could be the same automotive industry provider producing its car parts in Japan deciding to invest in Mexico and make them here, with local raw materials.

Those are the types of investments we can attract by reducing our costs and risks while increasing our efficiency. At the end of the day, when it comes to manufacturing products, the most important things are price, quality, and opportunity, which is why it is so important to know the consumer. Part of the studies we perform are focused on consumer trends. We have an extremely active role, and we want it to be even more active. We are investing money in Deloitte to achieve this. Globally, we already have three laboratories for Industry 4.0 manufacturing where we have production processes from beginning to end so clients can see all of 4.0 manufacturing, and the idea is to expand this.

We bring our clients there, where they can see the process with exponential technologies, augmented reality, digital printing, and digital twins. Clients can understand how they can modify part of their processes to become more competitive. We do not want to fall behind other countries.

Which is the main sector regarding exports and job-generating?

Mexico is heavily focused on the automotive sector; however, the products and industrial processes sector is crucial as well. The third sector where we see great opportunities to keep growing is the chemicals sector. Because of its location, Mexico has many opportunities to develop important chemical products and raw materials for the other sectors.

There is a good growth opportunity there, and we have made several investments. In fact, lithium is considered to be a national asset. Everything related to minerals and raw materials for other manufacturing processes is a great opportunity for us. ✖

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INTERVIEW

Jos é Z oza y a P R E S I D E N T, M E X I C A N A S S O C I AT I O N O F T H E AUTOMOTIVE INDUSTRY (AMIA)

What projects is AMIA working on at the moment?

A JOINT effort To help Mexico meet its targets of producing 5 million cars a year, AMIA is working to get the sector to become more competitive while lobbying for better infrastructure and government services.

BIO

José Zozaya has been Executive President of AMIA since 2020. He previously served as president, general manager, and executive representative of Kansas City Southern de México from 2006-2020. Before, he was the legal and governmental relations director of ExxonMobil México, a position he held for nine years. He has a honoris causa degree from the Mexican Academy of International Law and a law degree from Iberoamerican University. He completed advanced studies in corporate law and economic competition at ITAM, attended the executive program of international management at Thunderbird University in Arizona, the management program for lawyers at Yale, and the executive course for board members of administration at the Harvard Business School. He was president of the Mexican Railway Association 2020-2021, vice president of Concamin since 2018, and a member of the board of Afore Siglo XXI, Ferrovalle, and the Business Summit. In 2016, he was appointed president of the binational board of directors of the US-Mexico Chamber of Commerce.

The whole world is gradually moving from combustion engines to electric and hybrid vehicles. As one of the leaders in exporting cars, ranked fifth worldwide, Mexico must be ready for those changes and ensure its facilities have the capabilities to produce such technology. This is already taking place as we speak, and some of the brands in our association are already producing electric or hybrid cars in Mexico. We are working with the government in order to make sure all of the infrastructure that will be needed for electric vehicles is available. It is a major change that needs to be managed and led by the government alongside all of the different players in the auto industry.

We want to ensure the government is already starting on this, because otherwise, we would be too late for those changes, and Mexico could lose its leadership position. This would result in companies moving their operations overseas. To make sure this does not happen, we need to work on this proactively.

The government has set the goal of having 50% of the Mexican vehicle production be zero emissions by 2030. How close is the industry to that goal?

We applaud that decision and feel that it is good for the government to set such goals. However, we need to work together; one cannot set such an aggressive goal if they have not conferred with all of the players to make sure that this is possible. The government is not the one manufacturing cars. The first thing it needs to do—which we are also working with it on—is establish public policies regarding electric mobility, which Mexico is behind on. It may be complicated to achieve the goal by 2030 because at this moment, only 2 or 3% of the vehicles in Mexico are electric, and there are only eight years left to the deadline.

What is the current status of production levels in the country?

Unfortunately, we are behind and still in the process of recovery. It was not just the pandemic but problems with microchips and logistics issues. We are selling almost all our cars, though it is not because demand is high but because we do not have enough cars. We expect the situation to stabilize somewhat by the end of the year, and we will be in better shape. Then, we expect to reach pre-pandemic numbers by 2024; however, there are many things that could happen in between then, such as the war between Ukraine and Russia.

What can Mexico do to increase its imports and be among the top three car exporters globally?

It must be more efficient and produce more. We have not been able to, because of the electric chips and logistics issues.

We should be able to establish a better position in the future. Mexico has the capacity to build 5 million cars; right now, we are only at 3 million, so we have room to grow. This is a responsibility of the private sector; however, the government also has a role to play. It has to ensure the auto industry is supported by establishing fewer bureaucratic processes and facilitating the working and exporting processes for the auto industry.

Can you elaborate on the internal changes that AMIA is going through?

We are reinforcing our staff and establishing new internal policies and ways of collaborating in order to ensure we have the right skills and relationship with the government, media, and other chambers and associations. We have to be competitive, which means using a more efficient way of doing things, better infrastructure, and better government services such as customs and the like to expedite border crossings of legal merchandise.

Also, in the case of Mexico, electricity is extremely important. It has to be available at a competitive cost. All of these are extremely relevant and important for a country to become competitive. ✖

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B2B

Hé ct or Hir at a

Na za r et h B lack

MANAGING DIRECTOR, LEXUS

CEO, ZACUA

AUTOMOTIVE In such a competitive automotive market like Mexico, companies differentiate themselves with more customized offerings and better customer service.

What steps is the company taking toward introducing EVs in Mexico?

HÉCTOR HIRATA Lexus will do this step by

step, which is our company’s way of proceeding; we are extremely methodical.

We are starting strongly with hybrids.

That is the first step, and our mother brand Toyota has facilitated our work.

The technology is already well-known, especially in Mexico City. In just a few months, we managed to make 70% of our vehicles hybrids and intend to keep the level high. This is among the highest level on a regional level. For example, last year in the US, we had 18% hybrid vehicles, and so we have started on the right foot. We aim to be a carbon neutral brand and already have a complete electrification plan for 2030, as announced last December. It will be gradual, though.

We will not launch electric vehicles in Mexico until we are sure that the market is ready, although it is a certainty.

NAZARETH BLACK We entered a niche

market as a small electric car brand. It is like swimming upstream; the industry works one way, and we are going in the opposite direction by focusing only

on electric vehicles. We have dealt with the challenges well because our staff is made up of dedicated people, and we have experience in the subject. You need a great deal of emotional intelligence, determination, motivation, and patience, because you know it will not be easy. Why not a Mexican electric vehicle brand? The country is among the top five of assemblers, vehicle, and component exporters globally, it has the skills and industry, so why not a local electric car?

You do not require that much funding to produce an electric car, unlike a normal one, only intelligence and creativity.

With that idea hanging there, we bet on starting this project.

How do you look to differentiate yourself from other luxury brands in the country?

HH Lexus is still engaged in a local expansion process. We are a young luxury brand, born just 32 years ago. Lexus is already present in many countries, including in Latin America, and Mexico is the 92nd market for Lexus. Here, we have heard many people eagerly awaiting our vehicles. It is incredible how much people already know the brand. We do see

an opportunity to differentiate ourself here. One of our foundations is the spirit of Motenashi, which brings Japanese hospitality to the industry. This is a foundation for the brand globally. We have had much training with five agencies to instill this philosophy. It is not just about hospitality, but also about offering excellent service for sales and after-sales. That is where we can mark a difference in service. We enjoy substantial logistics support. The corporate assistance from the of US is important, and compared to the industry, we have shorter waiting times, which clients appreciate We intend to improve the sales and after-sales service standard. We have dedicated many hours of training to the sales force, and they have been assimilating the philosophy. We created a figure called Lexus Coach, unique to our market who trains staff to ensure that the best possible customer experience.

How do you plan to expand and diversify your business model?

NB We have to rebuild the main idea and evolve rapidly. We started with this idea of an electric car, and when it arrived, we started to receive different data than what we had expected. We evolved and adjusted accordingly, and now we are working on a second electric vehicle brand that will only focus on utility vehicles. Instead of being just an electric car brand, we have become an electric mobility group. We will have a second brand of utility vehicles. We are also working on some micro transportation projects, like small vehicles schematics. We initially only planned to be in Mexico, but there has been so much interest from many other countries, and we are working on exporting projects and exporting our own ideas. We will create a model, similar to a franchise, that we will send with our technology to other countries, so they can build their own similar factories. We have held talks with Turkey, Spain, and others in South America and Africa. Another part of our business has to do with soft landings, where we offer any vehicle brand that comes to Mexico housing, infrastructure, manpower, facilities, and so on to settle here, like an assembler. Everything is under the name of Motores Limpios, the group that manages Zacua. ✖

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FOCUS Elec tr ic ve h icle s

EV RIDER A lack of charging stations and the high cost of electric vehicles are inhibiting the transition away from combustion engines. But as a major manufacturer of cars, Mexico has great potential.

SCARCE CHARGING INFRASTRUCTURE and the price of electric

vehicles are two of the main problems facing the electrification of Mexico’s transportation systems.

With 3.1 million units manufactured in 2021, Mexico is the seventh-largest vehicle producer in the world, accounting for approximately 4% of global production. That position as a manufacturer makes the country a key point for the transition from legacy combustion vehicles to electric vehicles; however, there is still a long way to go for Mexico in terms of the adoption of green transportation systems.

In 2021, 1.1 million new cars were sold in Mexico, but only 45,939, or 4.6% of the total, were electric, hybrid, or plug-in hybrid units, according to data from the statistics institute INEGI. These are still small numbers compared to other markets such as China, where some 3.3 million battery electric and plug-in hybrid cars were sold in 2021, or 15% of the 21.48 million passenger cars sold that year.

In the US, 667,731 electric vehicles were sold in 2021, while 328,000 were sold in Germany, figures that show the work Mexico still has to do to make progress in this market.

“In Mexico, there is a fleet of around 32 million cars, traditional, hybrid, and electric. Before the pandemic, it sold more than 1.5 million vehicles annually,” said Nazareth Black, CEO of Zacua, a small car manufacturer based in Mexico City. As the first Mexican manufacturer of electric vehicles, Zacua plays a key role in the country’s transition to electrification.

“As a Mexican assembly company, we wanted to be the pioneers of this subject for our country,” she said. With its small electric vehicles, this company wants to contribute to Mexico maintaining its leading position as a manufacturer also in the electric vehicle segment due to its proximity to the US, its experience, its well-structured production chain, and the fact that it has some of the most important lithium mines in the world, a key mineral for the development of electric batteries.

But when it comes to electric vehicle adoption, several challenges remain. The Ministry of Energy estimates in its Prodesen electric system development roadmap that there will be 4.9 million electric vehicles in circulation by 2036. This would mean approximately 15% of the means of transportation in Mexico in about 15 years will be electric, hybrid, plug-in hybrid, or electric buses.

Currently, 39% of Mexicans are willing to buy a hybrid vehicle, but only 15% would buy a 100% electric vehicle, according to analysis by consulting firm J.D. Power. According to those surveyed, the two biggest challenges for this market to grow are the lack of adequate charging stations and the high prices of electric vehicles. The lack of infrastructure also translates into a shortage of repair shops, which can also mean the need to purchase more expensive parts compared to traditional vehicles.

“Moving to electric transportation is an urgent issue and a mustdo. Mexico also has to work on the recharging infrastructure as well as raising overall awareness. We also need to develop special payment plans so people can buy them, as they are more expensive than gas-powered ones,” said Black. In Mexico, seven out of 10 cars are sold on credit; however, Black points out there are currently no special financing plans designed exclusively for electric cars, and the firm is working to increase access to credit for such vehicles.

“We offer financial services with company called Car Fast Financial, and we have developed an eight-year plan for electric cars. We also have to work on public policies and some inner incentives,” she added.

This slow implementation of electric vehicles is not unique to Mexico, but is something shared with the rest of Latin America.

“The US will be 40% electric by 2030. Mexico and Latin America will take a while longer,” said José Román, President and Managing Director at Nissan Mexicana. “Electrification will not happen simply because we, as automotive companies, launch the necessary technology. There are three legs to this chair. The first is the client, the second is the government, and third comes the company,” Román added.

Pointing out that Latin American governments have not yet widely deployed charging stations to help the adoption of these means of transport, this is why the company decided to focus primarily on selling hybrid vehicles at affordable prices to consumers.

“The first solution we came up with not so long ago was to launch the hybrid: The Nissan X-Trail. What we are planning to do is to install electrification technologies in much cheaper cars. We want to bring democracy to electrification. Electrification will arrive in Mexico but won’t be fully implemented for at least another decade,” Román concluded. ✖

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INTERVIEW

looking AHEAD

A 100% Mexican company, GML is now working to help the country meet its sustainability requirements with an updated production plant and a new electric vehicle line.

E li as Mas s ri CEO & PRESIDENT OF THE BOARD, G I A N T M O T O R S L AT I N A M E R I C A (GML)

What are the main changes in demand GML has noticed in the Mexican market?

In what ways is GML improving the customer experience when it comes to EVs?

We made a decision in 2021 to broaden the products offered. One of the main goals of the brand was to resize the plant. It will be a different reality from what we know in every market; Mexico—and the whole world in fact—is changing in terms of preferences, necessities, the market, the kind of vehicles, and the last mile suffering. The flexibility of our vision in reaching the market makes us different from other brands that only push production. For us, the market pushes us. The plant is designed to respond to the market’s needs. The market calls, and we communicate with the orders and their necessities, price changes, and quantities. We have an ecological segmentation. The need starts from the market, and from there, we start the development and broaden our product line. We already have a category of pickups and commercial and gas vehicles.

We come in by offering the repair of batteries. For us, the electric experience must be the same as fuel.

We want Sei 4 cars to be the same whether they are electric or fuel. If there is an accident, drivers must be able to go to the mechanic and replace the parts with no issues. Examples like New Zealand are also important. Mexico has the most infrastructure for electric car chargers in the streets; it is ranked number two in the world. New Zealand has fewer chargers per car but sells the most electric vehicles. This means people understand that they do not need chargers on streets, but in their homes. Commercial vehicles and public transport are more expensive. They know exactly the distance they cover per day and how many hours they need to charge. The E10X model was launched in November at a cost of MXN430,000, which is cheaper than any other alternative energy vehicle. It is still a small market, but last year we covered 54% of the Mexican market.

How does GML plan to increase accessibility to electric vehicles in Mexico?

Electric vehicles are a project for life for us that we started seven years ago. We have heard about developments from every brand, and it has become a global philosophy; however, it is not the reality in Mexico. Our brands are thinking this way for Mexico, which is our most important market in the world. This is our differentiator, compared to other brands and even users: the profitability for users in electric vehicles and its democratization. It is attainable for everyone and not merely a luxury. We are looking for electric cars to substitute gas vehicles.

We are also involved with the government in a public project to update patrol cars in Hermosillo. We will update 220 patrol cars for the Sei 4, a big SUV. It is an electric vehicle, and this will raise greater awareness and create a change of consciousness.

We want to make electric vehicles accessible to everyone, starting commercially.

Working to increase access to EVs in Mexico Covered 54% of EV market in 2021

What are your objectives for growth in the industrial segment?

The electric project with Bimbo will continue and is more focused on this model. We currently work with all the big industrial brands in Mexico. There are already 25 electric trucks from JAC. We have an electric products line that will completely democratize electric vehicles for everyone. The EJ7 is for both passengers and public service. We wanted to enter the electric field, knowing it was a five or 10-year project. We have seen it in Sweden and Switzerland, and we seek to replicate it in Mexico.

It is good for this industry, and our vision is to be the leader in the new automobile industry. It is not about being leaders in only EVs; we want to be leaders in a country that will transform the automobile industry globally in the next 10-20 years or however long it will take. ✖

BIO

Elias Massri has over 30 years in a variety of sectors including commerce, services, and industry and is currently Director General & President of GML. He was president of the Chamber of Commerce and Industry Mexico Israel.

He was founding members for a variety of projects including a consulting firm in IT implementation and a company that is a holding group for a variety of companies in metamechanical and services.

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INTERVIEW

M i g ue l Barb ey t o P R E S I D E N T, MAZDA MOTOR

What changes in consumer habits have you observed over the past year in Mexico, and how has this impacted Mazda’s business model?

NEW ERA of mobility Mazda has worked on offering more digital tools for its customers to ensure maximum satisfaction and become a truly premium brand.

Customer habits are changing dramatically, because the trend in the automotive industry is focused on SUVs rather than sedans. Customers prefer bigger vehicles, high off the ground, which is why most manufacturers are producing small, medium, and large SUVs. Those segments are growing dramatically in the world as well as in Mexico. The other consumer change is how customers service their vehicles.

During the pandemic, Mazda offered digital tools for customers, not only to buy a vehicle but also for customer service and to make an appointment online so that the dealer could go to the customer’s home, pick up the vehicle, and then drop it off again after servicing. We developed and implemented many strategies and initiatives in those two years. There is also an electrification strategy that different governments are pushing in order to reach zero carbon emissions by 2030 or 2040.

Why is Mazda positioning itself as an alternative to premium brands?

BIO

Miguel Barbeyto started as marketing manager in Mazda Mexico and became its President 16 years later after assuming several key roles within the company.

Our strategy today is to be an alternative to premium brands, because of the promise we are delivering to customers in sales and service from a satisfaction point of view. In the short term, we want to be the first premium volume brand in the country. It will be challenging, but we will work on it with all the dealers and stakeholders within the company to achieve this. At this point we are close to the premium brand. Mazda is a great brand with excellent quality and solid products. However, the most important thing is excellent customer satisfaction in sales and service. We are almost there but have much to do to be a premium brand; however, we are close, and our strategy in the near future is to grow our volume. We have a plant in Mexico, so we need a solid strategy for a scale economy in order to grow our volume in the country. We now have that part of the business that offers a premium, so now we would like to reach the volume based. We want to increase

“We are improving the quality of every single car we have today.” our Salamanca plant production, focusing it in our domestic market, and double our market share.

Are you foreseeing a big surge in the demand for electric vehicles in Mexico in the medium term?

Customers want to protect the environment and the planet, and every single industry needs to move in that direction to protect the planet. People here are not that aware of the impact that this will have in the near term. Furthermore, the authorities need to invest more in order to accelerate this and formulate the right strategies in the country, from tax incentives to infrastructure and others. Mazda does not see this happening in Mexico until 2043 based on our own research. Electric vehicles will help the planet but will not fix the issues. It is only part of the solution.

How many new models will you launch by the end of 2023?

We are improving the quality of every single car we have today. The company’s plan is to introduce more vehicles for more profits in our portfolio. In the next 18 months, we plan to launch three new SUVs: CX-50, CX-70, and CX-90. These feature more technology, new design, better quality, more gadgets, and more and better features. For Mazda, the most important thing is the customer: internal customers, employees, are the average of the dealers; and external customers are drivers who buy the vehicle. The customer satisfaction is the priority of Mazda and Mazda Mexico. We are working hard, and we have a lot of room for improvement, but we are definitely on the correct path to reach that first premium volume brand in the world. I am pretty sure we will reach that in three years. ✖

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INTERVIEW

ahead OF THE PACK

Working on innovations to promote green mobility, Nissan Mexicana is banking on its E-Power technology to democratize electric vehicles.

What factors underpin Mexico’s status as Nissan’s fourth-largest market in the world?

We have been present in Mexico for 60 years and are a most interesting mix of Mexican talent and Japanese engineering. We are doing extremely well because we are such a beloved brand in our country. The first factory ever built outside of Japan was in Cuernavaca almost 60 years ago, so Mexico is truly a strategic country for Nissan. The numbers are excellent, but we have been leading the market for 12 years. The first factor was renovating our product, though another important factor is in the manufacturing scheme itself. We are the biggest vehicle producers in Mexico and export to many countries in the region and across the world. From here, we export to over 80 countries; the electric NIBU range is also managed from here. That is an additional 34 countries that I am also in charge of.

Aside from that, Mexico is an export base selling to over 80 countries. While not the world’s largest market for Nissan, Mexico ranks fourth after the US, China, and Japan, respectively. The industry is not witnessing its most prosperous times, mostly because of the chip shortage resulting from the pandemic. Yet, considering that environment, we are doing fairly well.

What steps is the company taking to become more sustainable and align with ESG standards?

Our two primary objectives are simple: zero accidents and zero emissions. Most of the accidents on the roads today are due to human error, and there is technology being applied in cars that can help prevent such errors. The Sentra or Versa, for example, which are mid-priced vehicles, already feature around 14 types of Nissan Intelligent Mobility technologies such as cameras, brakes, airbags, security controls, and traction. Nowadays, this has almost become a standard feature in cars, which is

J o s é R o m án PRESIDENT & CEO, NISSAN MEXICANA

wonderful. Our clients have also adapted and begun to invest greater trust in technology. And the other matter is that of electrification. We provide a Nissan-styled solution and it is quite a bit different because it considers the prevailing situation of each continent. The speed in which electrification is applied will be totally different in each.

Why will electric vehicles take longer to enter the Latam market?

Today, it is easy to access an electric car and within a competitive price range. It is only slightly more expensive than traditional vehicles. The necessary regulations have arrived in Europe, and the US will be 40% electric by 2030. Mexico and Latin America will take a while longer, however. There are three aspects to this issue: the client, the government, and the company. Governments have not yet rolled out electric recharge stations on a national level. Mexico already has around 700, though there is still a long way to go. Electrification is not the number-one priority of any Latin American government. The first solution we came up with was to launch our hybrid, the Nissan X-Trail. We then launched the Nissan Leaf, a 100% electrical car, 10 years ago, and it has become the best-selling car.

We believe the solution for Mexico is what is called E-Power technology, which is exclusive to Nissan.

E-Power has a large electric motor and a small gasoline-fueled motor that charges the battery.

However, it does not run the vehicle; the electric motor is the one powering it. The advantage here is the autonomy these vehicles enjoy. One of these can go as far as 800km, depending on the driver, without needing to be charged. We plan to install electrification technologies in much cheaper cars and democratize electrification. Electrification will arrive in Mexico but will not be fully implemented for at least another decade. ✖

Largest vehicle producer in Mexico Exports to 80 countries

BIO

José Román is the current President & CEO of Nissan Mexicana and NIBU, a company that has maintained its leadership in automotive sales for more than 12 years.

Román has more than 20 years of experience in the automotive industry. He joined Nissan in 2012 as regional vice president of Sales for Nissan Mexicana. After holding senior roles in Latin America, he was appointed global leader of Datsun in 2017, where he served as corporate vice president, Global Datsun Business Unit, NML. In his previous role, Román led sales and marketing operations and oversaw all commercial operations in Nissan Latin America.

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Industry

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INTERVIEW

a gradual PROCESS

Jaguar Land Rover is employing a business strategy driven by the three key principles of design, quality, and sustainability to develop the best products for its customers.

Mo n t s errat Mart í n ez BRAND AND PRODUCT DIRECTOR, JAGUAR LAND ROVER MÉXICO, L AT I N A M E R I C A & C A R I B B E A N

What is the objective of the new “Reimagine” strategy being used by Jaguar Land Rover?

a 100% electrification.

Reimagine is our global business strategy developed to lead the brands to our new future shaped by a modern luxury context where design, quality, and sustainability drive our actions to become the creators of the world’s most desirable luxury vehicles for the most discerning customers. This new vision is supported by developing new benchmarks in our customer experience, quality, and efficiency and a complete product line renewal towards pure-electric vehicles and zero carbon emissions across our supply chain, products, and operations by 2039.

In 2024, the first all-electric Land Rover will be released and, for the next five years, we will deliver six pure electric variants to be the world leader of modern-luxury SUVs. As for Jaguar, the pace will speed-up becoming an all-electric luxury brand in the upcoming 2025. Our objective is to deliver all our portfolio for both brands as BEVs by the end of the decade and for all Land Rover products to be available as BEVs by the end of the decade. With this scope on mind, Reimagine is designed to embrace modern luxury perfectly merged with unique customer experiences and a positive social impact through our products, placing sustainability at the center of everything we do.

In what ways are you adapting the brand to consumer needs?

And what are the challenges of being a 100% electric brand in Mexico?

Transition towards becoming a 100% electric vehicle brand in Mexico would be faster than we believe today, specifically in luxury, where experience and technology meet innovation and mobility. In 2022, our brands already include in their portfolio mild hybrid vehicles (light hybrid vehicles), plug-in hybrid vehicles, and 100% electric vehicles, and our customers in Mexico already are enjoying them. We strategically chose to begin with mild hybrid vehicles that would gradually introduce our customers to this new electrified lifestyle. We do not believe in heading toward electrification from 0 to 100.

We believe in a transition, and this strategy, which we have pursued since 2020, will contribute to

Customer need have changed significantly the last past years and we are fully aware of that. The luxury segment is the pinnacle of new and re-shaped customer experiences within innovation and technology. Our Reimagine strategy includes very clearly how we are working to deliver this to our customers.

We have supported every definition with bold customer research looking for mostly to their interests, lifestyle and experience touchpoints. Now, our planning and activities are curated in this new benchmark of modern luxury. We are also strengthening our partnerships with brands that really connect with customers as we do with all the above considerations. Naturally, they are involved in fashion, jewelry, and watches, gastronomy, and never-seen experiences, among others. Each event or activity we do is directed toward our unique customer experience.

First 100% electric Land Rover will be released by

2025

How is Mexico’s growth shaping up for 2022 and 2023 compared to previous years?

BIO

We were also affected by the global crisis, but our strong business structure supported our good results. And as a positive effect of the past two years, we have more efficient operations and investments, and seek a workable balance between volume and product. Each and every car that arrives at our dealership is sold. There is also an important enrichment of the product mix. Also, we have an important strategy for the evolution of the dealer network.

Currently, we have 13 dealers and plan for at least three more openings: a new retailer in Guadalajara, spectacular new facilities in Santa Fe, Mexico City; and retailers in Chihuahua and Tijuana. We also want to not only generate trust and comfort for customers, but also move forward in every customer experience touchpoint. Finally, multi-channel journeys are a must in our customer journey and we are strengthening our technological platforms and digital strategies to create the best digital experience for our customers’ lifestyles. ✖

Montserrat Martínez previously served as Edelman’s brand VP and has an accredited trajectory of more than 18 years in branding and brand strategy, as well as strategic planning and implementation support for clients in the communications, finance, digital start-ups. and commerce industries in the US, Mexico, and Latin America. She has held key positions in the definition of communications, content, marketing strategies, alliances, and platform management multichannel for companies such as Grupo Editorial Expansión, Grupo Bimbo, Rassini and Entravision (within its digital division, TV, and radio), as well as the internal platform of MetLife communication for Mexico and Latin America and strategic advice for luxury and lifestyle brands.

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F e l ipe V il l areal CEO, ALIAN PLASTICS

How are global developments affecting industrial growth in Mexico?

MYRIAD offerings Having invested heavily in machines, robots, and Industry 4.0 in recent years, Alian Plastics is in a great position to benefit from the growing interest in environmentally friendly plastics.

After the pandemic, companies have found opportunities in services, logistics, and raw materials and want to move manufacturing closer to the biggest markets.

Mexico is at an advantage, not just because we are just 200m away from Texas, but also because we are used to working with Americans and international companies. From the perspective of plastic injection and manufacturing, which includes several industries such as automotive, HVAC, toys, and so on, this year has been a huge boom for nearshoring. More and more companies are reaching out to us to help them transfer part of their production systems from other countries to Mexico. Alian is in a great position because we have demonstrated great success in delivering products, and our customers see us as a company that works with our suppliers and customers with 100% integrity, teamwork, and communication. By ourselves, we cannot provide excellence, and we need all our partners, suppliers, customers, and our people beside us.

How was 2H2022 for the company, considering the boom caused by nearshoring?

BIO

Felipe Villareal holds a degree in industrial and systems engineering from ITESM, as well as a Global MBA for Latin American Managers from ITESM and Thunderbird, in addition to different certificates in finance, operations, sales, and Lean manufacturing programs. He has worked in plant, operations, and commercial management for more than 22 years, with multifunctional teams from different cultures, including those from India, China, the US, Caribbean, Italy, and Mexico. After graduation, Villareal joined General Electric. He has also held management roles at Pentair and Broad-Ocean Motor. In 2018, he became Managing Director of Alian Plastics. In 2019, he was invited to join the board of INDEX NL.

We invested heavily in new machines over the last three or four months because of the demand. Our current customers are giving us new programs, which require more capacity. We have invested in machines, robots, and Industry 4.0, and 2H2022 has been huge. In the last five weeks alone, we have received 17 different tools for 17 different programs. This is a major step for the company. We plan to increase our manufacturing capacity by about 20%. In 2021, Alian Plastics was 100% automotive industry, and we embarked on a diversification strategy. Today, we serve five different industries: automotive, HVAC, heavy-duty trailers, toys, and garden tools.

We specialize in working with international companies. We have been asked to analyze some potential business, perhaps in aerospace. Hopefully, we can expand to serve eight industries. There is now a movement toward fabricating more en-

vironmentally friendly automotives and products, and there are therefore engineering changes being made in several industries. This new mindset about fabricating environment-friendly products is an opportunity for plastic injection.

How is plastic in industrial manufacturing eco-friendlier than other materials?

For example, in the automotive sector, there is a shift from gasoline toward electric vehicles and having a battery last longer. Instead of a metal 5kg one, we can construct one in plastic that weighs 1kg, thereby reducing the consumption of electricity and fuel. Furthermore, transporting plastic is cheaper than metal because of their weight. There is a growing tendency in different industries to switch from metal to plastic components. Plastic is also cheaper. Customers and OEMs in the automotive industry are looking for opportunities to lower costs, and plastic fits perfectly in that the approach.

Why is it important to invest in industry 4.0 to maintain competitivity?

If a company serving the automotive industry, HVAC, or any industry with big volumes does not have any software related to 4.0, they will soon be out of business because they need real-time data to make proper decisions faster and resolve any problems that incur during the manufacturing process. In our case, that is plastic injection, which is a specified industry and requires a great deal of technology.

We implemented 4.0 software in each plastic injection machine. It provides all the data that companies need in the manufacturing environment. We are certified with IATF 16949. For automotive, we were certified ISO 2015 as well as in UL, which certifies that the resin needed for a specific product is in fact the actual resin being used for the product. We are committed to the environment with our ISO 2001 certification. Even with all those certifications, we strive to provide more value to our customers, which is where we include technology and robots, namely Industry 4.0. ✖

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Image: The Western States Machine Company

A view from a Western States Machine Company facility

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INTERVIEW

SOLID position

Famosa in Mexico is among the top five toy companies in the highly competitive industry and is now targeting expansion across Latam and the US.

I gn aci o R o m ero MANAGING DIRECTOR, FA M O S A

Opportunities in Mexican manufacturing industry due to rising prices of international logistics

BIO

With a 35-year successful professional career in the consumer, financial services, and entertainment industries, Ignacio Romero has been leading the business of Famosa-GP in the Americas for the last seven years. Prior to Famosa, he worked for almost 20 years in the entertainment industry at some of the most important and powerful Hollywood firms in Mexico, such as Fox, Paramount, and Warner Bros. Romero holds a bachelor’s degree in business administration and a marketing diploma from ITAM, an MBA from La Salle, and a master’s degree in digital business from Universitat Barcelona.

What are the main trends in consumer behavior within the Mexican toy industry?

With the pandemic, consumer behavior and consumer trends changed dramatically as people began to buy online. Yet this did not compensate for sales lost in physical retail. We lagged behind economies as Brazil, the US, and Europe where online sales were much higher. Yet there have been clear changes in how consumers are buying and learning about products, whether it for toys or anything else. It is important for retailers to be omnichannel and to have what was previously seen online physically in store. Our trend in FAMOSA Mexico, specifically, a key market for the toy industry, has been important and impactful. We have grown from 10th position in 2015 to fifth in Mexico, just behind big global toy companies like Mattel, Hasbro, Lego, and Spin. Over the past eight years, we have grown to a solid position.

We are the biggest company out of the smallest distributors and manufacturers. Getting to this point has not been simple. The core factor is that we are developing brands rather than merely selling products. We set a three- to five-year plan to position our brands firmly within the market. We made considerable marketing investment and worked heavily on pricing and points of sales.

Those are our key commercial strategies that have led us to a solid position of growth. Today, we have the number-one brand leader in the nurturing category, Nenuco. Nenuco is now a generic name like Kleenex. With the same strategy, we are working to continue growing across our different categories.

We also have a deep analysis of the product that we will distribute from third parties every year and prefer to have brands that involve a three- to fiveyear plan, which takes a great deal of patience.

How did Famosa become one of the first companies in Mexico to develop digital marketing strategies?

We were one of the first companies to develop digital marketing strategies in Mexico. In 2015, we developed different highly-structured strategies.

We are also working to develop our e-commerce, which is a longer process. We are not experts in managing stores, but rather in developing and selling toys, especially dolls. We sell on Amazon for example and all the various online retailers.

Instead of investing in managing them, we prefer to offer competitive prices and effective marketing and advertising that supports our brands.

Meanwhile, in terms of globalization, it is difficult to penetrate the US market. Now we are working through distributors and pursuing a direct operation model through distributors that are helping us work with Amazon and online businesses. Latin America is a complicated market because its sheer size has prevented us from opening an operation on the ground, which is why we operate through distributors. Mexico is number one and is positioned either at the same level or even above Brazil. Mainly, our growth strategy is to identify more distributors and partners to distribute our toys in Latin American key territories. This is how many other toy companies, including the larger ones, reach these markets.

What are the main growth opportunities in the toy industry in Latam?

There is a significant opportunity in terms of manufacturing for Mexico right now. In the mid to long term, I do not see the cost of selling returning to what were before the pandemic. One of the key variables in the logistics supply chain is sea freight prices for shipping products from places like China, for example. All of the toy manufacturers in Mexico are trying to develop toys in Mexico and we have already had a head start on this with our plant in Monterrey. This will in turn make the US market a more viable proposition. ✖

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INTERVIEW

En r ique F ig ue r o a MANAGING DIRECTOR, L AT I N A M E R I C A N N O R T H , C A L D I C L A TA M

Why is Mexico a strategic market for Caldic?

BIO

Enrique Figueroa has more than 26 years of experience working for the GTM Group.

He joined the company in Guatemala as a sales executive, assuming positions such as sales manager, general manager of Guatemala, and the management of other regions. In 2020, he became responsible for the entire Latin America North region as Managing Director Latin America North. Figueroa has a background in industrial chemical engineering with an MBA.

For Caldic, Mexico is strategic because is the second-largest economy in Latin America. In terms of distribution, it is an important market like Brazil. The percentage of people living in Mexico also makes up 46% of our portfolio in the area. Our business is related to final users’ focus on end markets that we are attending because they consume a high volume of several products, which is how we have quantified the market. There is also significant potential to produce products in Mexico and export them to the US. In Mexico, Caldic is focused more on the specialty chemicals market and developing customer solutions. We acquired Highchem, a specialty chemicals company, mainly engaged in the paint and ink market in Mexico, because we see the great market potential in the life sciences market, which mainly comprises food, pharmaceuticals, personal care, pet care, and agro.

What strategy is Caldic using to grow in the market?

Caldic is set to grow organically and through acquisitions, investing in our technical human resources and laboratory infrastructures. We are already seeing companies that are leaders in the market and capable of achieving scale in Mexico. This is a great opportunity for us. We will realize this predominantly in the Life Science market, the sheer potential of which became patently clear to us during the pandemic. Formerly we had been more engaged in the industrial component in the other consolidated clusters such as Central America and Peru. We are developing our strategy by remaining close to our customers to progress and best evaluate those processes where we can bring added value from the perspective of creating solutions where both the customer and Caldic can create a win-win business. Now, with the integration between GTM and Caldic, we are a stronger group with a global presence which brings us several opportunities to grow in potential markets and offer more innovative solutions to our customers and principals. We will keep our Latin way of working with agility and transparency, potentializing new business opportunities. ✖

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INTERVIEW

COMPLIMENTS to the chef

AGM is committed to improving its offering by retaining staff, creating a happy environment for both employees and clients.

J o rge P u i g MANAGING DIRECTOR, AGM

Offers shares to employees to help with talent retention

BIO

Jorge A. Puig Valdez is Managing Director at AGM. He is an entrepreneur chief executive with over 15 years of experience, specialized in industrial food services for large corporations and universities in Mexico. As a leader, following and sharing values such as being humble, ethical, perseverance, discipline, motivation, loyalty and being grateful with his working partners gives his work and life experience the opportunity to support the development of AGM and take it to the next level.

How has AGM taken advantage of the last few years to restructure itself?

We are being extremely cautious and have used this time to restructure our company. We have added more talent to our team to help us get ready for 2023, which will be an amazing year.

Everyone is talking about the recession, but I expect 2023 to be much better. For the first time in many years, we have paused growth and use this time to restructure and prepare. In Mexico, we are struggling with the same issue of creating opportunities for people to engage in our companies. We eventually want to license and franchise our operational system.

How does your human resource program promote loyalty and career development?

We are up against large international corporate companies. It is not about money; what we strive to create is loyalty. When people join AGM, we want it to become a platform for them and their families. We offer all kinds of incentives including scholarships; right now, we have sent our chefs to culinary school. We have a new program offering degrees for all our supervisors so they can become managers. At the same time, we are

developing a program where we reward loyalty with company shares so that our employees can grow with the company. Everyone wants to be a part of something, and we work as a team. I am extremely optimistic and grateful that the programs have been working.

How are you preparing AGM for the opportunities to come?

My main objective is the same as it was in 2021: to prepare the company to take all the opportunities ahead of us. As a food service company in Mexico, we seek to revolutionize our services and bring them to another level. We want to be extremely different from other restaurants, though we are bringing the restaurant to corporate. Our main goal is to impress all our customers and aim high in customer satisfaction. We are also doing this by making sure our teams have a culture and by systematizing everything. We need to ensure our people follow the process. We are bringing different team players that will enhance our company. We are looking for a different path that will retain people in food service, which is what most companies in our field are struggling with. ✖

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Image: VG Foto

A man welding a turbine at a power plant in Baja

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VOICES FROM THE SECTOR

R o d o lfo C am argo MANAGING DIRECTOR, E L C R I S O L , S . A . D E C . V. How has El Crisol sought to combat shortages in supply chains with its distribution center?

Ed uar do C ar baj al GENERAL MANAGER, E AT O N How is Eaton helping Mexico better manage its use of energy?

All of our management energy solutions at Eaton are focused on helping the countries we do business with to efficiently optimize energy management across industries and segments within the region by understanding the priorities and long-term strategies of our customers in Mexico. Eaton has a global presence, and Mexico plays a key role in our global strategy. We have objectives focused on improving the quality of life and environmental conditions. It is important to stress here that this is achievable through optimizing energy use by deploying solutions on various platforms that we offer in the market.

What main sectors do you collaborate with?

We have a significant number of facilities in the country. Our electrical and industrial businesses are largely focused on serving and supporting the North American market. We manufacture medium and low-voltage solutions for the Mexican market, with electrical distribution equipment as well as transformers and engineering solutions. To this, we may add solutions focused on energy management for different segments. These segments mainly concern infrastructure with operations such as the nationwide distribution of electricity, water treatment and management, mining, and industry in general. Industry also encompasses sub-industries that our application engineers are focused on. We are also engaged in residential construction.

In 2021, we made a MXN300-million investment to build a distribution center in Querétaro State. Logistics is the key to successful business in the future, and it gives us an important competitive advantage to always have products in stock. Our short-term vision is to further strengthen our presence in the export market, which is where we have a great opportunity as Mexicans and as a company. We will open the largest distribution center in Latin America and, with the confidence that the business model we have implemented, will continue to give excellent results.

What sectors do you specialize in?

El Crisol actively participates in 31 different industries, the most relevant being F&B, pharmaceutical, microbiology, petrochemical, environmental and mining, and now also life sciences and everything related to scientific research, molecular biology, cell biology, and immunobiology. These markets will continue to expand regardless of issues with trade, supply chains, government, or others. Mexico has great potential in many segments, such as food, water treatment, oil and gas, mineral extraction, and that is where we support with the best materials, equipment, reagents, biologicals, and laboratory solutions.

P i erre-L o u i s Du b o u rd eau PRESIDENT & EXECUTIVE DIRECTOR, MICHELIN In what ways are you collaborating with the public sector?

We are the main supplier for the Mexico City Subway, not for all the lines but a large majority of the lines on tires. The benefits are greater comfort for the users, although those systems do not have the same velocity. Safety is a top priority for us. Ultimately, we do not work directly in the public sector, though some of our distributors distribute our tires to local public markets. The interesting thing is that the large bus industry in Mexico is still massively private. When talking about public transportation, there are many private companies working in different states and cities, and they are our customers.

What are your priorities to the end of 2023?

Our big focus at the moment is to ramp up the teams and the competencies. Competency levels are one of our biggest priorities in terms of sustaining quality levels and developing the training and learning paths for young Mexicans, especially in Guanajuato to work for Michelin. The second priority is to better disperse our service offering to the market because our offerings for the transportation industry are bolder than what is on offer in the industry today. Many transport companies in Mexico do not leverage best-in-class technology to run their operations.

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VOICES FROM THE SECTOR

K lau s J ell MANAGING DIRECTOR, KRAUSSMAFFEI

M a r c o G a l l uzzi FOCUS COUNTRY & HR HEAD, C O N T I N E N TA L What steps is Continental taking toward digitalizing its processes?

Digitalization is present in all our processes. We have what we call data scientist positions, using all the information we gather. Here, we have to develop internal processes and products. Digitalization is present in every corner of Continental. For example, all information on our employees, from our talent acquisition to people management processes and personal administration and compensation, are stored on clouds. In terms of digitalization as well as new internal concepts and shared services, Continental is making great strides. It impacts how we manage our own business and how we develop our products using these tools, mainly data scientist, for the benefit of our customers, as well as the use of robot process automation.

What is Continental working on for the near future in Mexico?

We are extremely important in Mexico; in 2021, we opened a new electronic automatic plant in Aguascalientes. We also have expansions on the automotive side in San Luis Potosí, where we have a hydraulic brake plant. We are currently constructing a new plant in the Las Colinas Industrial Park. We also have a greenfield under study for a new business area in Mexico.

What main trends is KraussMaffei observing in the Mexican plastics and rubber market?

Historically, the plastics and rubber market in Mexico has been dependent on the automobile sector. We also have to explore potential growth opportunities in the tire and rubber industry as well as the packaging industry. We already have prominent references and customers in this sector, which serves as a basis for further growth.

The common trend among all these industries is the topic of the circular economy and sustainability, namely making plastic greener and of a higher quality and rendering the entire process more efficient.

What is KraussMaffei doing to ensure its operations are more sustainable and aligned with ESG standards?

We have set ourselves special goals. For example, by 2023, we aim to have achieved a silver rating of the most reputable sustainability rating agency. Internally, we want to be the best machine system manufacturer for the plastics industry in the area of sustainability and cost efficiency by 2025. In 2023, the company will celebrate its 185th anniversary, and taking advantage of the occasion, 2023 marks the beginning of a new sustainability area for KraussMaffei. As a main player in the plastics industry, KraussMaffei always maintains its responsibility for current and future generations in mind.

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CHAPTER SUMMARY

IT & Telecoms

DATA, DATA EVERYWHERE he digital world has made the market

demanding than ever, and a bad T more customer experience can quickly chase

clients away as companies are no longer competing locally, but globally. To ensure a crystal-clear customer experience, companies must back up their operations with top-of-the-line systems and data centers that can promptly move and store information. In this context, Mexico has come to a point that it can no longer rely on international data centers and has started to invest in local infrastructure to reduce latency. “Mexico is the second-largest economy in Latin America after Brazil. Brazil initiated data center projects about seven years ago, and Mexico is about six years late in its growth in data centers,” said Ricardo Arévalo, Managing Director of ODATA Mexico. “Wholesale data centers are currently being built to take care of large cloud service providers like Microsoft, Oracle, and Facebook now Meta, and all these companies have decided to enter the Mexican market in the last three years,” he continued.

Following the wave of the technological revolution, players are hopeful that 5G will finally become a reality for Mexico and will serve as a catalyst in the IoT and the digitalization of indus-

trial sectors. “5G was officially announced by both Telcel and AT&T in 2022, and both wireless operators are deploying new 5G antennas and upgrading 4G infrastructure with 5G net-work overlays,” said Antoine Delaprée, CEO and Founder of MXT Holdings.

Along with the development of telecoms infrastructure, this chapter also highlights the importance of software in helping CEOs and leaders adapt to the new needs of the market. “There are several studies like that of the International Data Corporation (IDC) indicating that 95% of SMEs in Mexico lack the technology to automate processes or make decisions in real time,” said Angela Gómez Aiza, President of SAP. “Second, there are sustainability issues; we are having numerous conversations with the CEOs of all types of companies from small to huge ones, on how technology will allow them to not only measure ESG-related indicators, but also optimize their business processes for investor compliance.”

In all, interviewees showed excitement for what is to come in telecoms and IT and how advancement will play a key role in further connecting Mexico to international markets and opportunities. ✖

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A Telmex tower pictured in Cancún

DISTRIBUTION OF FIXED BROADBAND SUBSCRIPTIONS

BY TECHNOLOGY (4Q20) SOURCE: STATISTA

41% Cable modem 28% DSL 29% Optical fiber 0.1% Satellite 2%

Others

TELECOMS REVENUE

BY SEGMENT, 2021 (MXN BN) SOURCE: STATISTA

99

Fixed line

125.2

Pay TV

Mobile

Image: Colinmthompson

300.04

IT & Telecoms

143

INTERVIEW

growth PLANS

Megacable has invested significantly in infrastructure and expanding to become a major player in fiber and entertainment.

What are the primary development prospects within the Mexican telecommunications industry?

The company is focused on two markets: the mass market, where we are known as Megacable; and the corporate market, in which we have business units such as MCM, MetroCarrier, ho1a Innovación, and PCTV. Close to one-fifth of our total consolidated revenues comes from the corporate market, and the rest from the residential, and within this business model we draw three axes on which we base our vision of the company in the future and how we are going to get there.

Regarding the first initiative, we anticipated an increase in bandwidth demand and took on the task of accelerating investment projects to strengthen our network capacity. The next project is related to how we have to evolve in order to remain an important player in the entertainment market, since younger generations are more focused on streaming or watching a video in a non-linear way, where you choose the video you want to see on different platforms and by niches. The answer to that is our product called Xview+, a multiplatform video service that integrates all of the market’s apps or streaming services, based on Android TV and providing the subscriber with a user-friendly interface and a search option. In addition, we also include 150 linear HD channels for the market that wants to see linear TV; our subscribers will be able to navigate between streaming, conventional, and non-linear content in the same platform.

There has been a great acceptance in the market for this product, already reaching over 80 million non-linear video reproductions. Moreover, it gives Megacable a long-term vision of how to maintain and penetrate a market that is deaccelerating in other geographies. For example, there is a lot of noise in the US about cord cutting, which means dropping the paid TV service of a bundle and maintaining only the internet service. There is still a strong possibility to maintain the service trough

R ay m u n d o F ern án d ez P en d one s DEPUTY CEO, MEGACABLE

integrated apps, streaming, voice remote control, and the Android TV search engine. Our third initiative is related to: Where do we see ourselves in the future? We want to be a company with a national presence with a very efficient operation. We have a project, called MEGA 2025, through which we will double the size of the company in the next five years, including the mass and corporate segments. This implies deploying 50,000km of fiber and, instead of having 9 million homes passed, we will reach 18.5 million. That would put us in the position of being a national player. This vision includes growing the corporate business, including MetroCarrier and ho1a’s units. The goal of these investments in the MEGA 2025 initiative is to become a major fiber player, conclude the construction of the network in a period of three years, and double the size of the company in five.

What strategy is Megacable using to double its subscriber base?

As a result of ongoing network improvements, we are doubling the speed available to subscribers in the cities where we operate. For all of our legacy subscribers, we offer interactive video services.

The company’s current objective is to have the vast majority of subscribers using an Android TV within the next three years. However, doubling that size will depend on a larger scale on the mass market and the company as a whole, including organic growth. It will likely require an increase in the number of employees from 24,500 to over 40,000. We are opening 88 cities simultaneously, and building fiber and roads to the border and the rest of the country. We are confident enough to invest USD2 billion over the coming years, averaging USD500 million per year. The strategy is to build and operate efficiently, since we know how to do it, maintain a tight cost structure, a great video and broadband product, and commitment to customer satisfaction. ✖

Planning 115,000– 120,000km of fiber optics in next 5 years Investing USD500M per year in technology for total of USD2B BIO

With a 30-year track record in the telecommunications industry, Raymundo Fernández Pendones serves as Deputy CEO of Megacable. He is currently vice president of digital strategy of CANIETI and chairman of the board of GTAC. In addition, he has been a member of the board of directors of TEPAL, the COPARMEX, the National Chamber of the Cable Television Industry, Productora y Comercializadora de Televisión, S.A. de C.V., and the Association of the Mexican Cable Industry. He is also a founding member of the Mexican Cellular Telephony Association (AMCEL). He holds an MBA from Gonzaga University of Washington State, an MBA from Gonzaga University, and specialties in telecommunications, finance and marketing from ITESM, and banking and credit from ITAM.

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Image: Antonio Tanaka

Telecoms towers pictured in Sinaloa

IT & Telecoms

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INTERVIEW

making AN IMPACT Focusing on infrastructure development, Fermaca Networks has helped develop major infrastructure projects in the digital infrastructure and petrochemical industries.

R ay F let ch er CEO, FERMACA NETWORKS

In what ways is Fermaca Networks innovating its portfolio beyond pipeline infrastructure?

What does your portfolio comprise, and what is the main focus of your current investments?

Fermaca’s core activity since 2000 has been the development of pipeline infrastructure. However, the focus of Fernando and Manuel Cavillo has been to think outside the box and leverage our 20-year capacity and experience into related businesses. This brings us to two main areas we are pursuing, the development of digital structure in two basic projects: a dark-fiber, long haul network and data centers. Another is in the gas transformation industry, specifically the development of an ammonia and urea plant on the Pacific coast of Mexico. We have been working on the data center project for the past five years. Mexico has tremendous challenges in terms of available infrastructure to create data centers that accommodate international standards. The two focal problems we have noticed are availability, reliability, and the cost of energy and the other is connectivity between the country and other parts of the world. This led us to prioritize the connectivity issue by tackling the development of a fiber optic network to provide for the necessary infrastructure to provide connectivity to our data center project. In a broader context, we must resolve the connectivity issues first. We have experience developing and executing 2,200km of gas pipelines and can leverage this knowledge with one of our sister companies, BCYSA Servicios Industriales, which can offer an added-value in developing this type of infrastructure.

Fermaca Infraestructura’s core investment is in the fiber network from Ciudad Juárez in Chihuahua to Querétaro with a leg west into Guadalajara. We are building 1,950km of state-of-the-art, long-haul dark fiber, with a right of way adjacent to our existing gas pipeline as well as a highway, all of it underground.

Our network will count with two border crossings that connect it to major US fiber optic confluence, therefore opening it to a wide range of opportunities in the US and beyond. The fiber optic network will have established a presence in metro areas like Querétaro, Aguascalientes, Guadalajara, Chihuahua, and others. We can interconnect with the metro fiber present in those cities and link to the local data centers, specifically in Querétaro. When it comes to data center projects, we are looking for additional areas in Mexico to create what are called edgetype data centers, namely smaller data centers closer to the end user. We can leverage our energy-producing capacities to make it more efficient to transmit data into areas other than Querétaro.

What is the next step for the company given this rather unconventional business strategy?

The main focus is digital infrastructure with dark fiber and data centers, aside from being competitive producers of energy. We have also created technology that can be used in building solutions for data centers at a reduced scale. It can lower energy consumption by eliminating the need for artificial cooling. It re-

duces operating costs by 25-30%, making it greener and environmentally friendly.

In addition to creating projects beneficial to the people of Mexico, which is our priority, we are also conscious that projects need to be sustainable within the scope of these industries and thus differ from the typical infrastructure available.

Our other core project is the ammonia-urea plant, leveraging our experience in the gas industry. In a nutshell, we seek to provide Mexican farmers with a local and reliable product source at a better price. These projects for now are self-funded, though we are looking into different financing sources. We are working with several financial entities to realize these projects and are looking to finalize FID for the fiber optic project at the end of 1Q2023 and for the fertilizer plant in the 4Q2023. Our main focus is to generate infrastructure that will benefit the people of Mexico and leave a positive legacy for future generations. ✖

BIO

Ray Fletcher has been the CEO of Fermaca Networks for five years. He attended the Law School of the National Autonomous University of Mexico (UNAM) and has extensive experience as an entrepreneur, having been a part of the early stages of the fast-food franchise industry in Mexico in the early 1990s and in the hedge fund industry from 1995 to 2017.

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THE FERMACA NETWORKS DARK FIBER NETWORK. ADVANTAGES: Geographically unique route spanning from Central Mexico to Texas.

100% Subterranean deployment with TIER II design system (TIER III HVAC).

Service area includes at least 3 of the 4 key expanding Bandwidth and Data Center markets in Mexico.

Connectivity to Metro Dark Fiber available in key Metropolitan areas.

Connectivity to Key Long Haul & Metro Dark Fiber providers in the USA. Parallel to Highway & Gas Pipelines Right of Way. Own cross boarder permit in order to bring extra redundancy to the system.

Capability to integrate solutions in the US, Mexico & Canada through Fermaca Fiber Partners.

Fermaca Networks has created the Fermaca Fiber Partners Program in order to provide for our customer´s specific connectivity needs with a tailor-made integrated solution via a one-stop shop.

Our Fermaca Fiber Partners Program counts with the participation of the leading and most competitive Dark Fiber Providers, both in Mexico and the US, that together with the Fermaca Networks Dark Fiber Network provide for a winning combination to address any connectivity need.

DARK FIBER CONNECTIVITY TO MAJOR DATA CENTERS/NAPS & CARRIER HOTELS IN THE USA AND CANADA.

contacto@fermacanetworks.com

IT & Telecoms

BORN TO CONNECT A big step for Fermaca Networks, a huge step for Mexico.

Fermaca Networks is a purpose built Infrastructure provider seeking to utilize the safest, most unique right of way in Mexico for purposes of being a leading provider of much sought Long Haul Dark Fiber infrastructure in Mexico.

El Paso Ciudad Juarez

Chihuahua

Torreón

Aguascalientes Guadalajara

Querétaro

Our Unique and Premier High Count Fiber & Duct Route Equipped with State of the Art Technology

•Key segments include Hyper-scalers, International Carriers, Domestic Carriers, Cable Companies, Satellite, and ISP/WISP, Large-scale Corporate, Government & Enterprises.

•Services provided include Dark Fiber, Collocation, Energy & Integrated Solutions.

6 Points of presence in the most important cities along the Route, Ciudad Juarez, Chihuahua, Torreon, Aguascalientes, Guadalajara & Queretaro.

14 Optical Line Amplifier (OLAs) / Intermediate Light Amplification (ILAs) along the route on which Fermaca networks counts with 26 Racks per site with the capacity of 20-60 Amps A+B per rack. www.fermacanetworks.com

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INTERVIEW

CONNECTING the dots R e n a to T r ad ard i CEO, G O L D D ATA

How is Gold Data improving the connectivity between Mexico and international markets?

Gold Data specializes in connectivity and strategic business verticals in telecommunications, focusing on the development of related infrastructure.

BIO

Renato Tradardi has over 25 years of business, engineering, sales and project management experience and is responsible for directing and controlling the operation of the group of companies globally. In 2000, he founded Gold Data, after also establishing companies with the same focus and line of business in Panama, Costa Rica, the Dominican Republic, Mexico, and the US. Tradardi has led the group to be recognized in the Global Carrier Awards and Carrier Comunity with different awards in Latin America and the Caribbean.

Gold Data is a company with a history spanning over 22 years. Our company is a multinational technology business with a key focus on telecommunications and the development of related infrastructure. We specialize in connectivity and strategic business verticals in telecommunications, and our goal as a company is to expand throughout the region.

Mexico is part of that expansion plan as our seventh market. We created the Mexico project more than four years ago, but due to the pandemic, our entry into Mexico was delayed. For us, Mexico has always been an important market, and Gold Data’s objective is not to compete, but rather to bring new investments and better international connectivity and to supply strategic vertical areas of international connectivity in Mexico that are not supplied at the time. Mexico’s fast-growing data market and today’s significant investments such as those occurring in Querétaro and other areas of the Republic require modern infrastructures due to the exponential demand of digital ecosystems. Consistent with this plan, Gold Data’s proposal is to enhance this infrastructure because, today, the legacy networks in the country do not support the large volumes of data that will be seen over the next five years. Mostly because of this strategic reason Gold Data Plan was created three years ago and its target is to install new international infrastructure through a submarine system that would provide the capacity to connect large data centers and strategic points of the Republic to the world. Our strategic plan will span three years. 2022 being the first year of this implementation, and the goal is for construction and implementation process to finish in 2025. By 2025, the submarine system and networks will be in operation. We are going to have a process and a timeline for the delivery of infrastructure incorporated into Gold Data’s overall plan for Mexico. We have designed a new network and connection

route that has yet to be used. The new layout connects central Mexico to the east coast of the US. Because the design of this new infrastructure will offer up to 35% better latency to the most important Gateway of telecommunications of Latam region, NAP of the Americas in Miami. This is a great achievement, and will offer the Mexican Republic the best connectivity in the region as it will be able to connect more directly to the content provider to the origination content at the US, either on the west or east coast.

The speed, the connection, and obviously the capacity of this cable are so great that it will also enable more competitive pricing. This will also have a positive impact on the Mexican market. Total investment for the submarine project is USD150 million.

After Mexico, what other countries in Latin America do you intend to expand into?

Mexico was in a period of natural delay in 2022 as a result of the pandemic. However, while significant investment from Mexico will be reactivated, we began operations in Colombia, one of our seven markets of operation, and are also in the middle of a larger construction project to begin in the new year: new underground infrastructure for Colombia. After Mexico we will enter Brazil. Additionally, we are set to establish a new connection in Miami. This is ultimately good for regional development. We have to know how to be intelligent and take advantage of such opportunities. For example, why are we building a submarine system between the US and Mexico? Why can’t it be between Mexico and Colombia, Mexico and Chile, or Mexico and Brazil? The answer is mainly because the largest trade relationship in the world between two countries is the one between Mexico and the US. We are here to provided the required connectivity support to that great relationship. Better roads also require digital roads, the digital infrastructure that allows connects these two great countries.✖

IT & Telecoms

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INTERVIEW

extensive NETWORK

A 100% Mexican company, IENTC Telecomunicaciones has positioned itself among the leaders in its field in the country.

What is your perspective on the current state of the telecom industry in Mexico and the main challenges that it faces?

One of the main challenges right now is the evolution of small businesses. After the reform in 2015, there were many new small enterprises and telecoms businesses trying to grab a slice of the market that was previously unattainable. This is both an opportunity and a huge challenge for the big players, because they are losing subscribers to the smaller entities. Right now, there are over 1,000 license holders all over the country for telecoms, and they are also providing fiber service, which is a huge opportunity. There is a great deal of consolidation right now, and medium-sized enterprises are undergoing many mergers and acquisitions, while large companies are acquiring smaller ones, especially cable operators. We are a relatively small company compared to them, but we are better able to adapt to the market and pricing, which is an advantage for us. The Mexican telecoms sector has been extremely attractive for foreign investments, and the returns have proven to be real and bigger than expected. It is a much safer sector to invest in, than real estate or others that do not have the potential to grow.

In what areas in Mexico are you investing for additional growth?

We started in Querétaro, and from there we are starting to build the network. Everything has been success-based CAPEX investment, with customers that already have contracts, so we are building this backbone for the long haul to connect other cities until we have customers in that new city. We built and maintain our network by our own to avoid external OPEX expenses and become a much stronger local player in the regions. We are now expanding to Michoacan, Jalisco, Aguascalientes, and San Luis Potosí, namely the large industrial cities. It

C arlo s A rgu i m b au CEO, IENTC

takes more effort to enter these areas, but we are trying to do it with our own network, which gives us a stronger presence and higher returns. To become a local player with national coverage without using any contractors, we need to build offices and have local people on our payroll in every city to ensure we have the right quality and operation expenses to serve the market as we should, with aggressive pricing. These are investments we seek to do, and our goal is to penetrate the entire country. We are starting with the markets that have the best economies. Moving from Querétaro, we are looking at moving north first and then south. The goal is to have a long-distance network all over the country and local networks in every reasonably large city here in the next five years.

Mexico offers higher ROI in telecoms than Europe or US Based in Querétaro

Are you also betting on 5G in Mexico, and do you have any plans to participate in it?

We are working with AT&T and Altan to offer fiber services, dark fiber, and infrastructure for their towers. We are also working closely with Altan to share network agreements in which we do investments on the network side, and everything is 5G ready. We only need software updates to make 5G available as soon as the network is ready to deliver 5G services; however, for 5G to properly work here, the networks require a significantly bigger density and thousands of more antennas and small cells all over the country. This is something that the country needs to work on together. There are many companies and partners working to deliver this infrastructure to provide an acceptable quality of service. All companies struggle with this, which means we need more density regarding to towers, distribution antenna systems, and fibers.

We are all working with the network operators to cover all these dark places that have no coverage or where coverage is already at more than 100% of utilization. ✖

BIO

Carlos Arguimbau is the founder and CEO of IENTC Telecomunicaciones. He has more than 10 years of experience in the telecommunications industry and is skilled in negotiation, business planning, session initiation protocol (SIP), customer relationship management (CRM), and IP networking. He graduated in communications from Instituto Tecnológico y de Estudios Superiores de Monterrey and is one of the most experienced executive directors with a solid track record of work and success in this sector.

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Mexico 2023

IENTC is a network service provider, expanding rapidly from the Bajio region towards the center and north of the Mexican territory operating a state-of-the-art fiber network. It can provide every type of telecom services, across every market in Mexico, with a vision to expand nationally in the following years, and focused on providing an outstanding customer experience.

2022-2023 Dallas, TX.

El Paso, TX.

Cd. Juárez

Eagle Pass, TX.

Cd. Acuña

Piedras Negras

Sabinas

Chihuahua

POP Metropolitan Network

Monclova

Network in Process

Torreón Saltillo

Current Network San Luis Potosi Aguascalientes Gto Lagos de Moreno Irapuato

Qro

León Guadalajara

Tulancigo Celaya

Toluca

Pachuca

CDMX Puebla

Cordoba Orizaba

km

8,000

IT & Telecoms

ientc.com

Contact Us!

of FIBER OPTIC NETWORK SERVICES Dedicated Internet Access Dedicated Internet Access provides an exclusive network with direct interconnection and symmetrical bandwidth with a much higher packet per second capacity. You will forget about delays and latency issues. A high-end service for corporations and businesses whose everyday processes depend on the internet for stability, security, and speed.

SD-WAN SD-WAN is a service that helps combine different types of internet connections in your location and place it all in one front, adding up the bandwidths of different carriers, and keeping your public IP address in extreme security through an end-to-end encryption. This service is ideal for banks, or very secure operations, also for businesses with several branches that need a closed network or a centralized firewall, also widely used for redundancy.

vPBX Allows you to have local or remote extensions for your collaborators. This guarantees that even in home office or at a coffee shop employees will be able to make and receive calls “from” the office, and have the ability to record their communication between customers and employees. Extensions can be installed in laptops, computers, cell phones or fixed desk phones that can ring simultaneously.

Cloud Network Connectivity If you have your services in clouds like AWS, Azure, Google Cloud, or almost any other public cloud, or if you are thinking about installing one, we can provide a secure private connection from your LAN to your public cloud services.

Telephone Services - SIP Trunks We offer SIP trunks for business, callcenters or wholesale customers, like carriers or medium and large enterprise, we are a direct interconnected carrier in Mexico for traditional phone services with IP technology.

Mobile IENTC Mobile service, is specialized in providing mobile services for businesses that includes special functions and tools such as the management of mobile communications and users in a centralized manner, offering a simpler and better experience. Our network only LTE, offers the largest coverage in Mexico, territory in the B28 700Mhz with a great penetration-reach balance.

LAN to LAN This service allows L2 connectivity, with in Local Area Networks in diverse geographic locations, like branches in different states or even different countries, this service is available world wide in a variety of bandwidths

Firewall as a Service The functionality of FWaaS or Firewall as a Service is to provide end-to-end network security in the cloud by eliminating the care and maintenance associated with traditional cybersecurity appliances.

Server Co-location This is a service in joint venture with Data Center operators, to offer a mission critical, innovative, agile and customized way to co-locate the client's servers in its data center. Co-location consists of placing the physical server of a company in the data center of a hosting company.

US!

empresas@ientc.com 442 628 0050

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Mexico 2023

INTERVIEW

MAXIMUM bandwidth

In just seven years after its establishment, Odata has grown to become the number two company in Latin America for data centers, with plans to grow even further.

R i card o A rév alo MANAGING DIRECTOR, O D ATA M E X I C O

Querétaro is data center hub in Mexico

BIO

Ricardo Arévalo has over 30 years of experience in IT, telecommunications, and media in business development and operations being responsible for countries and regional business units as director, CTO, COO, and CIO. He has led commercial, business development, technology and operations for companies like American Tower, Hewlett Packard, Oracle, and Telecomm operators.

He graduated in computer science and marketing from Tecnologico Monterrey and Top Leadership from IPADE.

Why did Odata decide to enter Mexico with one of the biggest data centers in the country?

What is the difference between a hyperscale data center and a normal one, and what advantages does this offer?

Odata has been in the market for seven years, and in that time Odata has met its growth expectations.

Now, we are the number two company in Latin America for data centers, and in the last few years Odata has closed the gap with the leading company. When I joined Odata two years ago, it had 120 employees, and now we have more than 350 people. In two years, we have doubled our number of employees. We are a young company, but we have aggressive goals and aggressive results as well. Mexico is the second-largest economy in Latin America after Brazil. Brazil initiated data center projects about seven years ago, and Mexico is about six years late in its growth in data centers.

Wholesale data centers are currently being built to take care of large cloud service providers like Microsoft, Oracle, and Facebook now Meta, and all these companies have decided to enter the Mexican market in the last three years. Odata started two years ago by purchasing land in a great location that would satisfy the needs of our end customers. When construction started two years ago, it took us 16 months to deliver the first hyperscale data center to our customers, and we became the first one to deliver data centers for the wholesale market in the region.

A hyperscale data center is a built-to-suit data center. Hyperscale data centers are designed for tier-three certification, and the cost is higher once you decide to go for maximum certification. This translates to the data center having the ability to have zero outages 365 days a year and 24 hours a day. Now, hyperscale data centers in Mexico start at 20MW and can go all the way to 120MW, while in the US hyperscale data centers can go to up to 200MW of power. The biggest company with the highest number of data centers here is KIO, though the total power it can support is less than what is needed to support one of the new hyper scale data centers. In terms of size, all the retail data centers in Mexico can be supported by just one hyperscale data center. The wholesale market is for companies such as Amazon, Oracle, Google, Microsoft, Meta, and Netflix. Now, one emerging industry that needs data centers is gaming, and soon we will hear gaming companies coming to Mexico looking for data centers. We already have a customer in Brazil for gaming; it is one of the biggest in the world and is supported in Odata’s data centers.

Does Mexico have the potential to be the leader in data centers in Latin America?

There is great potential in Mexico, though it has a smaller economy than Brazil. Another reason is that it is so close to the US that latency did not used to be a problem. It is only now that applications demand less latency with the growth of OTT (content) that the latency needs to be reduced, which is why Mexico needed to build its own data centers.

What is the next step for Odata in Mexico?

We will continue to expand for the first data center in phases; we already delivered phases one and two, and the idea is to expand with phases three and four. We will start construction on a second data center on a different site, and it will be bigger that the first. The second site is in Guanajuato.

The business model for hyperscale data centers is to sell the project and only start construction once the project has been sold. In terms of sales, all the sales are being managed by the team in Brazil and the CEO. We focus more on delivering what was sold and keeping customers happy. ✖

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Image: Luis Raul Torres

Payphones pictured in Puebla

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Mexico 2023

INTERVIEW

UNLIMITED advantages An toi n e Delap rée CEO & FOUNDER, MXT HOLDINGS

What are the main opportunities for investment in the Mexican telecoms market?

MXT Holdings is working to connect the Southeast of Mexico with modern, long-haul fiber optic networks, and to help this part of the country potentially reap the rewards of the upcoming 5G revolution.

Currently, we see three main investment opportunities in Mexico. The first is to participate in the 5G revolution, which is finally being deployed in Mexico. 5G was officially announced by both Telcel and AT&T in 2022, and both wireless operators are deploying new 5G antennas and upgrading 4G infrastructure with 5G network overlays. MXT Holdings is working alongside its wireless clients, by sharing its telecoms infrastructure, through the colocation of new 5G antennas on its telecoms towers portfolio as well as providing lastmile, fiber optic connections to cell towers (FTTT services) to help reduce latency. The second opportunity is to take part in the migration process of Telefónica’s wireless traffic onto AT&T infrastructure in Mexico. The third opportunity we are seeing is a potential market consolidation. Large portfolios of telecommunication towers and fiber optic networks are currently for sale in Mexico, reshuffling the competition cards of the main towercos and fibercos and will definitely drive M&A activities in the coming months.

Is there a convergence trend in telecommunications infrastructure?

BIO

Antoine Delaprée has been the CEO and Founder of MXT Holdings since 2015.

It is an investment platform dedicated to developing, acquiring, owning, and operating neutral-host communication infrastructure assets in Mexico. He has a master’s in tnternational affairs, international energy, and finance policy from Columbia University (SIPA), and a master’s in corporate finance from EM Lyon Business School. He has over 20 years of experience, mainly in banking, private equity, and infrastructure investments.

We are observing a global trend of accelerating convergence of both wireless and wireline networks. The main driver is that the architecture of wireless networks is evolving rapidly to absorb the exponential growth of data traffic driven by the 5G evolution and cloud service providers. Overall, convergence is what we are trying to do to leverage these telecoms market dynamics.

Since 2015, MXT Holdings has been building a diversified portfolio of telecommunications infrastructure assets: as of December 2022, we own and operate 650 wireless assets (telecom towers and DAS systems), as well as some 3,400km of long-haul and metropolitan fiber optic networks.

Are you looking to raise more capital or find more investors to further grow the MXT Holdings platform?

There are several opportunities to continue the growth of the platform, both organ-

“As of December 2022, we own and operate 650 wireless assets.” ically and through acquisitions. Organically, MXT Holdings is actively working to finalize the construction of its unique fiber route in the Southeast. For instance, we currently operate three long-haul fiber networks (~1,750km) and are advancing well on the permitting process to build and install three new fiber routes by the end of 2023 (Mérida-Cancún, Tuxtla Gutierrez-Villahermosa, and Veracruz-Coatzacoalcos). We are talking about almost 1,650km of new “data highways” to be built 100% underground. Second, with respect to M&A, large portfolios of telecommunication towers and fiber optic networks are currently for sale in Mexico, potentially leading to a market consolidation. Wireless carriers are also looking at ways to recycle capital and monetize passive infrastructure assets. It is a good opportunity for MXT Holdings to get scale and leverage potential costs synergies.

Both opportunities require large amounts of capital, and MXT Holdings is working with its existing shareholders to implement its long-term strategy and also benefit from these unique M&A situations.

How much financial support are you receiving from the public sector for these projects?

There is strong support from the public sector to invest in digital infrastructure in the south. However, MXT Holdings has not used any public funding to date. Our investments in the telecoms sector in Mexico are essentially private equity funded. The current government is pursuing an ambitious plan to enable access to internet for everyone. It is investing public funds in the deployment of new fiber optic networks and telecom towers to provide connectivity in rural areas and leveraging on existing communication infrastructure, like the assets operated by MXT Holdings, to accelerate technology deployment and reduce time-to market to connect end users. ✖

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INTERVIEW

Jor g e Es té v ez CEO, GRUPO BACKBONE MEXICO

What have been the main advancements of the telecoms industry?

MORE on the horizon Grupo Backbone Mexico works with several companies across the country to provide design and engineering, construction, and maintenance services for fiber optics networks.

BIO

Jorge Estévez is an electrical engineer who graduated from ESIME. He has positioned himself in the world of Fiber Optics since 2006. He is currently CEO of Grupo BackBone, where he is at the forefront of the group’s commercial and financial strategies. Throughout his career, in addition to his different leading roles, he has developed as an independent professional with different projects for CFE and many other projects related to telecommunications and energy.

We see 5G technology is the next step for telecoms industry in Mexico, and following closely will be IoT and the Metaverse.

Then, the next step will be reaching more customers along with increasing the connectivity. All Mexican carriers Totalplay, Izzi, Megacable, and Telmex are working on expanding their networks. They all want to beat the competition and increase their market share in internet connectivity, television, and other telecommunication services targeted at residential customers. We are working directly with some of these carriers, while with others we work through Chinese technology companies.

Why are neutral networks not more popular in the Mexican telecom industry?

In the case of a neutral host network, the model in Mexico is meant to be a network built by the government and whose infrastructure was going to be installed fully by the government so that everybody else would tap into it. This would remove further need to invest in infrastructure and have one all-encompassing project, that is, one single builder for the infrastructure so they would all connect to it. That is the underlying basic principle. However, some companies do not trust a “sharing economy,” given that a company’s worth is that of the infrastructure they have installed plus how many clients they have connected to that infrastructure. The concept of a neutral-host network already operates in other countries, though in Mexico, it did not catch on. In Mexico, companies prefer to build their own network. It could be more popular if there were more incentives. There is an issue over price, whether it is cheaper to rent or build for oneself.

For instance, Altán has built a neutral host network, and everyone who wants to tap into it to deliver their services can do so for a fee. However, no one wants to connect to it. We are lacking something, either as a culture or in our economy.

What kind of projects are you developing in fiber optics?

“We expect to grow exponentially and in a structured way in 2023.”

We are currently providing three types of services: design and engineering, construction, and maintenance for fiber optics networks. In 2022, we won with CFE TEIT a turnkey project of 12,000km whose main objective is to connect priority sites in states like Oaxaca, Chiapas, and Guerrero. We also expect to help with other regions. We also have another turnkey contract to build 1,000km on the Southeast, called Maya Project, with MxFiber. We also expect to start with the construction of 800km of FO on trench in Campeche.

Last but not least, we are looking forward to another project in Nuevo Léon that will connect all the metropolitan areas with private inversion. We expect to grow exponentially and in a structured way in 2023.

Why is a there a need to reinvent yourself cyclically in the telecoms sector?

The thing about telecommunications is that trends and projects come in cycles, in which, for a few years there are large amounts of investment and contracts to carry out work. Later, there is nothing for a while until there is another major technological turning point, similar to the pandemic. Now that the pandemic is under control, everybody is out to build infrastructure. In two or three years, we will hit a new low. We need to keep reinventing ourselves to be able to seize those opportunities. Our work revolves around these projects. In some of them, we work directly with the client. In the case of Megacable, we recently became its vendor since we have been doing a great job for the company. Now, with other companies, we act as a supplier, as is the case of ZT, Huawei, and FiberHome. This means that one way or another, we are present as either a direct contractor or subcontractor. ✖

IT & Telecoms

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INTERVIEW

sustainable, DIGITAL WORLD Equinix has established itself as the world’s digital infrastructure company helping to connect and power a more sustainable digital world.

A m et N o v i llo COUNTRY MANAGER, EQUINIX MEXICO

What are the main growth opportunities in the Mexican telecom and internet industries?

Equinix is the world’s digital infrastructure company that provides a trusted platform for digital infrastructure leaders to bring together and interconnect the foundational infrastructure that powers success and enable their customers to access all the right places, partners, and possibilities they need to accelerate advantage. We have 240-plus data centers worldwide and are present in 71 markets in 32 countries and six continents. In North and South America, Equinix has 85-plus data centers, strategically sited in Brazil, Canada, Colombia, Chile, Peru, Mexico, and the US. Equinix arrived in Mexico in 2020 with the acquisition of three data center facilities: two in Querétaro and one in Monterrey.

The data centers strategically located in Querétaro, outside of seismic zones without flood risk, offer multiple diverse fiber entry points that include five network service providers currently operating within each data center. Customers in Mexico City can mobilize to connect to their networks locally now, while other customers aiming to expand their colocation footprint to Mexico can broaden their ecosystems and connect to the Infomart™ Data Center in Dallas, the NAP of the Americas facility in Miami.

Equinix serves over 10,000 customers worldwide and is trusted by Fortune 500 to connect with other leading companies in the world’s most active enterprise and service provider ecosystems. Equinix has invested around USD2 billion since it started operating in Latin America in 2011 in Brazil. The figure sums up all acquisitions and expansions across the region, including the USD200-million investment announced in 2021 for ex-

pansions in São Paulo, Rio de Janeiro, Bogotá, and Querétaro, and the company expansion to Chile and Peru with the USD705-million acquisition of four data centers in 2022, which represents an investment of almost USD1 billion from 2021-2022. Today, we have almost 15 data centers across five countries in Latin America and we expect to continue growing and investing in the region.

When will you begin construction on the land you acquired in Monterrey and Querétaro?

Our MX3 data center will be our first xScale data center in Mexico, and it is close to completion. In the case of the Monterrey project, although we already have the land, we are in the definition and design stage, after which we will have greater visibility of the next stage, which will start with its construction. In Querétaro, we are in the last phase of the MX2 data center expansion, which should be completed in 2023.

digital world. We design, build, and operate our data centers with high energy-efficiency standards and a long-term goal of using 100% clean and renewable energy for our global platform. We have made it our goal to reach 100% renewable energy coverage across our global data center operations. Achieving this will not only help us shrink our own carbon footprint, but also help our customers green their digital supply chains. In 2021, our renewable coverage was 95%, our highest rate so far. We have an excellent relationship with the Mexican state entities in terms of discovering power availability. That helps us to assure our operations. In that way, we mitigate numerous power-related problems. Thus, the public sector gives us information regarding their scheduled power investments across various regions. ✖

How much demand do you foresee in Mexico for data centers?

The digital acceleration in countries like Colombia, Brazil and Mexico shows up clearly in the Global Interconnection Index (GXI) 2023, an annual market study published by Equinix. The GXI Vol. 6 benchmark forecasts interconnection bandwidth in the Americas to increase at a CAGR of 39% through 2025, making the Americas the fast-growing region in the world. Going digital will require expertise, investments, and extensive coordination among the multiple stakeholders.

How are you ensuring the energy supply for the projects you are investing in?

At Equinix, our purpose is to protect, connect, and power a more sustainable

BIO

Amet Novillo has more than 25 years of experience in business IT and telecommunications environments in companies like Axtel and Alestra. Novillo obtained a degree in telecommunications engineering from the Autonomous University of Guadalajara, an MBA in business administration and finance, as well as various certificates from internationally recognized schools.

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Mexico 2023

FOCUS In vest me nt in dat a c e n te r s

INFORMATION HUB With 13 data centers, Mexico is the second-largest player in this sector in Latin America.

DUE TO ITS GEOGRAPHIC LOCATION and powerful domestic econo-

my, Mexico is becoming a strategic country for the establishment of data centers to support the growing digitalization process that companies are undergoing. In the wake of the pandemic, telecommuting has become an option for many employees, and demand for digital commerce and cloud services has skyrocketed. All this revolution is possible thanks to data centers, and Mexico, with 13 of these facilities by mid-2022 according to Data Center Map data, is currently the second Latin American player in this sector behind Brazil.

The number of real estate data centers in Mexico will see a double-digit increase between 2022 and 2027, according to data from JLL Mexico. Microsoft, Oracle, IBM, Google, and Kio Networks are some of the main companies in this sector and are behind the new data center projects being developed. And, with plans to build 20 data centers, the state of Querétaro is on track to become the absolute king of this industry in Mexico in the coming years.

By the end of 2022, the portfolio of projects under development represents an investment of USD1.4 billion and will require 350MW of energy once in operation, according to data from Querétaro’s Secretariat of Sustainable Development. With these figures, this state alone would have more than the 13 that Mexico has, but it would also be well above the rest of the regions in terms of the number of data centers. Mexico City currently has three, Querétaro three, and Guadalajara two.

The installation of data centers in Mexico is first seen as an opportunity due to its excellent geographic location. “Mexico is a strategic market for us since it connects Europe, Asia, North America, and Latin America,” said Mario Chao, CEO at NTT Data. The country’s GDP size, population, and relations with North America are suffi-

ciently attractive to make it an interesting market for the arrival of private companies that provide cloud services.

Sectors such as mining, banking and industry are intensive in the use of data engineering; however, it is also a strategic location on a global scale for exports to other regions. “Many European, Asian, and Latin American companies locate their production facilities in Mexico to export, which is why it is a strategic market for the NTT Data Group,” Chao said.

One of the main challenges facing the country is its energy generation capacity to power these infrastructures. For example, in Querétaro there is a current installed generation capacity of 1,200MW, but only 10 of the 20 data center projects will demand 350MW of energy, that is 29% of the current capacity. Therefore, the technology companies are working with the government and the utility company Comisión Federal de Electricidad to ensure that these facilities will have the necessary power to operate 365 days a year, 24 hours a day.

“Mexico is part of a global strategy of evolution and incorporation of data centers at a corporate level from Oracle,” said Maribel Dos Santos, Managing Director & Senior VP at Oracle Mexico. The company has a development center in Guadalajara with 2,000 engineers developing new automated database solutions to improve decision-making processes. This contributes to the creation of high-level trained jobs in Mexico, but also significantly increases the ability of local companies to access disruptive technologies.

“Data is the new oil,” said Dos Santos. Data management is the fuel for the development of emerging technologies such as AI, machine learning, the internet of things and chatbots. In this sense, Oracle is focused on materializing this revolution in Mexico through

IT & Telecoms

data analysis services that serve to improve decision making with the objective that companies improve their processes. “There is a strong trend toward analytics, and we currently have strong solutions,” Dos Santos said about its services to digitalize Mexican companies.

The need for entities to respond immediately to manage information is another factor that is fueling this growth. “One of the main challenges right now is the evolution of small businesses,” said Carlos Arguimbau, CEO at IENTC. Following the telecommunications reform promoted by the administration of former President Peña Nieto, many small companies came forward to digitalize their busi-

ness. This represents a great opportunity for telecommunications businesses, as this market has great growth potential because it is huge.

In Mexico there are more than 4.1 million SMEs, which represent 99.8% of the total number of companies in the country, according to data from the statistics institute Inegi. And all of them, in one way or another, demand digital solutions to improve the efficiency of their operations. “The Mexican telecoms sector has been extremely attractive for foreign investments, and the returns have proven to be excellent,” Arguimbau said. ✖

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M a r i b e l D o s S an t o s MANAGING DIRECTOR & S E N I O R V P, ORACLE In regard to digital transformation, what are the most common challenges you face with your clients in Mexico?

GREATER value Having been in the region for over 30 years, Oracle recently had the best two years in terms of results, largely due to its response to the market in terms of helping clients with digital commerce and innovation based on emerging technologies.

BIO

Maribel Dos Santos is currently the General Manager & Vice President of Oracle Mexico. She joined the company in 2007 as key account director. Prior to her current position, Dos Santos served as vice president of strategic accounts for Latin America, regional president of sales for HCM applications, and Oracle’s general manager in Peru as well as in Venezuela. Dos Santos has more than 30 years of experience in the IT industry, with experience in companies such as Unisys and Siemens. She has a degree in marketing with a specialization in marketing from the University Institute of Marketing of Venezuela, in addition to a second degree in business administration with a mention in computer science from the Simón Rodríguez University of Caracas, Venezuela. Additionally, she has a certification in Telecommunications by the National Telecommunications Commission of Venezuela. In 2021 and 2022, she was recognized by Expansión Magazine as one of the 100 most powerful women in business in the country.

It depends on the industry. If we are talking about the horizontal component, many companies seek virtual sales and focus more on e-commerce. This happens in every industry. There’s also innovation, namely understanding how to be innovative today and standing out in the market. That depends on the business objective of each industry or client. In regard to telecommunications, this technological innovation and 5G will generate a massive unfolding of IoT devices with connected solutions and algorithms. It is not clear yet what value all the other companies will have once they make use of 5G services. When it comes to the retail industry, their biggest challenge is making sure all of their operations are customer-centric. It is about understanding who the customer is and what other services, within the store, you can offer them, not just in-person but digitally. So, we have digital commerce and innovation based on emerging technologies, which is a must for organizations today. As an IT company, Oracle is currently living its best years, especially in Latin America.

Oracle is more than 30 years old in the region and these have been the best two years in results. I believe it has to do with our response to the market and what the consumer needs. Consumers know that now they can perform 90% of their activities via a screen.

Can you elaborate on the cloud region that Oracle launched in Mexico?

Mexico is part of a global strategy of evolution and incorporation of data centers at a corporate level from Oracle. Recently, we launched the first regional data center in Mexico because we wanted to invest in the country. We have a development center in Guadalajara staffed by almost 2,000 engineers developing new solutions with emerging technologies. One of our strongest solutions is the Autonomous Database, which is the evolution of the automated database developed in Mexico

by Mexican talent. Furthermore, this data center investment is a response to our clients need for data protection and everything related to the cloud. This concerns cloud growth for the banking industry, the government, and telecommunications. These are the most restricted industries because they have the strictest laws regarding privacy and transparency.

It is the first data hyper-scaled center in Mexico that adapts to demand, regardless of the area of the market you are in. Oracle knows Mexico is a country of many entrepreneurs. Currently, 75% of employability comes from this sector. These industries will make a difference in the digital transformation of the country. We cater to the private and public sector alike. One of our main clients interested in this is a local government from Querétaro. We are set to democratize the cloud service, which means being accessible to any type of company whether they want additional sources of income, cost reduction, or new business models. It is not the only such scheme either, as we will have another one in Monterrey.

Why is Oracle focusing on emerging technologies for the next year?

One of our goals is the development of emerging technologies, their incorporation, and being there for the client. We want a controlled incorporation of these solutions that allow you to automate, innovate, generate new incomes, and reduce costs. After the pandemic, the international demand for Mexican talent increased notably. One of our goals for this year is to retain our focus on education. Then, we intend to have a responsible adoption of technological transformation working together with the client and knowing which maturity stage their processes are in. We suggest to our clients what form the technology adoption can take and encourage them to not only invest in technology, but also in reskilling people through training. Digital transformation is not just a question of selling technology; it is about advising and customer success management as well. ✖

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continued SUCCESS Providing a solution for every single type of business, SAP has had great results in Mexico in the last 30 years, with over 10,000 clients in 25 industries.

A n gela G ó m ez A i z a P R E S I D E N T, SAP

What role does Mexico play within the international strategy of SAP?

For SAP, Mexico is one of the pioneering markets in technological innovation, and we continue to reinvent the way we do business in different industries. Mexico was the first market with SAP operations in Latin America, and even when we still had no appointments here, we already had the first SAP client, which at the time was Hylsamex, now Ternium, almost 30 years ago. In 2022, we celebrated 28 years in the market in which we are driving innovation throughout the region. In addition, speaking of the short term, we have had several quarters of double-digit growth. To date, we have managed to capture over 10,000 clients and we serve 25 industries. In other words, these 10,000 clients are distributed across 25 industries, and 80% of them are SMEs, which in Mexico account for 90% of the economy. It might seem as though SAP caters solely to large companies, though the fact that 80% of the 10,000 clients based in Mexico are SMEs confirms that we really have a solution for every business type. In Mexico, we have 1,200 employees and two corporate offices in Monterrey and Mexico City.

Additionally, we are a support center for several of our systems and clients globally. In Monterrey, we play an innovation and support role, which not only serves clients in Mexico, but also around the world.

How do you seek to sustain your consecutive quarters of growth?

The way we measure our success has to do with really being close to customers

and understanding their needs. The pandemic may be countercyclical for some sectors, because there are companies that are holding back their investments, but when companies lack proximity to their clients and collaborators, they realize the need to invest in technology.

SAP has been characterized for 50 years as the creator of ERP, or business management systems. In 2021, we launched a specific ERP offering in the cloud called Rise with SAP. This involved giving more companies access to ERP without the need to invest in infrastructure. We have signed an agreement with three private companies, AWS, Google Cloud, and Microsoft Azure, whereby the client hires us and ERP in the cloud, and need not worry about what is behind it. One significant type of growth concerns the investment priorities of businesspeople in Mexico. We can have many solutions, but we have to make sure that we give each company what it is looking for.

country in which CEOs are more willing to invest in technology-related issues.

Of all the companies we interviewed, 55% identified sustainability as a priority, and, of that number, 65% said they would invest in technology to enable sustainability issues. A third point has more to do with an objective, not only of SAP, but also a personal one, namely closing certain gaps. We have been focused in terms of women’s engagement in science and technology. As SAP Mexico, we are a company that already has a 40% ratio of women in leadership positions, well above of IT industry standards. However, we are not satisfied to merely remain an exemplar, and to support policies we make our clients aware of this commitment we have to closing gaps so that they may follow suit. ✖

What are your main objectives for next year in Mexico?

There are several studies like that of the International Data Corporation (IDC) indicating that 95% of SMEs in Mexico lack the technology to automate processes or make decisions in real time. Second, there are sustainability issues; we are having numerous conversations with the CEOs of all types of companies from small to huge ones, on how technology will allow them to not only measure ESG-related indicators, but also optimize their business processes for investor compliance. In a study we conducted in Latin America, Mexico emerged as the

BIO

Angela Gómez Aiza has served as President of SAP Mexico since 2021. A large part of her professional career was developed in SAP, and she has been part of the company for more than 15 years directing different areas of the company, including vice president of services for Mexico and Central America. Most recently, she served as chief innovation officer of El Palacio de Hierro, and, prior to that, she was president for Latin America at Safilo Group. In 2022, Gómez Aiza was recognized with the 2022 EXATEC EGADE Award of Merit for her career as a graduate of the Tecnológico de Monterrey Business School.

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FORUM

DIGITAL TRANSFORMATION Growing demands for increasingly effective transformation strategies has made Mexico a market with almost unlimited potential across different industries and markets.

J org e Var gas

Ja vie r Cor d ero

Mari o C h ao

CEO, IPSOS

CEO, R E D H AT

CEO, N T T D ATA

WE HELP CLIENTS make decisions by understanding consumers, markets, and societies. Companies see in Ipsos a unique option to be sure about making decisions quicker, smarter, and go further. IPSOS continues to invest both in faster digital solutions and undertake much larger acquisitions than in the last few years, particularly in the analytics and advisory areas to respond to growing client demand. We saw 27% growth in 2021 in our new digital and advisory services and expect this to continue and for these to become an even larger part of our business in 2022. The only certainty about 2022 is uncertainty; however, for Ipsos, uncertainty is a driver of growth: brands and governments need up-to-date information about what is happening in the world. They need accurate information on how consumers and citizens are reacting to the tectonic shifts we can now see in the economy, in work patterns and in the environment, both natural, political and geo-political.

For example, the second-largest concern polled at the moment is inflation and companies want to understand how this context shapes societies and public opinion and its effects on markets and consumption behavior.

OVERALL, OUR MANTRA is digital transformation. We are only at the tip of the iceberg, and the real transformation is still imminent. There are a few industries that are ahead of the others, and we are currently concentrating on those industries. Telecommunications is a rapidly evolving sector and is one of the industries that we are focusing on. As we speak, in Mexico and Latin America, 100% of the carriers use our technology. In this 5G world, you need technology that is containerized, and we do that extremely well. When talking about 5G, you need certain network functions that used to be carried out by specific hardware. In 5G, those network functions are virtualized and kept in a digital container for those things to run faster. For 5G, we have the concept of edge computing, where not only is the road fast, but the data is also close to those consuming data. In telco, media, and entertainment, 90% of our activity goes to telco. It is an important sector for us because the world is moving toward 5G, which will enable different ways of working. We are empowering 5G through our technology such as edge computing, containers, and so on.

OUR GREAT DIFFERENTIATOR is that we offer an end-to-end service. We have technology consulting and business process consulting, and we have innovation that is part of the core business. There are companies that are dedicated only to outsourcing the system or application, maintenance of computer systems, or business process outsourcing; we have the entire value chain. We design a strategy, adapt their processes based on the strategy, and determine the best and most appropriate technology to support their strategy. While other companies in the niche can be good at one point in the chain, we have a one-stop shop.

We have a value chain that not only includes our 2,500 employees in Mexico, but our entire team in Latin America. We have a large staff in the country that is also connected to our team in the region and especially Europe. We do not do basic research; we do innovation, which is turning science into money. Now we are creating a data garage, where we tell the client what their challenges are, and we provide them with creative business solutions done together. This is our way of working—innovating, creating, committing ourselves to clients, creating end-to-end solutions, and above all, betting on talent.

IT & Telecoms

César Enr iq ue Or tuñ o

Al e ja n d ro C an t ú

V P L ATA M , CORNERSTONE ONDEMAND

COO, L AY E R 9

WE ARE THE LEADER of talent solutions

I HAVE BEEN in the Mexican market all my

worldwide and are investing heavily in improving the hyper-personalization of employee experience across all talent process. We have launched a new platform that takes care of the entire journey of an employee from candidate right through to their growth within the company. The platform integrates the learning experience, and we are adding an aspect called the skills engine, which is the greatest innovation in this type of solution worldwide. The skills engine within this experience will recommend an individual the proper training. They will receive recommendations based on their preferences and their roles. The engine has over 55,000 normalized skills, and we built this skills database based on millions of records. Now, we have over 250 million roles mapped to corresponding skills. This content and training courses will help them develop the skills along their specific career aspirations. The main reasons why people leave their jobs is the lack of development or a clearly visible career trajectory. Now, with these solutions, we are giving visibility. With this tool and without any human intervention, we extend possibility to 100% of people within the business, while the HR team defines the business requirements.

life as well as in the US, having worked for many manufacturing facilities focused on recognition applications. I had the opportunity to visit the vast majority of all the data centers in Latin America and Mexico. After the pandemic, the need for faster communication and lower latency was something that the Mexican market could not get away with anymore with the CSPs and other customers. Applications are getting stronger and bigger and require more processing. The cloud itself needs a lot of computing power and storage as well. Our company was founded by people from within the industry. And although we’re a new company, we have over 50 years of experience, with over 20 million square feet built to date in infrastructure and construction. We have created protections that enable us to secure our growth and offer a clear line of sight for customers. We currently have a project in northeast Mexico and plan for expansion into Yucatan. Connectivity is something that we are exploring, in terms of sea cables. Again, we have to purely connect Mexico with the world and have different landing stations from subsea cables. We also have projects in Costa Rica, Panama, Chile, and Colombia.

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SOLUTIONS for common problems Al f r e d o G u t i érrez COUNTRY MANAGER, W O R K D AY

What is Mexico’s role in Workday’s international strategy?

Offering innovative ideas and solutions to the market, Workday focuses on facilitating the digitalization process in organizations.

Being 17 years old, Workday is a relatively young company. From the outset, we have experienced a constant growth rate.

Today, the company’s total revenue is USD5.14 billion, and our growth objective is to reach USD10 billion in the next three to four years. These are aggressive growth goals that will present challenges, mainly regarding work tendencies, the great resignation, and others. We are heavily focused on our goals from day one to offer leading solutions, different from those in the market, to improve our clients’ performance.

Regions such as Mexico, Indonesia, and key EMEA markets are important because much of the growth that can help us achieve our goal comes from these countries.

When did you enter Mexico?

BIO

Alfredo Gutiérrez serves as general manager at Workday Mexico. He started his professional career in the consulting services world at Accenture, working as a consultant for the financial services industry. Subsequently, he held multiple commercial and client relationship roles within the technology sector in organizations such as HP and IBM. Most recently in SAP and Cornerstone on Demand, he specialized in the promotion of cloud solutions aimed at the efficient management of the human talent lifecycle. Gutiérrez is a graduate of the School of Industrial and Systems Engineering of the Instituto Tecnológico de Monterrey and holds a master’s degree in banking and financial markets from the Business School of the Universidad Anáhuac del Norte.

We entered three years ago. The pandemic was not part of our business plan, though it taught us many things, mainly regarding interaction with our clients and how to help them to continue being successful in such a different scenario. Globally, Mexico is important for Workday because its new geography promises the same growth we have been experiencing in places like Europe and Asia. Growth in the countries that opened for business after the US has been fairly rapid.

ple not to resist change. Many people are focusing on redesigning a new workplace.

What works for the collaborator, regarding place, space, collaboration, and communication networks is not the same as it was two years ago. We must understand that we cannot measure productivity the same way with people from different generations. It is all about understanding what is going on within your workforce and what you can provide them to keep productivity up. Above all, people are looking for a purpose, a goal. They want their jobs, where they spend a lot of time, to reward them not just with a salary.

How can you help collaborators in a company to feel they have purpose or well-being?

The first step is to listen. We want to provide our clients with listening tools. A platform such as Workday takes the information from those listening tools and translates it into actionable data. The manager can know how people are doing, not just with the projects, but also with work stress, teamwork, and work satisfaction. It is a combination of tools within a managing platform that allows leaders to know in real time how people are feeling and mainly which tools they can provide for a better and most efficient experience.

In Workday, with our more than 9,500 clients globally, we learn a lot from what has been successful in other industries and regions, and we apply it in our local market.

What are the main challenges for companies when it comes to management software?

What is your growth expectation in Mexico?

There are plenty of challenges, especially in Mexico and Latin America. We sell solutions for financial management, human capital management, analytics and planning, and strategic sourcing. We work with the leaders in those organizations, who head up those departments, and a phrase we have been hearing heavily is the “great resignation.” Today, one of the main skills an executive in charge of those areas must have is the ability to “unlearn.” What used to work two years ago might not work today. One of the things we need is for peo-

Arriving in Mexico under the systemic circumstances already discussed, we required many adjustments and have had an excellent response from the Mexican market enabling us to continue our expansion.

Our goal right now is to further solidify the brand, which is already well known on a global scale. We want to give it further exposure and show the Mexican market that we are here and ready to assist. Our shortterm goal is to consolidate our clients and help them to realize the benefits of working with our platform. ✖

IT & Telecoms

A business prepared for everything can handle anything.

The world changes fast, and lately it’s changing faster than ever. But our customers have learned that with the right enterprise management cloud, they can keep growing through it all. That’s why Workday is built to adapt – with real-time data that turns into real-time insights, employee engagement that’s truly personal, and scenario planning that helps you prepare for whatever comes next. Because change never stops, and you should always be ready for it.

Workday. The finance, HR, and planning system for a changing world.

FP AD HOLDER WORKDAY

© 2022 Workday, Inc. All rights reserved. WORKDAY and the Workday logos are trademarks of Workday, Inc., registered in the United States and elsewhere.

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Image: Nelson Antoine

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TBY ANALYTICS: MEXICO 2023 IT & TELECOMS We posed a number of questions to our interviewees in the IT & telecoms sector. These are their responses.

What technologies are growing in demand?

Telemarketing tech

9%

7%

5G

29%

5%

17%

Very positive

6

Cloud/data/fiber

7%

26%

What is your outlook for the sector?

Positive

22

Payments tech

Average

Business tech/ cybersecurity

Negative

0

Very negative

0

e-commerce AI

7

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INTERVIEW

new OFFERINGS

Salesforce accompanies companies in the adoption of best practices to transform strategic business areas such as customer service, sales, and marketing, using its technology.

What are the main differences between Mexico and other countries in terms of how they connect with customers?

Before the pandemic, Mexico was slightly behind other countries such as Brazil, though right now it is catching up. There are large groups targeting many different industries; it is common here to see retailers with their own banks and insurance.

There are many opportunities now, with groups looking into export and requiring new ways to view the customer experience, which is where we come in with our 360-degree view of customers. To improve our market knowledge, we continuously conduct surveys. Recently, we carried out one that we call “State of the Connected Customer,” from which we got interesting findings for both consumers and corporations. For example, we found out that for 93% of consumers in Mexico the customer experience has the same relevance as the product or service itself. Before the pandemic, many financial services were still done in person, though they had to quickly leapfrog and develop online transactions via digital transformation. Telecommunications, finance, CBG, and insurance are the driving force of the Mexican business right now.

We are supporting all those sectors. Our product is not an app; it is an out-of-the-box product for which we usually develop a project together with the customers. They approach us for solutions to their particular needs. We cater to large consulting firms, medium-sized companies, as well as boutique, specialty ones such as e-commerce.

Can you elaborate on the NetZero marketplace and the role Mexico will play in this project?

We have a new offering, and it is a perfect match since Salesforce has always been social oriented and philanthropic; this has a human-centric approach. We are all interested in protecting the

H u go E . F rey t es COUNTRY MANAGER, SALESFORCE

environment and finding ways to treat the environment better. In the past, we have platforms to manage assets and financial resources. Now, we can manage and monitor how we do in terms of emissions. For Salesforce, our target for 2022 is zero emissions. NetZero does not just affect the company, but the entire ecosystem. For example, we have suppliers, and if we can measure the emissions of our suppliers, we will have positive feedback to the whole ecosystem. We will launch the NetZero marketplace, with a carbon bonus to counteract or neutralize emissions produced by your business. What surprised me in Mexico is that many CEOs have been asking for a NetZero marketplace. There is great demand for it.

Cloud-based software company headquartered in San Francisco Offers CRM software and applications

What are the main achievements of Salesforce this year?

First, I am proud of what we are generating as an ecosystem. One of our values is customer success, and we always say we are only successful if our customers are successful. I am pleased that many of our customers in different segments in Mexico are extremely successful, and their customers are receiving better experiences. We are growing rapidly, and so is our ecosystem. Our partners, consultants, and companies are training many professionals relying on Trailhead, Salesforce’s free online learning platform. In Mexico, we have a partnership with ISDI, an education institution, that also complements its learning experience with Trailhead. This allows young adults to receive training as a Salesforce professional, which has a significant impact on generating jobs for young people. We also have an initiative to promote equality where everyone is treated the same regardless of their age, race, gender, or others. Those are the most important things in terms of social impact. ✖

BIO

Hugo E. Freytes is the Salesforce Country Manager for Mexico, with extensive experience in the technology sector in Latin America. He has worked with Oracle, Ventiv Solutions International, and NTS Solutions Americas in leadership positions. Freytes has a degree in business administration from Universidad Argentina de la Empresa (UADE). He also has a PhD in administration sciences from the University of Belgrano.

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M a r í a Es th er V i s o Á lv arez REGIONAL SALES MANAGER, L ATA M B L U E V O YA N T

How did Mexico become one of the quickest markets in Latam to adapt to cybersecurity trends?

CIRCLE of security Offering a complete overview of the cloud, from the internal data of a client company to monitoring OT and IT and controlling the endpoints, BlueVoyant has seen great success in Mexico.

Regulations are more enforced in Mexico as compared to the rest of Latam, and Mexico was one of the quickest to adopt these regulations. For the small and diverse instruments that we have in the industry, the regulations can become difficult. In a bank, it is easier to regulate its processes compared to other new industries. Mexico is one of the most enthusiastic adopters of technology, though it is important that we start protecting and have greater visibility in areas such as mobile devices. The biggest attack can start with a small device. Companies are trying to protect the devices that their employees are using from home. With everything outsourced, we no longer control the infrastructure, and we have to trust that the providers are doing the right thing in terms of cybersecurity. We can only monitor these situations. Mexico is one of the countries in the region trying to do better in security. The biggest challenge is not compromising on cybersecurity because of the speed of the business.

How much demand are you seeing from more industrial sectors such as mining and automotive for cybersecurity?

BIO

María Esther Viso Álvarez is an information security professional with more than 10 years of professional experience in the field. She is in charge of leading the commercial strategy and relationships of the teams in Mexico and Latin America for key clients throughout the continent and promoting strategic agreements that combine infrastructure, products and services.

In 2022, we saw heavy demand from these industries. Out of 10 leads, five are from the operational side. Some companies say that they can live without IT but not without operational technology (OT). OT devices are more intelligent than before and are targeted more as they manage more information. It is important for us to start the conversation about both the security of both IT and OT. We can establish a layer of monitoring that can include both sides. They can protect the devices and be accountable at the same time. The automotive industry, retail, manufacturing, and mining industries experience the biggest challenges in this area.

What main added value does BlueVoyant offer the Mexican market?

One key area is our integral view of the cloud from the internal data of the company to monitoring OT and IT and controlling the endpoints. Subsequently, we start building layers of visibility around the company. Brand management is extremely important, as a company’s brand can be affected by impersonation, such as fake websites and apps used for phishing.

This is one of the layers that we can also monitor, as there are currently many false campaigns against companies in open forums or social media. We provide data management services for companies to add a privacy layer as one of the benefits of the cloud. We are then able to investigate developments around the brand.

Many companies have official apps, but no one is monitoring non-official ones controlled by cyber criminals. We can also determine if domains are being changed and take them down. Third parties are also critical to ensure a good cyber defense posture. We can work with those third parties to reduce the risk. We are working to make companies compliant with BCI, the standard for the framework of cooperation for security. Financial companies that manage sensitive customer information need to be compliant with BCI; this is definitely an added value.

What are your next steps in Mexico?

We are partnering with others in Mexico in order to cover most of the territory.

We want to have strong partners to complete the circle of security. In Monterrey, we have some small to medium-sized partners. Our aim is to start growing our managed security services. Microsoft is our worldwide partner, and we are one of 10 companies providing managed services by Microsoft for Latin America.

We incorporate the cloud-based SIEM or relation engines on the services. In 2023, Mexican enterprises need to focus on how we can be more secure and independent. We help companies evaluate their providers and become more aware of what they are doing and who they are hiring. ✖

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INTERVIEW

Jul i a n V a r g a s L AT I N A M E R I C A D I R E C T O R , ORACLE NETSUITE Why is Mexico an important country within Oracle NetSuite’s international strategy?

BIO

Julian Vargas is a business manager with over 10 years of experience leading and developing the growth strategies Latin American companies with technology platforms. He has extensive experience in cloud solutions, multichannel platforms and defining the technological architecture for finance departments.

Mexico is an important country for Oracle NetSuite, not only for Latin America but globally as well. We have clients of all sizes across industries, from manufacturing, retail, and distribution to agriculture and education. At NetSuite we are focused on identifying strategies where we can support and partner for companies, helping them make crucial decisions. Business leaders must run their businesses better, bolster their bottom lines and be focused in the profits; this new growth needs a system that empowers it. That system is NetSuite, and for this reason we had been focused on constantly improving our solution helping all the Mexican markets and supporting local regulations and local needs focusing our strategy in the small-to-medium market.

What are NetSuite’s main goals in Mexico for the coming year?

One of our goals is to keep helping all the companies to improve their efficiency, productiv-

ity, and profits. Our vertical knowledge in the local market, as well as our years of experience and leading practices are a major bonus for us.

Another goal of ours is to get all employees to embody our value to care about the client, listen to what they have to say and understand the situation as it is and not just try to offer new solutions that the client may not need. Finally, our main goal is to continue to do our work extremely well. One of the areas we are highly focused on is ensuring regulatory compliance. Within Mexico specifically, many of the necessary modules have been released to be completely aligned with Mexican regulations.

Another important point is that NetSuite has been a solution for unicorns around the world, and in Mexico 2022 has been extremely important because entrepreneurs have already seen that they can start working with us from the beginning. Then, when they start to enter into investment rounds and growth processes, they are growing hand in hand with NetSuite.

Another chapter that is a core element for us is ensuring we help those organizations that are helping the community. We want to correct the misconception that companies need to be a big organization to be able to work with solutions that provide leading technology. ✖

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BUILDING A relationship R o d r i g o Mari n h o V P S A L E S L ATA M , TWILIO

Why is technology an important tool for growth in Mexico, particularly startups or enterprises?

Twilio has transformed the way companies around the world communicate with their customers with more automation, personalization, and technology.

Technology can help start-ups gain more visibility and grow faster. An important first step, when companies are working toward digitally transform their operations, is to move communication channels to the cloud. Twilio can help these companies with this shift. We do not have a specific target segment or company profile because Twilio is adaptable for all segments. Both small and large companies use Twilio. For example, Mercado Libre is a public company using Twilio, though we also have tiny companies and start-ups that use Twilio to grow their business in terms of communications or improving their relationships with their customers.

What is the main differentiator of Twilio over other companies that offer similar services?

BIO

With a university degree in computer engineering and an MBA in administration, business, and marketing from USP, Rodrigo Marinho has more than 22 years of experience in the telecommunications and technology sector. Today, he leads Twilio’s operation in Latin America, with the position of VP Regional. Rodrigo was a key player in positioning Twilio in Brazil.

Our flexibility in terms of the technology is a differentiating factor compared to other companies. Marketing in Latam at this moment has transformed the mentality of the consumers by using technology. For example, we have many providers of contact centers but these providers use a specific code or black box that is extremely complex. Companies need greater flexibility to provide customers with a more personalized service and experience. There is a movement of traditional companies going digital, which is great because companies need more efficiency in their business, and this is possible with Twilio. We can help these companies provide more automation, personalization, and technology. We have had great results in other countries in the region, and it is possible to apply these results in Mexico. Our local team also has the added bonus of understanding local culture and this is a big part of the business and key to our success in the country. It is important for companies to understand the culture of its customers to provide greater personalization. Other countries such as Brazil have similar issues to Mexico.

There are three or four different regions that we operate with different profiles, and Twilio was able to help clients and

adapt solutions based on our technology.

It is possible for us to reapply these adjustments to the culture of our customers in Mexico.

How is Twilio continuing to innovate its portfolio in 2023?

The idea is to continue to increase our presence in the Mexican market, specifically for enterprise companies, mid-market companies, and growing companies.

Twilio wants to not only provide more technology, but also understand the problem of its customers in order to provide the best solutions. In 2023, Twilio will acquire a segment in a customer data platform (CDP) company. The idea is to provide the entire cycle of communication with customers. This includes gathering information and data and building up a relationship with customers, to be more than a communications company.

Our goal for the region in 2023 is to enhance and strengthen our relationship with clients. There are two major areas in terms of customer relationships: CRM and our communications channel. The responsibility of CRM is to provide the history of the relationship with customers. The other area is the channel or strategy of the communications. We integrate these two areas and build up a relationship with customers.

What strategies does Twilio use to adapt to the needs of different generations?

After COVID-19, there was a community of baby boomers entering the digital community, but these users still prefer to make calls for customer issues. On the other side, there is Generation X, which prefers to do everything online. We use TikTok, WhatsApp, Facebook, and Instagram. The challenge of the company is to prepare the infrastructure to attend to these different cultures and customers. At the end of the day, the idea is to sell to the customers. Because of that, it is extremely important for companies to understand this moment in marketing because it is not possible to exclude any channels at this moment because then we would be losing sales. ✖

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providing GREATER VALUE Qualcomm is a global leader in creating semiconductors, software, and services related to wireless technology and is seeing developments in Mexico improving by leaps and bounds.

J u v en al G o n z ález GENERAL MANAGER, QUALCOMM MEXICO

What steps is the company taking toward diversifying its portfolio?

We see great potential in Mexico because it is traditionally a manufacturing country including cars, so we want to be in that discussion. We are in talks with all the stakeholders in Mexico. The role we are taking on now is far more active than what we were doing in the past. We want to be part of this chain including the design process and the distribution of supplies as part of the diversification of our portfolio. Traditionally, the focus of Qualcomm was wireless and mainly smartphones for a long time; however, since 2021 we started to direct our strategy more on Mexico. We had started earlier in other countries to diversify, not only smartphones, but now going into compute and IoT in a more structured way. There are around 14,000 companies working on IoT, and it is fragmented and difficult to adapt. We are taking on the role of making it easier for other partners to develop their own solutions. That is how we provide greater value for their work. For us, it is important to be in that value chain. We want to go into complete solutions so that when we have an idea for, we want to enable a partner to succeed. We want more partners to be part of this model. This is perhaps the largest change in our strategy lately.

Qualcomm is investing in projects such as extended reality in Europe. Is the company contemplating bringing these to Mexico?

That is one of our key areas in 2022, and we will also see more of that in 2023. Since

2019, we have been discussing that topic with certain partners. In Qualcomm, the R&D team is working constantly on innovation, and those projects start much earlier than the end user sees. It is important for us to do many iterations to bring a better product. Unfortunately, sometimes Mexico comes late into the cycle when there is already some activity elsewhere. That can also be positive because we tend to use a more mature technology and can move faster. Now, we have all the means to truly extend the end user experiences because we have a platform that is mature. During the pandemic, we had an amazing group of people doing R&D who delivered a great update and a new platform. All the launches today, like the Snapdragon 8 Gen 1, is a culmination of a great deal of work that was done during the pandemic. Our core is Snapdragon.

We also have a Snapdragon Sound, and Hi-Fi codex and also AI capabilities. We have cars with evolved dashboards, and the car will become a smartphone with wheels. The car will be connected for telemetry, services, and auto-pilot and it will communicate with the road, emergency systems, other cars, and people.

These things are incredible, and we want them to be available in Mexico.

What are the main areas of opportunity for growth within the digital transformation of the country?

I see a positive evolution happening in Mexico. Not everything is centralized in Mexico City anymore. There is a huge ecosystem of developers in Guadalajara,

Monterrey, and other cities committed to solve problems related to what our country needs. IoT is not cookie-cutter technology; you need to find the right solution for each project and each requirement. We must develop projects that are needed for Mexico, we are working today with all our partners on this goal. We are bringing in people from outside of our legacy ecosystem to bring new ideas. If we have a partner like this that wants to take the lead role, we should encourage them. Everyone has their own vision of what IoT means. This has perhaps been the most complicated thing: encouraging its growth because it needs to be tailored. We are bringing a platform that can be tailored to anyone. ✖

BIO

Juvenal González has been General Manager of Qualcomm in Mexico & Vice President of Qualcomm for Latin America since 2021. He has worked for Qualcomm since 2013, previously as director of business development.

He has an extensive trajectory in the technology and telecommunications sectors, collaborating in important global companies such as Telcel, where he began his professional career in 1998 as head of special projects, and at Nokia, where from 2004-2013 he held positions such as manager of solutions and applications, and manager of the América Móvil global account. He is a graduate of telecommunications engineering from the National Autonomous University of Mexico (UNAM) and has an MBA from the University of Phoenix.

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A BETTER experience

Ranked first in market share around the world, Genesys offers the best portfolio solutions to help clients manage customer experience.

R afael S án ch ez L o z a FORMER MANAGING DIRECTOR, GENESYS

Specializes in customer experience and call-center technology Founded in 1990

Why does the company emphasize empathy-driven innovation and customer experience?

A company is only as good as its customer service. Today, a customer’s full experience is entirely wrapped around the way they are treated. Service is extremely important; sometimes customers prefer companies to be empathetic, rather than offer a speedy resolution. Our core is to produce and sell solutions to manage customer experiences. Mexico has a heritage of great customer service; we can use what we are doing here to share with the world our best practices.

What challenges do your clients in Mexico face when it comes to implementing this philosophy in their businesses?

BIO

Rafa Sánchez Loza was responsible for overall execution of Genesys business in Mexico. He has extensive experience in business development within the IT industry. Prior to Genesys, he served as general manager at IBM and SAP and oversaw many other executive positions at a regional level for Latin America in both companies.

He also contributed at a global level in the expansion and growth of Softtek. He holds a bachelor’s degree in computer science, an MBA, and postgraduate studies in engineering, finance, and executive skills.

In the case of Mexico, there is an extremely open and competitive market. What makes a company competitive today will certainly be replicated by others in a few days. Companies need to always be prepared and ready to evolve immediately because customers’ needs are also constantly evolving. The other challenge is that there are different groups of customers that have to be treated individually, like millennials or centennials, those who prefer digital channels, or others just somewhat in the middle who prefer a mix of digital and voice. Companies need to take all this into account in terms of their customer journeys.

What are the main trends in the market when it comes to customer experience?

We are a customer experience (CX) company focused on relationships and customer management.

During the pandemic, CX, which was already at the forefront before, moved more to the front. Companies now have to pay greater attention to their websites and digital presence. The digital competency of every customer is a core competency. The second aspect has to do with new technologies like AI that are bringing new exciting developments to this area.

Companies are currently in a phase of trying to au-

tomate everything, which will eventually evolve to making the digital experience for customers more human. There are certain sectors that are a priority for us, like financial services. Financial services sell transactions, and they are currently under a great deal of pressure from fintechs, new ways of collaboration, and managing new areas such as insurance, banking, and so on. New business models are being introduced every day, and traditional banks, insurance companies, and brokers all need to adapt and update their capabilities, strengths, and technologies to better serve their customers. Retail has been growing, even during the pandemic, because people are now buying everything mostly using new channels. We want to be behind every customer’s smile.

Regardless of the offering, we want them to be treated the way they like. We want to provide what they are looking for and meet their expectations. This is the best way to ensure that this customer will engage with a company again.

What is your vision as the new director general in Mexico for Genesys?

We truly believe we have the best portfolio solutions to manage customer experience around the world.

We are the number one in market share around the world. My goal, first and foremost, is to bring the latest and greatest to Mexico by industry and replicate our global our success stories to help companies better manage their relationship with their customers. The second goal is to produce new examples, new references, and best practices here in Mexico to share with the rest of the world. For example, tourism is extremely important in Mexico. It is the fourth-largest industry in the country, and there are areas such as Cancún and Los Cabos that serve not just domestic tourism but also international tourists as well. We should, therefore, elevate the way that we treat all guests right from the beginning and not just at the hotel. We want to ensure that during the entire experience that we fully engage with customers and, in the end, make a real connection. ✖

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solid SOLUTIONS A key differentiator for Avaya is the technological solutions it provides to both large companies as well as SMEs to address the customer experience.

F ern an d o R u i z -G ali n d o MEXICO DIRECTOR, A VA Y A

In what ways have trends in the digital transformation changed since the pandemic started?

The pandemic’s effects and the lockdown impacted everyone. Now everyone is talking about the hybrid model, but that model is starting to raise many issues for the companies that were not expected it two to three years ago. Many tools and things that were used during the pandemic, were used in a drastic or urgent mode at the beginning, and, right now, companies are analyzing which ones are truly productive for the hybrid model. So, you need tools that are flexible, and capable of combing two or three people in one location and adding others remotely. One issue that many companies are facing is that these tools during the pandemic were relying on the employee’s domestic internet connection, which might not have the required bandwidth, or flexibility in terms of certain tools required by a professional hybrid model. Meanwhile, during the pandemic, many people started shopping heavily online; however, many people are exploring items online and later going to the store to get them. Therefore, if the online experience falls short of providing the right information, that company may lose a potential sale. The customer experience must also reflect the employee experience, and this is the key differentiator for Avaya versus other companies in the technology space. We provide solutions addressing the employee and the requirements of customer experience.

Why did Avaya decide to invest in private cloud?

We work on all scales and recently announced two new data centers in Mexico. With these two centers, we provide

a private cloud offer that allows large companies—our focus market—that want cloud solutions but still need tailor-made ecosystems to integrate multiple operations. These data centers located in Mexico provide a safe and secure solution and are certified with many security standards required for such companies. This private cloud is like having your own specific cloud with which to enable a multiplicity of operations objectives swiftly. We can provide such solutions for the small to medium business as well as the giants.

What are your priorities for the next year?

With our existing customers, we have a large digital base of Avaya Solutions in Mexico and worldwide. In terms of contact center technology, we are the number one and have been for a long time, as all the large banks and contact centers in Mexico employ our technology. Some have claimed that contact center technology is set to disappear with the advent of new channels such as WhatsApp, social media, and so on. However, there is a challenge of having a separate channel and not being linked with the contact center, reports, analytics, and information. You are not learning from your customer, and you are unable to analyze trends to comprehend new ways of how a customer wants to be contacted. On the other side, there is a big push related to the cloud, and Avaya solutions are all available right now on the cloud and under a subscription model. This gives us not only flexibility to not only provide solid cloud solutions to our existing installment base, but also identify and attract new customers to our ecosystem.

Right now, with our cloud solutions we are delivering the speed and flexibility

that the cloud provides, but in communications. Many niche companies were born in the cloud and offer cloud solutions. The cloud normally implies certain standards and convenient replication, but it is not customizable or tailor-made for customers’ needs. The cloud was working in the right direction for those mid-sized companies that can adapt to the cloud offer. Yet, the larger firms want to move to the cloud, enjoy the same flexibilities, save money, not have their own data centers, and avoid investment in power and solutions that they would otherwise need to update or upgrade in the future. Therefore, we have separated our offers. We have a unique cloud offer in the technology space. ✖

BIO

Fernando Ruiz-Galindo holds a degree in electronics and communications, telecommunications, and IT engineering from Instituto Tecnológico de Monterrey.

He did a senior management program at IPADE. Ruiz-Galindo is Managing Director at Avaya Mexico, where he has held leadership positions in Mexico and the Latin American region. Before, he was the leader of enterprise sales in Mexico responsible for relations with the largest companies in the market, covering all segments of the private sector. He also served as cloud sales leader.

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What are your plans for international expansion?

DJ We have another company in the US,

J u a n Fe lipe Ánge l Ar b o l e d a

D a vid Ja s san

CEO, WOLKVOX

CEO, DIRECTO

CALL CENTERS With the call center business on a steady upward trajectory, these companies are focused on providing the best technologies and innovations to best serve their customers.

Why did wolkvox decide to enter the Mexican market?

JUAN FELIPE ÁNGEL ARBOLEDA Mexico

is our second-most important market.

We were born in Colombia and remain strong there. We are a USD12-million company with 110 employees globally. We began to grow significantly in Colombia because we had a physical presence; however, through Google Ads and social networks, we also began to sell in Mexico without much effort. Clients here are paid in the US, but now we would like to make payments in Mexico and offer support to our clients there directly. Withdrawing money is complicated. In 2021, because of the level of clients we had in Mexico, we opened a company locally.

What is Directo’s main value as compared to other solutions providers?

DAVID JASSAN We consider ourselves a carrier that has now transformed into an integrator of technologies for contact centers. We are a phone line created and adapted for service contact centers that require a massive number of connections that must work extremely well. In

Mexico, we are doing better now than we were in past years. During the pandemic, we were able to service international users, and we have not sought to expand those relationships because we are focused locally. Also, our engineers have accumulated a vast knowledge that we have to align to growth of the Mexican economy.

Could you tell us about your client profile in Mexico?

JFÁA We have three types of clients.

The big BPOs, with them we have regional agreements. They need to have licensing prices very much in line with the industry they manage, because they outsource. We have other clients that are important; they are the partners. The partners are these companies that sell our product, and they have a margin of 30% upwards as distributors. They are called resellers, partners, or distributors.

Here in Mexico, we have three or four distributors. PECOM is one, and the other two are Centro and Telnor. Our third type of client are the medium and large businesses that have their own contact center and need a platform to gestionate the interactions easily.

a phone company called Computer Tel, launched in 2000. There, we service Verizon, T-Mobile, and Sprint for international calls going out of the US to other countries, including Mexico. We also sell in other countries calls to the US. Most calls going to the US is call center traffic generated in the Philippines, other countries, and Mexico. We would like to use that as platform to expand our Mexico offering of call centers and start to offer a US-based call center. They do not have to be located in the US and could be in the Dominican Republic, the Philippines, or Latam, but serving the US. We want to replicate that model and serve the US market, which is much bigger than its Mexican counterpart.

What is the company’s next step in terms of development?

JFÁA What we want is to consolidate

ourselves in Latin America and start penetrating the American and European markets. We will do this slowly, because we have not yet received investment to achieve this. At one time, we got into the entire entrepreneurial and investors ecosystem in Colombia, but the company has become more dynamic, and we do not need to receive investments, so we are taking the gradual route. Our vision is to have a team of 50 people in Mexico and, in two or three years, invoice around USD500,000 per month just from Mexico. We believe in the potential of the Mexican market.

DJ We want to interface phone calls with SMS. Many of our customers need to connect to people who do not answer the phone. We want to send an SMS to say, “we are calling from this bank on this phone number.” Essentially, we seek to interface the CRM to the massive interface process that SMS is a part of. Another thing we are doing concerns ensuring the quality of the voice call. We need to assess why, for example, a call to that AT&T or Telcel user is not working. All our efforts go toward providing a crystal-clear quality connection. We are training our engineers to understand the KPIs for each customer. We need to provide the best possible phone line, and having reached that point the next step is to help increase the performance of the company we work with. ✖

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Image: Kyle J Little

Telecoms infrastructure pictured in Mexico City

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STRENGTHENING growth Jua n I g n a c i o S ad a CEO, TELEPERFORMANCE (MEXICO, CENTRAL AMERICA & CARIBBEAN)

What trends are most in demand when it comes to customer experience in Mexico?

With the growth of nearshoring in the US, Teleperformance is poised to capitalize on upcoming opportunities with new technologies and increasing the effectiveness of the service it provides.

One of the obvious trends is everything related to remote work. We have applied our knowledge and know-how of our current service operations to this new environment. One of the trends today is truly understanding what needs to change in this process to make remote work more effective and efficient and restore engagement with people. That is one of the things we have lost with remote work; and although we have been making up for this engagement challenge, we are not there yet. We have to continue our effort and step up to regain such engagement. The second trend is around quality. Traditionally, quality is based on how we measure service, whether it is a compliance checklist or listening to the client to understand what they need and how to resolve an issue. Through the years, we have done that through teams of people who monitor interactions, whether it is chat, voice, or other. One of the things that is trending significantly today is the use of speech analytics and leveraging this through teams of analytics experts who study that information to provide input or make changes to operations accordingly to improve service. Those are two of the main trends today.

In what ways is the rise of nearshoring in Mexico also an opportunity for Teleperformance?

BIO

Based in Monterrey, Juan Ignacio Sada leads Teleperformance’s nearshore region operations, consisting of over 30,000 employees in Mexico, El Salvador, Costa Rica, the Dominican Republic, and Guatemala. With more than 23 years within the company, Sada holds an MBA from the McDonough School of Business from Georgetown University and an engineering degree from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM).

Firstly, nearshoring represents roughly 70% of our revenue in Mexico, and so when the economic, political, and social international environment presents opportunities for nearshoring, Teleperformance is poised to capitalize on them.

Global inflation has had an impact on general consumption, which means a reduction of revenue for a large number of companies. These companies are and will continue to be pressured to cut costs. A good way to reduce costs is by outsourcing support service, especially by near- or off-shoring. In the contact center world, roughly 75% of all operations are in-house,

in other words, are owned and managed by their own company or parent company. This means that our USD100-billion outsourcing industry represents only about 25% of such operations. When companies need to reduce costs, the near- and off-shoring section of our industry benefits the most. We will see companies from the north looking our way for nearshoring opportunities. We have partners that were in this situation in the past, and when they moved to our nearshore operations, they saw fantastic savings and a high-quality service, in some cases, they have seen those benefits for more than 15 years now.

These are stories that will be replicated with the current inflationary pressure, and we expect a part of this huge slice of the pie to start knocking on Mexican doors, especially on Teleperformance doors.

What are some of the other main projects that you are developing in Mexico?

We are creating the strongest work-fromhome operation in the market. Our Cloud Campus solution has been improved since the pandemic times. We have not only digitalized our whole process, but we have built distribution centers (CEDIS) with experts in logistics so we can distribute and supply equipment to the more than 300 communities where we hire people today in Mexico. We launched our first CEDIS in Monterrey, and we will continue to grow with other distribution centers in other parts of the country. Digital transformation is now a key element in our core service. We are adapting processes for our partners and creating robots to improve operations, increasing the effectiveness of the service we provide for their end users, and reducing costs in the process through efficiencies. These digital services will continue to become stronger as we go along. We are developing great tools in different verticals, such as travel and hospitality, healthcare industries, banking and financial services, among others which are growing significantly. Those are the projects we will mostly focus on for this year. ✖

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better PREPARED

NA-AT Technologies is today a leader in technology solutions for the financial sector with a participation of more than 70% in the market.

How serious of an issue is identity theft in Mexico?

There is currently a serious problem related to identity theft. This has been happening for a while now, especially in the financial services sector, though it is taking place in other sectors as well.

Between January and March 2022, 1.385 million files on identity theft were opened. Just as digitalization grew and accelerated because of the pandemic, so did identity theft crimes; however, every crisis provides an opportunity, and Mexico has been prepared to handle these problems with technology for years. Even though we do not have a national ID like other countries, we have our voting credentials. INE has done a great job, with a fingerprint database where people can consult fingerprint biometrics to verify a person’s identity. Recently, INE also incorporated facial biometrics to tackle the identity theft problem, and we are one of the four companies authorized to perform this biometrics variation. Furthermore, the technology in Mexico is the same as the one used in other parts of the world. Globalization allows us to have access to the best technologies.

There are challenges here, but we have advanced institutions, access to the best technologies, and laws that help our work us. Companies have to make use of the resources available to handle the problems, though they are not doing so. It is a complicated panorama with many opportunities.

I see three main opportunities here: cloud identity or multi-biometrics; all of the processes of remote boardings, such as buying insurance when one is abroad; and digital signatures. Right now, we have three funds in Europe—one in the UK and two in Spain—that want to invest in us for a business consolidation process so we can acquire other companies. The alliance will become official this year.

Why is it now the ideal time to invest in identity theft technology?

This is a massive market that will grow. In addi-

C arlo s C h av arrí a CEO, N A - AT T E C H N O L O G I E S

tion to fingerprint and facial biometrics, there are also other types of biometrics related to behavior or DNA, for example, and this is the perfect moment to invest. In 2021, three or four companies wanted to acquire our company, so we knew we have something good in our hands. We are in the US, Mexico, Panama, Guatemala, Ecuador, Chile, Argentina, Brazil, and soon Venezuela. When we entered those markets, our technology was so incredible that people wanted to acquire it.

Our main markets can be split into four: the US, Mexico, Latin America, and Brazil. In the US, the strategy is to target the Hispanic financial sector.

There are more Hispanics in the US than Spaniards in Spain. Then, in Mexico, we want to grow beyond the financial services sector, because 72% of the financial sector are our clients, so we need to expand to other sectors. We are also growing significantly in the education sector—with seven universities that are our clients, retail, automobile credits, and the public sector. The company is 17 years old, and our first client was a bank. Our specialty has been the financial sector, so when we enter another country, it is easier to sell to the financial sector because we have references and global clients. This is the case in Latin America and Brazil. With Europe, we are working through investment funds. They want to create a Pangaea project, a consolidation, with identity verification for USD18 trillion and digital signatures for USD16 trillion. We started on this several years ago.

How has your extensive experience set you apart from the many starts-ups in your sector?

We have many large clients that use our technology. A global bank in Spain, whose name I cannot mention, is our client. We signed with it in Mexico, and it is also present in many countries in Latin America. Mexico has become a hub from where many deals for Latin America are closed. Furthermore, our digital autograph signature is registered. As I said, the opportunities are plenty. ✖

Opening office in Argentina for South American market Biometrics and digital tools can be used to prevent identity theft

BIO

Carlos Chavarría is an entrepreneur, inventor, and prominent participant in technological, cultural, and blockchain education committees in Mexico. In 2005, he founded NA-AT Technologies, a Mexican company with an international presence and dedicated to developing technology.

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TECHNOLOGY ENTREPRENEURSHIP Looking at gaps in the markets in various areas, these companies have been able to use technology to provide better and more innovative services to both client companies and customers.

Ha s san Y asine

D a n ie l a Mu ñ o z J i m én ez

A rm an d o F u en t es

CO-FOUNDER, GAIA DESIGN

CEO, IOIO

CO-FOUNDER, EVCON GROUP

GAIA started as an e-commerce for home

SOME START-UPS begin with the iden-

IN 2014, the phrase Internet of Things

and living, furniture, and home decor.

We evolved our business model to also include physical stores. We started in 2014, and within two years we became an omnichannel business offering our products online and offline. We focus on offering a very personalized customer experience and guaranteeing that the product and the experience is what customers expect. Our products are a combination of furniture and bedding designed by us and furniture that we have curated that combines well together and features different trends, styles, price points, and collections. Our purpose in Gaia is to help customers design the life that they want with our products and services. The founders of Gaia Design have different experiences and cover different sides of the business. In the first round, we raised less than USD1 million, which was enough to kickstart the business and take us to the second round, where we raised USD2.5 million, which was significant in 2016. What helped us greatly was coming to understand that to build a business in furniture in Mexico, we had to not only build an online presence but an omnichannel business model, including stores, where customers can touch the furniture, see that the brand exists, and can be helped and guided one-on-one.

tification of an opportunity within the market. I had sold my belonging to start a business and attempted to find platforms to rent everything and found nothing. If it was possible to rent any type of physical thing, why not services, too?

From there, ioio was born, and we also looked at how we could insure freelancers. At the time, this was utopian. The first investment, as with many start-ups, was from friends and family. The second round was with an angel investor.

Now, we are looking for a hardy round.

And from here, ioio arises. The idea was that you could rent your services for 30 minutes and be insured for 30 minutes.

Nothing like this existed before. We launched a product with a low commission on each rent of 10%. No other application has a commission at this rate.

It worked well and people loved it. We did a second version, and they loved the insurance scheme. We later decided to change the entire business model and create a monthly subscription of MXN29 with no commission. We have already signed many users. We are poised to launch this third version, which will be a proper launch.

(IoT) was very popular, particularly in the industrial sector as everybody started talking about digital transformation.

Armando and I created the company together and what motivated us was the vision we had in terms of IoT. The name of the company is Evcon, which means Everything Connected. We wanted to create hyper-connectivity because we knew it was going to advance. Terms such as IoT, blockchain, AI, and cloud are now well known. We came from the connectivity world so we knew we had to set the base on different industries and their different business needs. In manufacturing, for example, the question is how can the information in the production chains help the business to make better decisions in real-time. When will we perform maintenance on the equipment?

In 2018, people in manufacturing were being told about security regarding IoT because cyber-attacks had begun. They have always existed but in those years the number increased. So basically, we were hyper-connectivity with IoT and machine learning, which is how we built the company’s philosophy. We wanted a real digital transformation; it wasn’t about the newest or nicest equipment.

We have an important business partner, Cisco Systems, we are its premier partner. We also have the experience and certification with the engineering team.

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A ndr é s Góme z

Al e ja n d ro S erv í n

Mart i n Trej o m o v i ch

COUNTRY MANAGER, BUK

GENERAL MANAGER, B E LV O

COUNTRY HEAD, TA - D A

WE PROVIDE companies with support via technology so that its employees feel there is engagement with the company.

We have democratized access to such technology by developing a system that is applicable to all industries and companies. This allows them to automate their employees’ journeys, as we call it. The system captures an employee’s entire cycle, including learning management systems (LMS), payroll, and so on. The entire collaborator journey is automated, and at the end of the day, there are two effects: people’s productivity improve, and now those in charge of human resources who traditionally spent time on manual processes are able to dedicate themselves to substantive issues such as empowering people. All these help companies reduce turnover and hire better talent. Any company with more than 50 employees should be using our system.

We also have a program developed in Chile that we are applying to Mexico for microenterprises with just five or eight employees, for example. We provide them with a free system to show our support. It is part of our social responsibility, and if the business succeeds, they stick with the program. In Mexico alone, we have more than 100 companies using our system. This demonstrates the growing interest in such a system.

OUR CLIENTS are financial institutions, and we have different client acquisition strategies and marketing campaigns. We have some of the most robust security protocols in the industry. We have an ISO 27001 certification, the most robust certification in the world for managing data and sensitive data. There is no other open banking start-up with this certification in Mexico. We are currently in advanced negotiations with banks that represent 90% of bank accounts in Mexico and are close to launching a new solution with a major bank for open banking.

We offer diverse solutions. First, we have data aggregation where we extract data from banks or the Tax Administration Service in Mexico. In this way, we can tell our clients how much money a company or individual is making in terms of their bank accounts, how much money they are receiving, and how much money they are spending. Then, we enrich the data in terms of categorizing the movements and transactions. For example, we can collect data on how much this client is paying for entertainment or fast food.

We can see their tax returns, how much profit you are stating, or how much losses. We need to assess the data using their risk assessment models.

OUR BUSINESS STRATEGY right now is the result of the goal of Grupo Modelo to transform into an innovative technology service company bringing the best solutions in the beverages industry to both consumers and customers. Last year, as a result of our clear objective as a company, we took the next step with Ta-Da to deliver a clear value proposition for consumers with a touch of magic. That is where the name Ta-Da comes from— bringing magically cold beverages in the shortest time possible to our consumers at a fair price. We are delivering an ambitious and challenging value proposition for our consumers. Right now, our biggest challenge is placing the consumer in the center of our value proposition and everything that we do, having a product market fit our consumers, and delivering a value proposition that solves their pain points and their frictions when buying and choosing their favorite beverages.

There is a great deal of competition in the delivery market, and this connects with our brand Ta-Da and delivering the magical experience to our consumers. In terms of our coverage today, we cover more than 30 cities in Mexico and more than 50% of the Mexican urban population.

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INTERVIEW

Ca r l os Br it o EXECUTIVE DIRECTOR NOLA, LOGICALIS

What main opportunities for investment has Logicalis identified in the Mexican market?

ADDING value To ensure maximum customer satisfaction and ensure its success, Logicalis invests heavily on services and building a strong practice.

BIO

A C-level senior executive with over 20 years of experience, Carlos Brito was appointed as Logicalis Latam’s Executive Vice President to lead the regional operations in North Latin America (Mexico, Colombia, Ecuador, Puerto Rico, and Dominican Republic).

Previously, he was the country president of Dimension Data Brasil and, earlier, its finance director. With his prior employer Compuware, Brito directed all financial functions for the company’s Brazil subsidiary as well as other countries in Latin America. He was also with Compuware as a financial supervisor and with MSF Brazil as financial analyst.

Brito holds an Executive MBA in finance from IBMEC São Paulo and an MBA in business management from Fundacao Getulio Vargas.

We decided to organize ourselves on the four major pillars: the cloud, security, data, and services. Even though we are a systems integrator, we started with networking and connectivity, transactional basic stuff.

We are transforming the business toward the major trends and are organizing ourselves with our business units to capture those four pillars. Our investments revolve around these right now. Currently, we have a robust portfolio around those four pillars, and we continue to invest in developing this portfolio, building business cases, or use cases for our customers around those pillars. We invest heavily on services because they are where we materialize the experience and the value that we sell. This is all about how we build a strong practice about customer success to ensure customers are capable of using and adopting the technology they are buying and extracting the maximum value of the investments. It is assisted operation. That is why as a system integrator, we do not manufacture anything; we build the puzzle. We purchase from different vendors or partners from our ecosystem, add our services to them, and deliver an end-to-end solution.

That is how we bring value to the tool. As a system integrator, we have two sets of customers: the manufacturers or vendors; and customers. We need to serve and add value for both. Our intellectual property is all around services. That is where we materialize all the value that we bring to the market. Companies do not just buy technology for the sake of buying them. It is all about how technology can accelerate the ambitions of their companies.

How would you describe the profile of your customers in Mexico?

Strategically, we have selected six verticals that we focus on where we have a specialized sales, pre-sales, and services delivery.

The purpose of this strategy is to ensure our team speaks the language of our customers, because self-security to a bank is different from that of a telco, a retailer, a

mining company, and so on. That requires a level of sophistication and specialization that, according to our strategic plan, we can only achieve by specializing in sales pre-sales and delivery capabilities. We only focus six verticals in the private sector: telcos, finance, retail, mining, automotive, and utilities. Those are the six verticals where we have specialized teams. Right now, we do not support the public sector as of yet.

What are some of the main projects you are developing in Mexico?

We have transactional types of projects for infrastructure; however, since we deal with all those investments around the four pillars, our goal is all about accelerating those four pillars. We build a portfolio, so we participate in events. We invite customers and do presentations around those four pillars of the cloud, security, data, and services. Then, we present our capabilities and what we can do with that. We seek projects around those four pillars in those six verticals. We do not physically build data centers; however, we can do everything, from equipment, services, cabling, and so on that is needed inside a data center. We can manage all the technology that goes inside a data center. We can build, provide support, and manage services and help those data centers to operate. We have a strong practice around services to guarantee that we can support, operate, manage, and monitor. We are one of the few systems integrators globally that can provide internet solutions. Logicalis has a large operation, perhaps one of the biggest in Latin America. We have a presence in 12 countries and 3,500 people on our team. In Mexico, Puerto Rico, and Dominican Republic, we started from zero. We started in Mexico seven years ago with three people, and today we have 160. By February 2023, the end of our fiscal year, we plan to have 200 people. We have more than 900 customers in Latin America. Because we have such a strong footprint in Latam, we have many regional customers and do many regional deals. ✖

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INTERVIEW

in the FACE OF CHANGES

CONTPAQi’s software and products are helping companies adapt their business models to digitalization and evolving consumer behaviors.

What technology trends has CONTPAQi observed in the SME Mexican market?

We are a founding company of the software industry in Mexico and have been in the market for 38 years, specifically serving the micro, small, and medium-sized company market. Today, every year we conduct a study of the digitalization of SMEs, and we have found interesting findings. For example, now at least five out of 10 companies already have at least one process on the cloud. There have been two important factors that accelerated the adoption of technology in Mexico: the birth of electronic invoicing in 2010 and becoming mandated in 2013; and the pandemic, which caught many companies off guard. Most companies are still being managed hierarchically, which is becoming obsolete. Today, more than hierarchies, companies need to work in collaborative networks.

The pandemic also accelerated the adoption of such technology and revolutionized the way in which the work of others is supervised or reviewed.

Today, at least 70% of Mexicans have already conducted transactions over the internet. That is why companies are rushing to adopt ecommerce and that entails structural changes in the way business processes are organized.

How do you help SMEs incorporate this technology into their operations?

We have a platform called Cursa, where everything is completely digital. This Cursa platform allows users to download lessons and even guides them until they achieve a certification. For us, certification is important, because we provide a diploma from an institution in Mexico called Conocer, which recognizes the skills of people. The diploma gives people employability. We do this through a network of more than 6,000 distributors throughout the country, and that network is responsible for deploying training to end users. We have trained these 6,000 distributors or business partners to guide and help SMEs, especially in matters of what technology must be adopted to face changes.

Technology by itself is useless, and technology on

R en é Mart í n To rres F rago s o CEO & FOUNDER, C O N T PA Q I

the cloud must support a change in consumer behavior to adapt the business model to that change.

Do you have plans to enter Latin America or other countries in the short term?

With the cloud, the physical barriers of country borders are eliminated. Basically, all of Latin America and the Hispanic market in the US share the same values. There are some minor differences in the tax rates and in the way of calculating it; however, the countries all practically have the same taxation schemes. Now, the issue of electronic invoicing opens up a wonderful opportunity for us because other countries in Latin America are starting this process of electronic invoicing. For us, one of the best models is the Mexican one, because it allows almost online transactions. Our business model is that we sell the software for the invoices but not the stamp, and that scheme has worked well for us in Mexico. We are precisely exploring this for Colombia, Chile, Ecuador, and Peru. Chile and Colombia are already slightly more advanced.

Today, we are audited by SAT, and we are one of the most robust PAQs in terms of security, which is essential for us.

In what ways is CONTPAQi changing its business model to prepare itself for further growth?

In 2021, we grew around 17%, and in 2022 we are growing around 15%. For the first time in the history of the company, we are exceeding the historic sales levels of every year. That opens up great possibilities for us. We are also reaching 500 collaborators, and we had set 500 as a limit, because when we reach 500 collaborators, we have to change the systems of management of the company due to the considerable number of people. Now, we are making significant changes in the organization within CONTPAQi to function in collaborative networks and autonomous work teams that will define their own budgets, objectives, and goals. Each of them will focus on customers; though we have always been customer centric, the main emphasis before was always on products. ✖

5/10

companies in Mexico have at least one process on the cloud

17% 15%

growth in 2021 and

in 2022

BIO

René Martín Torres Fragoso is one of the forerunners of the software industry in Mexico.

The founder of CONTPAQi, he is also co-creator of the software that revolutionized accounting in Mexico.CONTPAQi was highlighted in 2009 as one of the 100 Super Companies by international human resources agency, Top Company. In 2015, Torres Fragoso was recognized as Best Leader of the Year by Great Place to Work Institute. He is an electronics engineer from the University of Guadalajara (UDG) and holds an honoris causa doctorate from the International University (UNINTER) of Cuernavaca.

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INTERVIEW

TRANSFORMATIVE power Al b e r to R o s at i COUNTRY MD MEXICO & L E A D E R F O R S PA N I S H SPEAKING COUNTRIES IN THE AMERICAS, GFT

In what ways is GFT using the Mexican market to expand in Latin America?

As a pioneer of digital transformation, GFT develops sustainable solutions across new technologies including cloud engineering, AI, and blockchain.

GFT is a German company with around 11,000 people globally. We are working in Mexico for around seven years, and we launched here focused predominantly on key clients within the banking industry; however, now we want much more. Mexico has become very important to our global strategy, mainly in the Americas region.

We see three pillars of growth. First, we are focused on expanding our presence in the local market, enhancing our presence in the Banking & Insurance sector and opening new clients in other industries.

The second pillar is nearshoring for the US and Canada, mainly, and supporting global accounts around the world, standing out, Spanish customers. Third, Mexico is a springboard for growth in other Latin American markets. From the outset, we have been focused on digital transformation, knowing that everything will be on the cloud and that the business that we used to see a few years ago was going to be disrupted. Some clients may be late in grasping this or else unaware of how to face the challenge, which is where our expertise comes into play.

What are the main challenges facing open banking when it comes to the Mexican legal framework?

BIO

Alberto Rosati has more than 30 years of experience in IT, software, consulting, system integration, digital transformation, and cognitive business operation. Previously, he was head of banking and financial services Brazil at Tata Consultancy Services. He was also CEO Latin America at Tech Mahindra. Rosati has a bachelor from the Mackenzie Engineering School and has completed postgraduate programs in capital market and foreign exchange and in global business strategy.

We believe it is important for regulators to recognize the challenge open banking faces in Mexico. Unless they give us a clear idea of their take on matters, it is difficult to proceed. Some markets have significantly developed open banking that we could learn from such as Spain, the UK, and Brazil. These countries are defining standards, patterns, or the way of doing business, and these countries are working faster than in other countries. The regulator is key in this process. Open banking cannot rely solely on markets, it is not so simple because the culture is different. Yet, we believe that everybody or most of the country in the key important economies are going down this

route. GFT leverages the knowledge that we built originally in Europe and Brazil where the market followed a well-defined roadmap for open banking. GFT has also created certain tools and accelerators for open banking implementation to support our clients in this area.

Apart from the banking industry are you looking to diversify into other industrial sectors?

Currently, GFT globally has around 70% of its activity in banking, 18% in insurance, and 12% in manufacturing and other industries. Here in Mexico, for example, we have strong a presence in banking and recently started important contracts with insurance and retail customers. We are pursuing all of them based on cloud solutions that enable these clients to transform their businesses. Insurance is seeing interesting and solid growth. If we compare Mexico to the US market in terms of the percentage of people having insurance products the figure is much lower. The potential for growth, therefore, is amazing. But it is important to see that many of the processes could be shared with another entity that provides services on the cloud. Sharing the investment and related information could help many businesses. GFT will be launching related project next March. We believe that the industry is changing and moving ahead and GFT wants to be the right partner in this transformation. GFT, still in the banking industry, believes in the new generation of digital banks. This is one thing that we are investing heavily in. For instance, GFT Mexico launched a center of excellence for digital banking solutions with the objective of training a large number of professionals, in partnership with software vendors of cloud-native core banking technology. We looked at the market and the current capabilities of the banking industry and came to the conclusion that working with the anywhere, anytime, next-generation digital banks solutions are the best path forward for the market. ✖

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INTERVIEW

focused ON SUCCESS Kyndryl is currently the largest and lead service provider for IT infrastructure services in Mexico’s IT industry.

J u li o H es h i k i GENERAL DIRECTOR, KYNDRYL, MEXICO

What strategies is Kyndryl using to assure growth in 2023?

Our main goal for 2023 is growth, and Kyndryl Mexico is set to focus on building its portfolio. We will take two things into consideration: offerings that will differentiate us from the rest of the market and investment in our people.

Our offerings came from our previous company, IBM. Kyndryl started in 2021 spun-off from IBM IT infrastructures.

The company was born with the spirit of a start-up, but with a significant legacy in terms of experience, client base, and the support of an important company. Our global customer base includes 50% of those companies in the Fortune 500 and 75% of the Fortune 100 companies. We focus on three areas: cloud, corrective prices systems, and workplace services.

Those are the three core practices that we started with, though we later decided there were three other areas that were extremely critical and associated with such products and services: applications data and AI, security and resiliency, and network and H computing. The market is hot, and Mexico is becoming a hub for many companies. We design, build, transform, and manage IT environments over which mission-critical processes and platforms run the business for our clients.

What type of companies is Kyndryl focused on working with?

We focus on the financial industry, retail, industrial and transportation. We approach these potential customers through partnerships with other companies, an example being Oracle. We sign a global alliance with Oracle and there are certain elements of the infrastructure at our clients that will contain Oracle

products. We integrate those, but there is no one single client that has only one single technology, and the complexity of integrations are managed. We might be working with a bank that has an on-prem data center that needs to be migrated to public and private environments with Microsoft, Azure, and AWS in Oracle components in it, and we remove the complexity for our clients. Their specialty might be finance. Pure infrastructure tends to be more of agnostic to some extent because it could be the same infrastructure that you might replicate regardless of the customer’s particular industry. You need the specialty of the industry as you get into the details and help the clients through the detail transformation process. You need to understand what finance is and why the digital channels and wider applications are so important. This differs from the industrial sphere where you need a resilient operation that can be sustained 24/7.

kets and reports into the president of the company. Fast means being empowered to take decisions. Unlike many other corporations, decisions are taken at the country level. Our focus is the client because it is what matters. These changes don’t happen overnight, especially when expecting the same people who used to run the division in the past to act and think differently. Cultural change was therefore extremely important for us. We have accomplished a great deal in one year. We have the ability to attend to all the needs of our clients quickly. We are also able to engage with our partners to deliver the best value to our clients. ✖

What do you consider to be the main accomplishments of Kyndryl in Mexico?

Number one is the fact that every single customer that we had in the past with our previous company came across to Kyndryl. They only established one condition: transfer the contract and make sure that the same people are working on my account from a technical standpoint.

We have been able to retain every single client whenever the relationship made sense. We even gained more clients. We had to create a new culture, coming from a company that was over 100 years old to one that we wanted to behave like a start-up. We built three principles: fast, flat, and focus. We had many different layers in the past and eliminated those.

Mexico is now part of our strategic mar-

BIO

Julio Heshiki has a previous trajectory at IBM, having worked in countries such as Peru, Argentina, China, India, the UAE, and Mexico. He has extensive experience in roles at the regional level for Latin America, Europe, and Asia.

His leadership roles in various divisions are characterized by having a strong focus on the client, helping companies in processes of business transformation associated with technology. For more than 20 years, he has held different key roles as executive vice president of projects, director of client excellence, director of services, and delivery director, among others.

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VOICES FROM THE SECTOR

Ar m an d o A gu i rre E z q u erro CO-FOUNDER & COO, WIWI Why is there so little focus on the matter of connected public transportation?

A n g élica Spe ich COUNTRY MANAGER, M U LT I P L I C A What industries notably demand consultancy services for the digital transformation in Mexico?

Historically, we worked in financial services. It was the first to start and had the greatest demand, beginning to set up their software factories and digital hubs. The business is all about actionable metrics. Today’s capabilities range goes from research, user metrics analysis, creation of predictive models with additional data, software development and integrations, and customer experience and marketing flows. Additionally, we also created an entire people and recruitment business unit to staff the digital hubs of financial services. We have two consulting units that are performing strongly, especially in financial services.

When using public transport, passengers sit idle; there is nothing else to do than to move from point A to point B. It is not a productive time of the day. So, it is innovative to provide proper connectivity in such spaces that people use every day for people to take advantage of idle time. We have always said that if someone connected and learned a new language for one hour every day, in one year they could’ve spoken it. That is the great potential of connectivity as far as educational material is concerned. We thought that we were simply resolving a national issue and soon found out that this model had never been implemented anywhere else in the world. The United Nations acknowledged the way we conducted our financial and business models, how we approached the technological aspects of our project, and how we managed to make it all sustainable both technologically and financially. We found a way to make it profitable and balanced. That’s also the reason why it is innovative on a global basis. Each time a user enters public transportation, they receive much more than they paid for.

R i card o A m p er FOUNDER & CEO, INCODE Why did you decide to specialize in digital identity verification?

In what ways is Mexico a hotspot for pilot programs within the company?

Mexico is a huge hub for innovation, and most of its ideas are exported. it is a country with an entrepreneurial spirit and it is anchored on the fact that a large volume of resources is available. However, it is necessary to adapt the ideas to the local culture. Mexico is dynamic because of the variety and consumption levels. For foreign companies to attract users who begin to transact in their major goal. Of course, it seems to me that there is a culture here in which that occurs quite naturally.

At its core, Incode is a trust company creating the experience of the future. We do that by making it easy and secure to verify identities digitally. We help people open bank accounts, go to stadiums, visit doctors, or access the products and services they need without having to worry about fraud. Before COVID-19, the digital identity market was worth USD5 million; now, after just a few years, it has grown significantly to USD60 billion.

The company is based in the US. Why did you decide pilot this project in Mexico?

While the company was started in Silicon Valley, we have always been a global team. The initial team was made up of a Mexican founder and other Mexicans, Americans, and Eastern Europeans.

We felt Mexico should be the first country and market because there is a huge amount of opportunity with an interesting mix of challenges. Digitalization is just happening there and is rapidly gaining popularity. There are also difficulties around the prevalence of fraud, low bandwidth, and few official databases to cross reference. We felt if we can solve the digital identity problem effectively in Mexico, we can solve it anywhere.

J u an C arlo s L ó p ez CEO, CRIPTONUBE To what extent have you seen rising interest from companies in adopting cloud technology?

We are a company that started in 2013 in Guatemala, as a cloud service company for web services. During this journey, we became partners with AWS, Microsoft, Google, and Huawei, all with which we have worked with on the cloud service. In 2017, we began to work in Mexico and Costa Rica. Before that we were already working in the US, and today we have operations in the US, Mexico, Costa Rica, the Caribbean, Peru, Colombia, and Ecuador. We have a team of around 120 people divided between all of the countries and over 400 clients after being in the market for only eight years. In the whole of Latin America and the US, Cloud services are relatively new. Many are not yet qualified in cloud applications and are uncertain about how it will develop. In our case, we preferably do not employ engineers that are university qualified because they do not have what we need. We can take between 12 to 14 months to establish a certified workforce. It is not only about knowledge of the industry, but knowing the industry, its services and solutions and also knowing about marketing and IT.

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G ab ri el N av arro CEO, EVEN GROUP What main opportunities for telecoms growth are there in Mexico over the next two years?

J uan C ar los Molin a MANAGING DIRECTOR, GS1 How are you diversifying the solutions you offer to better support companies?

Our star product is the barcode, but we also have physical products and training, and give counsel, consultancy and courses. We have two leading products. One is Infocode, a project born as an app where the manufacturer and owner of the brand include relevant and additional product information for the consumer. The Economy Secretary is looking to convert us into the electronic label of brands. It’s much easier to read than any label.

We are working on new projects too, for example on an alarm in Infocode that shows you when you’re grabbing a product that has a specific allergen you’ve selected. We are also working on Syncfonia, an electronic catalogue where the owner of the product information is the manufacturer. They fill the catalogue with products along with all their characteristics and pictures. We also have another product and service called Secodat. It is revises and adds quality to the product description, which is important for us. In Secodat, we have specialists that ensure what’s written is perfect. This is data quality. They’re three products, all linked together. The base is Syncfonia, its data loading is verified with Secodat, and the result is in Infocode.

The biggest area of opportunity is the issue of infrastructure sharing. The country has a great need for infrastructure. The only way to continue growing or accelerating this infrastructure development is through infrastructure sharing. We saw the opportunity in 2017 when Neutral Networks was created. The goal was to create a neutral company where you can bring different companies that require the same infrastructure in a city or specific area together without them competing against each other. This accelerates the reduction of this digital gap.

N an cy E s t en s CEO, WO SMARTER HUMANS

What does your fiber-optic portfolio consist of?

We have 3,300km of fiber, divided across 10 cities in the country.

We are focused on medium-sized cities, industrial cities, and cities with high growth potential. The long distances infrastructure in Mexico were built more than 20 years. The new companies that are coming to this country, and mainly to Querétaro, will need for fiber infrastructure in order to connect their data centers to the US. There is an opportunity to build a diverse fiber network from Laredo-Texas to Mexico City in three phases.

C arlo s P erea S E N I O R V P L ATA M , CRADLEPOINT What is Cradlepoint’s biggest achievement in Mexico after almost one year in the country?

Cradlepoint is absolutely focused on network connectivity through cellular infrastructure. We help customers, companies, corporations, governments, smart cities, and institutions consumerize all the connectivity that the cellular network can deliver either in 4G or 5G. We make it easier for all these institutions by making services faster and delivering connectivity in an easier way to create data-driven business decisions through the network and cloud in a secure manner and environment where they can start to deliver AI and machine learning. They can do a clusterization of services through the cloud using the cellular network in 4G or 5G through all the devices that we connect in cars, vehicles, trucks, locations, branches, and people. We are pleased to be part of the transformation of businesses more beyond digital transformation. We are participating in many different ongoing projects worth almost USD40 million involving investment companies and investors focused on technology, IoT at advanced services, programming, and all those types of services in clusterization for Mexico and Latin America. We are the leader and number-one company for cellular connectivity for mobile, branch, or people connectivity in the world.

What main projects do you manage globally?

One of the main projects involves building smart cities and creating the first digital city that is 100% managed by AI. We are working on this with Dubai, for example, since it is a nation that is highly technologically advanced. Yet, Dubai imports heavily from other countries, including technical talent. We are also working with Latin America, in Argentina, Chile, Uruguay, Panama, and Colombia.

What is the next step for the company?

We want to connect all smart cities to AI, which is learning all the time about the interests of avatars. When you log in, having that digital twin of yourself is amazing. With this, we can know the consumer’s interests, while AI will learn what each person likes, improve the experience, and offer them things that interest them specifically. For example, it is common for a 30-year-old woman to be shown diapers even though she is not interested in having children, and that no longer applies. So, it is an improvement of the algorithm chains to be able to work with more accurate AI, which interests us for 2023.

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V i cen t Mo li n a CEO, T 7 I N T E R N AT I O N A L G R O U P How can T7 help companies predict downtimes and failures in their systems?

L eop oldo Ruiz REGIONAL DIRECTOR, A X I S C O M M U N I C AT I O N S What main trends has AXIS identified in the Mexican market regarding IT and security?

Mexico itself has trends across the whole industry. First of all, we started with solutions such as video surveillance, but the trend now is for wider application. For example, instead of just focusing on loss prevention in a retail store, you can focus on such thing as the lines, traffic, the quantity of products you have on the aisles, the customer experience, gender, and age, prepay business, and bottlenecks, so you can provide that information to the business.

This is actionable data, rather than simply surveillance. And, of course, we are on top of all the market trends that we are seeing, such as IoT, 5G, AI, and cybersecurity.

And of all the industries that you target in Mexico, where do you see the greatest opportunities for growth?

We work with many cities, and have a prime example here in Mexico City. The seismic alert and all the speakers that you see installed around the city, over 12,000 pieces are all from AXIS. This operates on the level of public safety. We also see opportunities to grow in industry, for example, heavy industry and mining; there is also a major opportunity is retail and transportation.

In the last 10 years, we have developed an amazing platform that we call VIGIA Master Suite, a powerful set of tools to prevent downtimes and failures in the technological environment.

We can achieve this through a platform we created to visualize everything. Our system collects and reads data to exactly predict when a failure will happen. The team developed all these tools to measure, predict and then react. We noticed that such solutions do not exist anywhere in the world, so our goal is for customer service to be provided as it should be for our clients. These downtimes that companies face in telecoms, social media, and technology do not have to be the norm. Minutes or even milliseconds in some cases not only mean financial losses but can also involve a loss of lives. We invest heavily in getting the best talent because they are the future. We have more than 100 engineers, scientists, physicists, mathematicians and digital architects. The IT market in Mexico is changing almost every day because we are near the US and are gaining access to all the innovations at the same moment or the next day.

R aj eev G u p t a, H E A D - N E A R S H O R E L AT I N A M E R I C A & C O U N T R Y HEAD- MEXICO, TATA C O N S U LTA N C Y S E R V I C E S ( T C S ) Why did Tata Consultancy Services decide to enter Latam?

For the last 20 years, Latin America has been a strategic area for TCS. We entered the region in 2002, and we’re celebrating 20 years here in 2022. Over the past two decades we have grown from zero to almost 26,000 consultants and associates across nine countries. It has been a period of fantastic growth, in double-digits for many of those years. Specifically, Mexico is one of largest operations for TCS beyond India, and the largest in Latin America.

The reason is that Mexico is a trillion-dollar economy with a huge local market. We therefore work with the preeminent companies, be they banks, retailers, healthcare, and life science companies, automotive or high-tech enterprises.

How are you helping your clients become more agile?

We are a growth and transformation partner for our customers. We have been partnering with these global, regional, and local companies. The digital transformation of companies, once moving at the speed of a car, is today going at the speed of a plane. In this world, agility in the way we are engaging with the customers, and we are working on the problems becomes essential. We are bringing the solutions and services to the customer’s customers.

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Image: Karl Cox

IT & Telecoms

ROAD NETWORK SNAPSHOT (2020) SOURCE: CIA

Length in km

817,596

Density

42

Paved (km)

175,526 (21%)

Unpaved (km)

641,986 (79%)

(km/100sqkm)

TOP-5 CARRIERS IN US-MEXICO MARKET BASED ON NUMBER OF FLIGHTS (2022, ’000) SOURCE: AVIACION 21

AMERICAN AIRLINES

66 UNITED AIRLINES

53 VOLARIS AIRLINES

DELTA AIRLINES

26 AEROMÉXICO

26

Image: p2n Media

31

Transport & Logistics

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CHAPTER SUMMARY

Transport & Logistics

GREATER VISION ogistics and supply chain safety have moved to the forefront of business plans as delayed deliveries, accentuated globally since the COVID-19 pandemic, can cause serious issues in cash flow for both suppliers and clients. From a global perspective, Mexico offers many advantages being close to strategic markets such as the US and South America, but from a local perspective the country faces challenges because of its size and varied terrain.

Mexico requires a comprehensive and diversified logistics and transportation network that can safely move products from point A to point B. “Mexico is gradually making some headway here, with important investments being made such as more than 2,000km of new railways, trains in Bajío, and more connections to the north since the northern border has many saturated points for both rail and land transport,” shared Rogelio Jiménez Pons, Undersecretary of Transport at the Secretariat of Infrastructure, Communications and Transportation. “In addition, our ports require a more comprehensive vision of development and greater integration in order to be logistics centers,” he continued.

The private sector is also stepping in to amplify the type of services available in the market, such as MSC Mediterranean Shipping Company, which announced the start of its air car-

L

go services. “The experience of supply chain disruption during the pandemic showed the usefulness of air as a complement to ocean container shipping solutions,” said Victor Monroy Vollmer, Managing Director of the company.

On diversification, although controversial, headway has been made toward alleviating the saturation of the Mexico City airport with the opening of the AIFA Airport in Santa Lucia in 2022. The Managing Director of the airport, Isidoro Pastor Román, explained that its development program consists of three stages. “The first is from 2022 to 2032, and by then we expect the airport to double to an annual capacity of 40 million passengers, up from its current capacity of 20 million in the first phase. Based on demand at the national level, which is growing between 9% and 10% a year, we expect the airport to reach full capacity within the first five or six years of operation,” he stated in an exclusive interview.

This chapter also highlights the investments that players within the sector are making toward innovation and better meeting the needs of clients in logistics from airlines to parking meters and fleet management. Players in this segment are working hard to break stigmas in the market around third-party management in logistics and the peace of mind it can offer. ✖

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INTERVIEW

CONNECTING the dots R o g e l i o Jim én ez P o n s U N D E R S E C R E TA R Y O F T R A N S P O R T, S E C R E TA R I AT OF INFRASTRUCTURE, C O M M U N I C AT I O N S , A N D T R A N S P O R TAT I O N

What are your priorities as Undersecretary of Transport as you enter your first year in this new role?

The Secretariat of Infrastructure, Communications, and Transportation has several key focus areas in the coming years, including upgrading its roads, investing in ports and logistics infrastructure, and upgrading processes.

BIO

Rogelio Jiménez Pons is an architect from the National Autonomous University of Mexico (UNAM). His professional experience has led him to specialize in urban development and planning, as well as in regional development plans and strengthening tourism in southeastern Mexico. He has been awarded the First Prize for Urban Planning at the II Biennale Mondiale de L'archiitecture INTERARCH of the International Union of Architects.

From 2018-2022, he served as General Director of Fonatur, the institution in charge of the priority project Tren Maya.

The transport sector encompasses many fundamental elements in the economy, including logistics and its contribution to national development in a country with a difficult geography. Mexico has to overcome many development problems, and in the transport area this is logistics.

The many challenges include the level of infrastructure development, since we are a developing country; security, which is extremely important; and other factors that have been going on for decades, such as corruption. However, Mexico has extremely advanced transport companies among the best in the world, though most of the transportation systems in Mexico are trucks, which are not ideal compared to railway transportation. Still, Mexico is gradually making some headway here, with important investments being made such as more than 2,000km of new railways, trains in Bajío, and more connections to the north since the northern border has many saturated points for both rail and land transport. In addition, our ports require a more comprehensive vision of development and greater integration in order to be logistics centers. Ports must be accompanied by logistics centers with sufficient territory to manage the growth capacity in adjoining industrial zones, boost rail and road connections, and include air travel options close to ports. In the end, we have to develop a full strategy that will require large—but profitable—investments. We have two years of administration left, and we want to propose corrective measures as much as possible. For example, we are looking into digital platforms for controls, placements, licenses, or training to deal with issues of ineffectiveness, inefficiency, and corruption. The sector in general has to modernize and be efficient, and that is the goal and priority. The way to do so is to digitalize it and attract investments from the private sector, which is essential in this sector.

The next presidential election will be in 2024.

What do you hope to achieve before then?

Before the next election, we want to leave behind more advanced plans and programs. We have made advancements in many areas, and as we achieve our goals, we can leave them to the next administration under better conditions. We are developing new airports that will be a good model. They will significantly impact the Pacific area, both in the south of Oaxaca and in Nayarit, because these areas are currently growing heavily in terms of tourism and production. In addition, we want greater control treatment of federal trucking is. There have not been any changes in 15 years or new license plates in this country. We have to overhaul the philosophy of replacement and provide new licenses. We must also have a solid security platform working closely with the National Guard to ensure both national security as well as road safety. For example, there is an important initiative involving dynamic weighing since there are transport vehicles that sometimes carry twice their load capacity, which obviously negatively impacts their brakes and our roads. In short, there are many things integrated into these concepts that would require several billion pesos a year; however, these are all profitable projects that can be guaranteed to work.

Why is it important to incentivize more forms of transportation beyond highways in Mexico?

There are many opportunities to invest in logistics centers. We are also encouraging slightly smaller facilities called whereabouts units, which is another type of highway infrastructure. They are extremely profitable packages, about 4-5ha, and are a center providing a series of services.

We also want to promote new rail links, which are essential. In some regions, we are looking into alternative transport options, such as coastal ones involving both cabotage and inland rivers, which were abandoned and can be revived relatively cheaply. We have to look into all these areas, especially as the Isthmus of Tehuantepec becomes increasingly important. ✖

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INTERVIEW

improved LINKS Felipe Ángeles International Airport was built to relieve the heavy air traffic congestion in Mexico City and is expected to serve up to 40 million passengers a year in 2023.

I s i d o ro P as t o r R o m án MANAGING DIRECTOR, F E L I P E Á N G E L E S I N T E R N AT I O N A L A I R P O R T ( A I F A )

How much progress has been made on the this first stage of Felipe Ángeles International Airport, and what is its current capacity?

Felipe Ángeles International Airport was designed in its master development program to be projected in three stages. The first is from 2022 to 2032, and by then we expect the airport to double to an annual capacity of 40 million passengers up from its current capacity of 20 million in the first phase. Based on the demand at the national level, which is growing between 9% and 10% a year, we expect the airport to reach full capacity within the first five or six years of operation.

What is the objective behind the creation of airport group Olmeca-Maya-Mexica?

In 2019, a committee was formed to initiate the necessary preparations and coordination to first create a company that could manage Felipe Ángeles Airport, and in a second phase, obtain the concession to manage the airport. In 2021, activities began to intensify, such that in addition to managing this airport, the airports of Palenque, Chetumal, and Tulum would be managed. In addition to these four airports and Tren Maya, between six and seven additional projects are being considered in the Southeast. Aside from Tren Maya, a number of ecological parks are being considered, alongside certain productive developments, with one being an underwater park. Tulum Airport is currently under construction; it will be completed by the end of 2023 and enter into operation.

How do you want to better connect this new airport with Mexico City?

The main connectivity is already established, namely the Mexico-Pachuca

highway, and then a deviation to Felipe Ángeles Airport. The other one that most of the people who come here, both passengers and service providers, decide to use is the exterior circuit in Mexiquense for Lecheria. Through Pachuca, the matter is a somewhat more complicated due to the congestion in Indios Verdes. However, work is already under way to relieve that congestion and improve vehicular traffic toward the airport. By the start of 2023, the connection between Mexico City International Airport and this airport will be streamlined. A suburban train that departs from Buenavista station and which is in the city center on average in 45 or 50 minutes from this point will also commence soon. By 2023, we will have full connectivity by road such that this airport will have the same arrival facilities as Mexico City International Airport.

Why was it necessary to build Felipe Ángeles International Airport?

In 2019, Mexico City International Airport transported 50.3 million passengers, 18 million more than its installed capacity, making it one of the 10 most congested airports in the world, sometimes even coming in first. If demand continues to grow at 9-10% per year, an alternative was necessary to relieve that congestion in landings and takeoffs at the airport as well as the facilities. This is precisely why Felipe Ángeles Airport was built. When operating this airport simultaneously with that of Mexico City International Airport, we are working on a gradual opening. We are gradually set to reach the targets that we have scheduled in our airport development master program. ✖

What strategies is Felipe Ángeles International Airport using to incentivize more international airlines to use it?

We have received several visits from different airlines, and a route is still being planned from Europe to the airport, directly and daily. We have been asked to reserve a route for commercial reasons from Europe, and we are beginning to receive some information to commence reverse engineering. There is already the possibility of a route to the US. Currently, there is a connection to Houston and Los Angeles, and we will shortly commence a route to Havana. We also intend to operate Panama-Mexico, Costa Rica-Mexico, and Colombia-Mexico routes. These projects have already begun with different airlines. In September 2022, we went from 12 operations to 62.

BIO

Isidoro Pastor Román is a brigadier general in the Mexican Army and holds a PhD in administrative sciences from the National Polytechnic Institute. He holds various diplomas and has participated in seminars in finance, results-based budgeting, human resources, distance education, socioeconomics, public audit, acquisitions in the public sector, risk management, quality management, strategies negotiation, and leadership, among others. He served as general director of administration in a dependency federal.

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FOCUS Fel ip e Ánge le s Int e r n a ti o n a l Ai r por t

COME FLY WITH ME Mexico City’s new international airport is on a mission to establish more routes.

ON MARCH 21, 2022, Felipe Ángeles International Airport (AIFA) was inaugurated with a presidential flight. It is now the Mexico City metropolitan area’s second-largest airport after Mexico City International Airport (MEX), which was unable to serve the sprawling city with its population of over 20 million anymore. To appreciate the size of the greater Mexico City and the necessity of AIFA’s construction, one should remember that MEX and AIFA airports are roughly 45km apart, though both serve the same city.

The construction work on Felipe Ángeles International Airport began in 2019, but the need for a new airport was felt much earlier. For years, Mexico’s aviation authorities had contemplated a planned airport, known as the Mexico City Texcoco Airport. The project was formally announced in 2014 to be constructed in the Zona Federal del Lago de Texcoco. But this airport never became a reality. President Andrés Manuel López Obrador took a dislike to the project, criticizing its high costs and ecological threats, and it was canceled as a result of a referendum.

Despite Texcoco Airport’s cancellation, the fact remained that the city desperately needed a new airport. With a major change of plans, it was decided that only a fraction of the Texcoco Airport’s USD13.3-billion budget was enough to construct a wholly serviceable international airport. The of renovation an existing airport, Santa Lucía Air Force Base, for use as a civilian terminal was chosen as the best course of action.

The renovation was completed more or less within the time frame. The new airport has achieved mixed results in the first few months of its operation. March 2022 marked the sixth month since Felipe Ángeles International Airport’s inauguration, by which time the airport had handled some 3,300 flights carrying 299,000 passengers. Though good enough for a new airport, this was less than 10% of arrivals at the Mexico City International Airport during the same period.

There was clearly some lack of awareness—or perhaps unwillingness—among airlines preventing them from organizing scheduled flights to and from the new airport, mainly because the airport services offered at AIFA were—at the time—not quite on par with what was available at MEX. This was principally because the construction work was far from over. “The airport was designed in its master development program to be projected in three stages. The first is from 2022 to 2032, and it is considered that by that year the airport will have to double to an annual capacity of 40 million passengers,” pointed out Isidoro Pastor, managing director of AIFA, who sat down with TBY.

Things, however, began to change for AIFA around September 2022, when the number of arrivals took off in a big way. This was largely due to the establishment of routs to previously underserved destinations such as Panama City, Santo Domingo, Havana, Puerto Escondido, San José del Cabo, and Veracruz.

The new routs have enjoyed reasonable ticket sales. “In September, the traffic in and out of NLU boomed. Between March and August, the hub had, on average, 33,535 passengers; then, in September, it increased to 97,839 in just one month,” according to SimpleFlying. This makes AIFA almost as busy as MEX. As of November, the new airport is used by six major airlines with more 200 scheduled flights per week, including Aeroméxico, which has come to use the airport as a hub. It seems that Aeroméxico, among some other airlines, has chosen AIFA as an alternative airport particularly for domestic flights and regional flights to LATAM destinations. Other airlines are still sizing up the new airport. “We have received several visits from different airlines, and a route is still being planned from Europe to the airport, directly and daily,” according to Pastor.

Most airlines, therefore, are employing those aircrafts in their fleet that have a limited number of seats for flights to and from AIFA— roughly 100-130 seats depending on the layout. This specialization in terms of destinations and aircrafts is not necessarily a negative thing. On the contrary, this means AIFA has found its niche in Mexico’s aviation sector. In addition to short-haul flights, the airport has come to be known as a hub for low-cost airlines and cargo flights.

Even more flights to and from Felipe Ángeles International Airport will be expected if Mexico regains its US Federal Aviation Administration (FAA) ranking in 2023. FAA is a well-respected arbiter of safety and reliability across the Americas and beyond. “Mexico is making progress towards recovering its Category 1 aviation rating,” according to Reuters. The result is pending on a final audit in early 2023, which will also have a significant bearing on the fate of Mexico City’s new international airport.

The new airport’s fate, in turn, is tied to Mexico’s economic prospects, especially because AIFA is also a hub for cargo flights. As Rogelio Jiménez Pons, Mexico’s Transportation Undersecretary, puts it: “Mexico must consolidate and take advantage of the economic bloc, especially since the US might repatriate companies from Asia back to the region. If Mexico had all the necessary infrastructure, such developments would be profitable for us.” The current administration, which will be in power until 2024, really wants to leave the success of AIFA as one of its legacies. ✖

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INTERVIEW

D i a n a Ol i v ares GENERAL MANAGER FOR MEXICO, L A TA M A I R L I N E S

What steps is LATAM Group taking to better position itself among executive travelers?

LOOKING farther afield With the revival of air travel, LATAM is also focused on sustainability and staying ahead of customers’ needs in an evolving world.

We are working at 74% of our pre-pandemic operations, we have 1,123 flights a day, 133 destinations and travel to 21 countries. We are in the process of re-establishing our position in the executive traveler market. From Mexico, LATAM Group flies to Santiago and São Paulo daily, and also flies to Lima, which are 10 frequencies per week. From there, we have connections to all of Latin America.

We will have 10 flights to Peru. In fact, we are the only airline in South America that flies with a large body plane, and we have all the national Peruvian connections.

According to different studies, only 5% of Mexicans fly to South America, and we want to increase that number. It is definitely a destination we want to work with now, after the pandemic. We have many promotions together with tourism organizations from South American countries and are currently working with our commercial partners, tourism agencies, and several forums. The goal is to increase the weight of South America using its currencies, languages, culture, nature, its wonders, and much more.

What trends do you see from South America to Mexico regarding your sector?

BIO

Diana Olivares has more than 20 years of experience in the airline industry and has dedicated her career to successfully developing projects in Mexico and Central America. She developed her professional career at LATAM Airlines successfully holding various positions, where she was in charge of a team of executives in Mexico City, Monterrey, Guadalajara, and Cancún, as well as different business partners in Central America and the Caribbean. In 2018, she became the first woman to hold the position of LATAM General Manager in Mexico. In 2022, Olivares also serves as President of the National Chamber of Air Transport (CANAERO), the first woman to hold this position in the more than 50-year history of the institution. She has been selected as one of the 100 most powerful women in the country.

Regarding national trends, there is a change of mindset in tourism and flying, as people are becoming more aware and sustainable. Hygiene measures are now also important. We have many processes in place to ensure hygiene and safety. Our company has a sustainable strategy where we care about climate change and the circular economy. For example, the cabin crew uniforms are sent to communities in South America to be used in craftwork. By 2023, we want to get rid of all plastic containers and single-use plastic. We have an airline global goal by IATA: to be zero/neutral emitters by 2050. We want the whole industry to have this type of action. We are also carrying out investigations on bio-degradable fuel. When it comes to fuel, social and political matters, and natural events, aviation has always been in the eye of the

“We are the airline with the most seats for South America.” hurricane. We work with alliances and study the offer and demand. Everything is based on numbers and knowing the consumer. We are used to crises. Right now, fuel represents 40% of the cost for all airlines.

What are your expansion plans for Mexico?

We are the airline with the most seats for South America. Before the pandemic, a flight was taking off every minute. We are conducting a great deal of activity on social media, communicating to consumers and tourism agencies. Paying attention to what each customer needs is crucial for our company, and we became more aware of those needs after the pandemic. Our company has several national Chilean, Peruvian, Colombian, and Ecuadorian flights, as well as many Europe and Mexico-North America connections. Our goal is to keep on growing and build new alliances.

What are your overall priorities for next year?

In Mexico, our goal is the recovery of flights. In Peru, we will increase the frequencies we had before COVID-19. In the corporate sector, we are working on a corporate value proposal. We have sustainability, inclusion, and equity as part of our development plan, and we are completely trained for this. For example, with regards to inclusion, in planes we have staff being trained to deal with people with autism.

With human resources, we are working on including disabilities in our matters.

With regards to equity, we work with many “minorities” that are not really minorities when it comes to numbers, such as women who represent around 52% of the population. In Brazil, which represents almost 50% of Latam, a big part of the population is black, so we work on ways on racial equality, as well as with LGBTQ+ people.

Such diversity helps us greatly. ✖

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B2B

How much growth is there in the leasing market?

RGDI The leasing market is a solid mar-

Re gina Gr anados D e I ta

Pa b l o Marav er

CEO, LEASE PLAN

CEO, OMNILANE

MOBILITY TRANSFORMATION Mexico’s large market makes it the ideal market for innovations to transform mobility, from parking and toll fee payment solutions to professional fleet management.

What opportunities for growth did you identify in Mexico’s transport and mobility industry?

REGINA GRANADOS DE ITA Mexico is a

market under development in this industry. We provide a consultancy service because there is a taboo in Mexico when it comes to leasing. We not only offer software service leasing but also solutions in maintenance, insurance, and fuel cards. We conduct reviews of the fleet of different distances and explain to the fleet manager how we work. We work with our customers to show them the savings they can accrue and help them select the best car. Cars are usually not a company’s business, and they generally do not have the expertise in fleet management. They should instead leave it to us to manage this aspect. We work with all companies, regardless if they have one car or 10,000. It does not matter if they are in pharmaceutical or logistics, we specialize in all kinds of customers.

We are flexible, and we know the needs of our customers. We seek contribute to the professionalization of the leasing

ket. With the pandemic, we worked on many initiatives to help our customers and our prospects. Many people do not yet understand leasing and its advantages, which is why we have been focusing on the consultancy part of our service for the past few years. That helped us grow by double digits since the beginning of the pandemic. We are successfully helping our clients reduce their costs and establish more agile operations. Education is needed to overcome misinformation on fleet management and leasing. Companies need to understand how they can gain savings and acquire expertise if they work with us. Looking at the future, by 2030, our target is for all our company cars to be electric. However, Mexico is not yet prepared for having electric cars; it does not have the infrastructure. We believe that hybrid cars are a more realistic first step. I love my electric car and am testing the car before we sell it to our customers. However, I do not think Mexico is yet ready to have electric cars.

market in Mexico.

How is Omnilane helping create a better user experience in terms of mobility?

PABLO MARAVER Omnilane provides three primary services: collection and gathering of the information about one’s vehicle; an all-in-one payment solution for their traffic fines, parking, and car verifications; and a guide to planning delivery routes. Our customers are mainly parking companies, whether they are parking operators or real estate groups, parking owners, shopping centers, hospitals, or private parking within cities.

Also, we have fleets and logistics companies such as FEMSA, KAVAK, or DHL that offer services to their fleet regardless of the industry they belong to. We channel all the information to them, saving them time and money. We can also be reference information within the country for a better delivery route or the best places to set up warehouses. Interestingly enough, we are evaluating the possibility of providing our parking lots solution to a toll collection operator. In an ideal scenario, drivers can enter a paid highway with only their mobile phone.

PM Instead of creating a new vertical platform, we decided to develop software and hardware integrate various platforms. Omnilane unifies the most digital access parking platforms or wallets to enter and exit parking lots. This way, the final users can choose how to pay instead of downloading a single app for every parking lot. Drivers enter a parking lot, scan their phones to get in and out, and the platform or wallet that they choose will charge them the parking fees: that is it. It is a faster experience in terms of the relationship between users and parking lots. It also allows them to opt for the most economical offer if a platform is willing to give them a discount or maybe free parking for using it five times or so. Also, it is a hook to have more captive customers for the platforms, wallets, and parking lots. Ultimately, we are the operator that routes requests to digital parking operators, ETC companies, drive-throughs, and gas stations allowing us all to win. ✖

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NAVIGATING growth

MSC Mexico is bullish about the upcoming opportunities in Mexico’s logistics market in light of the restructuring of global supply chains.

Headquartered in Switzerland

Leader in global container shipping

BIO

Victor Monroy Vollmer has a successful career in shipping.

He has assumed several management positions from an early start. Vollmer has experience in developing highperformance teams with clear guidance and shared values. He is well acquainted with Asian, European, and Latin cultures.

He previously worked as managing director Area Middle America in Hamburg Süd.

In what ways has Mexico strengthened MSC’s international business strategy?

Mexico is an important market, and the supervising head office for a number of MSC’s Central American markets and is also an important point for many more. Due to its geographical positioning, MSC Mexico has opened MSC’s doors to an abundance of business opportunities that have allowed us to strengthen our international business strategy, constantly adapting to the needs of our customers and partners worldwide. Besides connecting Central America, Mexico allows us to connect to key markets in North Europe and other areas in Latin America. Right now, there are also many opportunities in Mexico’s logistics market considering the restructuration of global supply chains. As we have seen and adapted to the changes of global supply chains, we have also identified alternative outcomes, including that of the developing manufacturing sector in Mexico. Noticing these developments, MSC is prepared for any additional influx or restructuring of supply chains that may impact our customers’ business in the area and act accordingly.

Why has MSC identified air cargo services as an important opportunity in the market?

Responding to the needs and demands of customers across the market, we have announced the start of our MSC Air Cargo service. The experience of supply chain disruption during the pandemic showed the usefulness of air as a complement to ocean container shipping solutions. For MSC, air cargo represents a great opportunity to offer a comprehensive solution and expand our portfolio of shipping and logistics solutions, which will be able

V i ct o r Mo n ro y V o llm er MANAGING DIRECTOR, MSC MEDITERRANEAN SHIPPING C O M PA N Y

to serve various sectors; including those that traditionally have significant air cargo needs.

What investments has the company made toward further providing digital solutions?

At MSC, we are constantly working on creating innovative solutions that will allow us to provide the best in-class service to our customers and partners, ensuring increased efficiency and assurance that all cargo will be delivered safely and timely. Throughout the years, we have worked on developing many digital solutions to benefit our business, including online tracking and other business insights through direct integration solutions, smart containers, eBL (electronic Bill of Lading), and our TradeLens network.

How is MSC preparing itself for further global shifts that could come in the next year?

With rapid restructuring of global supply chains and possible changes in the global economy, MSC is focused on strengthening our business practices and strategies to better be prepared for any upcoming global shifts in the upcoming year. Our lessons learned from the global pandemic and the changes it has brought on in a wide range of aspects have guided us as we navigate through the development of strategies that will allow our business, and our customers, to keep moving forward. We are closely observing the booming manufacturing business in Mexico and hope to continue to develop our ties in such an important hub, continuing to serve as the preferred shipping partner for many Mexican farmers, exporters, importers, business owners and more. ✖

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INTERVIEW

raising THE BAR Element Fleet Management wants to raise greater awareness of fleet management as an industry in Mexico and help companies become more profitable and their fleets more efficient.

Man u el Tam ay o COUNTRY HEAD MEXICO, ELEMENT FLEET MANAGEMENT

What role does Mexico play in Element’s international strategy?

Mexico, as a key market, has played a vital role in Element’s growth. We operate in five countries: Mexico, Canada, the US, Australia, and New Zealand. However, Mexico started the growth journey earlier than the US and Canada, and some of our growth strategies originated here. Mexico has become a strategic market with extensive growth and the largest growth country for Element outside the US. We manage around 1.5 million vehicles globally. We generate many synergies from North America, pursuing global integration and best-practice sharing for our clients. That has created a great deal of support for our growth strategy.

What trends are you seeing in fleet management in Mexico?

Fleet management as a whole in Mexico is a term that lacks full understanding.

We approach companies and talk about what it involves, discussing leasing or maintenance management, thereby effectively creating the industry in Mexico.

For example, we talk about self-managed fleets—fleets that serve a core business like medical distribution. The company internally manages that fleet, and this is the largest growth opportunity for Element in Mexico today. We estimate that about two-thirds of the fleets in Mexico are self-managed. Companies still manage their own their fleet, even though their core business is not related to it. It is not their specialty, and that is where we offer to manage that part of their business. We assure them of the

highest efficiency levels, making it more profitable for their company. We scale our business, technology, and suppliers using our business model to better serve the fleet, so they can focus on their core business.

Which industries have registered the greatest demand for such services?

We see activity from the F&B and pharmacy industries. There is now more adoption in logistics and last-mile delivery companies like DHL or FedEx. Such companies are more open to taking a look at our services and assessing how we can add value to their overall processes or operations. Consumers want to receive their products quickly, and there has been major growth over the past few years. More companies, not only logistics or last-mile delivery companies, but also retailers, have started creating fleets to service their clients or distribute their own products, and we have moved on this opportunity.

Mexico, which makes up 110,000 drivers or more. If we can impact 10-20% of our drivers, that is already a major impact for the country as a whole in terms of traffic, driving behavior, and accident levels. We are working with many of our clients on training and creating awareness. There is the term “gamification” that I like talking about with clients, because it brings a sense of fun to raising awareness and reducing accidents in fleets. Technology also helps us a great deal today, and we use telematics to deep-dive into every aspect of what happens in a vehicle. It is like GPS on steroids. We can measure all kinds of driving behavior in real time, with hard data for each vehicle in a fleet.

This enables us to focus on the areas of opportunity for a fleet to improve than with just training alone. For example, we can identify if drivers are bad at braking and give them specific remedial training.

This impacts both the performance and safety of a fleet. ✖

How can Element help companies increase the safety of their fleets?

There is safety in terms of excellence, which is also a major trend for our industry. That also encompasses our ESG initiatives. Theft is a serious issue in Mexico, though fortunately, most of our fleets have few such incidents. We help them out with telematic devices, and we bring in suggestions and speakers to talk about safety concerns. Fleet management as an industry is working hard to foster that awareness. It is a social responsibility we have as an industry to do better.

Element manages 110,000 vehicles in

BIO

Manuel Tamayo is currently Country Head for Element Fleet Management Mexico. Prior to taking over the country head role, he was the VP sales. Tamayo has 12 years’ experience in sales and holds an industrial engineering bachelor’s degree from Universidad Anahuac and an international MBA from EADA Business School in Spain. Before joining Element, he was with Santander Mexico and, before that, GE Capital business, a General Electric subsidiary, in Mexico.

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Sunrise in Puebla, Mexico

VALUE OF THE CONSTRUCTION INDUSTRY (USD BN) SOURCE: STATISTA 130 120 110 100 90 '18

'19

'20

'21

MEXICO HOUSE PRICE INDEX (REFERENCE: 127.54) SOURCE: THE GLOBAL ECONOMY

3Q2021

4Q2021

196.1 204.1 207

1Q2022

211.2

2Q2022

211.2

Image: Bo Arrington

2Q2021

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CHAPTER SUMMARY

Construction & Real Estate

THE NEED FOR MORE or the 2023 Mexico edition of The Business Year, interviewees highlighted that there is an important contraction in new housing developments and a strong interest in directing investment toward this gap. “Mexico is a country with a relatively youthful population, which translates into demand for a million new homes every year,” shared Eugene Towle, Managing Director of Softec. “And last year we did about 230,000, which amounts to 20% penetration of a million-unit market. This means that we're not reading the market properly; so, where then is the opportunity? The opportunity is precisely in reading the market properly and in finding the products that people need and want to buy, which means going back and doing your homework,” he continued.

The few that managed to continue building during the pandemic have become key players in helping satiate an underserved market. “In terms of numbers, demand will rise because there is a huge deficit in the construction of new units,” said Federico Cerdas, CEO of Global Businesses & Skyhaus. “This places Skyhaus in an ideal position as we were able to continue developing during this time. We are seeing a big demand for residential projects that are for sale or rent, or

F

multifamily market,” he went on.

The industry, however, faces an important roadblock as the government is not prioritizing the development of new housing in the country causing scarcity in capital. “People forget that real estate development is a capital-intensive business, as you have to put in capital to buy land, do your entitlements and permits and processing, and then you get financing to build whatever it is you are doing,” explained Towle.

Associations such as AMEFIBRA are playing an important role in helping connect players to capital through the public market as it is an underused tool in Mexico. “The REIT market started in the US in the 1960s and in Mexico in 2011, almost 50 years later. The sector is in its 10th year, so we still have a great deal of ground to cover,” said Simón Galante, President of the Mexican Association of Real estate FIBRAs (AMEFIBRA). “We have been adopting many good practices and learnings in the world of REITs,” he concluded.

The market is also exploring the possibility of using prop-tech in fundraising and connecting the real estate market to end-users. This chapter includes the perspective on some of the leading companies in the market for this segment, including La Haus and M2 Crowd. ✖

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Mexico 2023

INTERVIEW

Simón Ga lan t e P R E S I D E N T, M E X I C A N A S S O C I A T I O N O F R E A L E S TAT E FIBRAS (AMEFIBRA) & CEO, FIBRA HOTEL

Can you elaborate on the current state of the FIBRA industry in Mexico?

A UNITED front AMEFIBRA is the face of FIBRAs in Mexico in terms of dealings with the government, regulatory issues, and everything else related to the sector, with over USD37.66 billion in total assets among members.

Our association united the 15 FIBRAs in Mexico and our main focus is promoting the FIBRA market in Mexico through national as well as international investors.

This association also serves as the front for all issues with the government, regulatory issues, and everything else related to FIBRAs, so that communication is more efficient and is focused on having one centered strategy for all FIBRA players.

There is about USD37.66 billion in total assets among the FIBRAs. We have more than 2,000 properties in the association, with about 290.5 million sqft of rentable space. FIBRAs are present in many sectors, including the office sector, industrial, hotels, retail, educational and self-storage.

We also have about 400,000 collaborators or employees in the FIBRAs, directly and indirectly. This financial tool plays an important role in providing jobs for people in the 32 states in Mexico. Furthermore, 14 of the 15 FIBRAs have presented ESG reports, and AMEFIBRA as a whole has also done so. That is important in that we want to be a leader in real estate and play a public role in the ESG movement. This is not only a trend or something that investors want; we expect a full return of investment on such an important movement as ESG. We are also leaders in the emission of green bonds, with almost USD657 million in green bonds issued by all the FIBRAs. This is not only in support of ESG, but can also help save money and achieve a better rate. Another key point is that three of our FIBRAS are listed in S&P’s 2022 Sustainability Yearbook. We are extremely proud of their achievements.

BIO

Simón Galante Zaga is CEO of FibraHotel and founding partner of Grupo GDI. Galante has more than 30 years of experience in the real estate sector in structuring, acquisition, development and financing of real estate projects.

He holds certificates from IPADE and Harvard Business School.

In what ways is the Mexican REIT market still in development?

The REIT market started in USA in the 1960s and in Mexico in 2011, almost 50 years later. The sector is in its 10th year, so we still have a great deal of ground to

cover. We have been adopting many good practices and learnings in the world of REITs. (NAREIT) However, we are still in the development mode. The most important thing that needs to happen is a strong corporate government and inclusive boards with men and women. We have been extremely vocal about equality. For example, there are two female board members on our board, and we believe we can grow that number when required and when we see talent. The other thing is that we need to reengage the international community in FIBRA investments in Mexico. When we went out to market, there was great participation from institutional international investors, and now we need to return.

At FIBRA Day in New York City, we want to educate potential investors in order to diversify our investment into different markets. We also need to get better at disclosure and have been working strongly on that. Our disclosures and reports are world-class, though we want to improve further. We have also diversified into different industries, geographies, or risks.

We are the best professionally managed option. If someone wants to invest in the real estate market with dividends, a clear path, and professional disclosure, we are the best option. FIBRAs will grow strongly in the next 10 years.

What are the advantages of the Mexican REIT or FIBRA market in comparison to other emerging markets?

Mexico has a great opportunity with nearshoring. We are becoming, by far, the largest manufacturing opportunity next door to big markets. In the industrial sector, the past few years have been the best in the history of Mexico. The possibility to grow on that is enormous, and all the parallel things that go with that. This is a great opportunity that other countries do not have.

We have a historic opportunity in Mexico that we will grow, and this will stimulate all the segments of the FIBRA through that. ✖

Construction & Real Estate

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INTERVIEW

above THE REST With extensive expertise in building vertical residential developments in Mexico City, Skyhaus has the know-how and experience to take advantage of the upcoming boom in demand for homes.

F ed eri co C erd as CEO, GLOBAL BUSINESSES & SKYHAUS

Why are residential projects for rent an underserved market in Mexico?

This is an underserved market that we are starting to develop products for. For 2023, there are three things that we want to do: consolidate 13 existing projects plus eight more that we are set to add to our portfolio. There will be five residential projects for rent, as well as three residential projects for sale. This typically comprises large buildings with many units located in crowded areas and on main streets. We will divide these traditional companies in 300-unit apartments distributed throughout various different projects in order to diminish the impact on the community. We will focus on smaller more ecological buildings. We are focusing on Mexico City currently.

How much interest do you see from international funds in Mexican real estate?

It depends on the fund because there are mixed feelings toward Mexico. If the fund has already invested here, it knows the local advantages. When a fund has not had experience here, it is hard to win their attention due to negative risk perception. Mexico has a young population.

There are many underserved markets, in addition to the residential sector, due to the lack of local expertise. Foreign investors with a competitive product can go far in the absence of major competition.

The third thing is that the funds understand that the long-term vision of our country goes beyond any one political administration. The business community is thinking 10-12 years from now.

Mexico is still the best country to operate in. We held an event gathering funds from the US, Canada, Europe, Singapore, and the Emirates and will hold another in 2023 to raise awareness. I also want to

create Fibra Sky, a multifamily platform, because you need to have the assets in place in order to raise money at the stock market. It takes several years to launch a FIBRA. What housing market demand trend do you predict for Mexico City?

In terms of numbers, demand will rise because there is a huge deficit in the construction of new units. The current government stopped issuing permits for a period of time that stalled the production of new housing. This places Skyhaus in an ideal position as we were able to continue developing during this time.

We are seeing a big demand for residential projects that are for sale or rent, or multifamily market. This is the perfect window for us to gain market share. We want to continue producing the same product, namely 90-100sqm apartments in middle-class areas. We will also add co-working areas to the projects so that people are able to have meetings when not in their offices. Our focus will remain on optimum locations and quality design and construction.

partnership is not easy; dialogue rather than dispute is essential in a partnership.

What main advantages do you offer?

First, we have that expertise. Second, we are vertically integrated to be a one-stop solution for all project-related issues.

We have our own sales department and construction department; in short, everything is under one umbrella, which makes for great efficiency. The third thing is our ability to continuously build bridges, by which we are able to create out-of-the-box solutions to common problems, which most companies cannot. ✖

What would be your advice to a firm keen to enter the market?

First, everything is about partnerships.

Foreigners who want to invest in Mexico or any other country must identify the best partner, who should have three things. First is expertise in the market. In our case, we are a residential developer, engaged in vertical housing in Mexico City. The more specific the expertise, the better. The second is someone who has satisfied all the administration procedures in place that help them to comply.

The third is having someone capable of effective communication. Maintaining a

BIO

Federico Cerdas is co-founder of Global Businesses Inc. (2002), CRDS Holdings (2016), and Cobra Development Fund (2018). Additionally, he created two brands to represent his group in the sector: Skyhaus focused on homes for sale; and Viveh focused on rental housing. He graduated as a mechanical electrical engineer from Tecnológico de Monterrey and has a master’s degree in business management from IPADE. He participates regularly in the most important forums of his sector in cities such as New York, San Francisco, Miami, London, and Mexico City, among others.

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Construction & Real Estate

203

FOCUS Dem an d fo r i n d u s t ri al re a l e st a t e

A PLACE TO BUILD Mexico is on the verge of a nearshoring renaissance, which has led to a boom in the industrial real-estate sector.

THE REAL ESTATE SECTOR is recovering slowly but surely in Mexico.

Construction activities showed growth in early 2022, despite inflation and the increased prices of construction materials. Civil works commissioned by the federal government as well as the states are leading the market. But somewhat unexpectedly, the growth trend is almost as significant in the industrial real estate sector. Perhaps this would not be so surprising if we took one factor into consideration: the rise of nearshoring in Mexico has raised the demand for industrial real estate. This was partly caused by disruptions in intercontinental offshoring supply chains during the pandemic. “Companies [are now] investing in production closer to home so that they don’t have to deal with global sourcing challenges,” observes an article by Fortune. The closest and most trustworthy manufacturing hub for North American businesses is still one place and one place only: Mexico.

Nevertheless, there is also a political side to the story. With the US’ increasing mistrust of China and its politics, American businesses are encouraged to restrict their dependence on Chinese suppliers and subcontractors. Such businesses are naturally turning to Mexico for nearshoring operations. This has so far led to a limited but promising revival of Mexico’s manufacturing sector, and the nearshoring wave has been gathering momentum in recent months.

Well-known credit analysis firms such as Fitch Ratings have made favorable forecasts for the industrial real-estate sector in the country.

Fitch Ratings believes industrial properties will see a steady growth in their rental prices throughout 2023. Or probably for a bit longer as “logistics and distribution facilities near airports have contract terms usually ranging between three years and five years,” as Fitch Ratings concedes.

Even this may be a rather conservative forecast, given the fact that nearshoring contracts are usually signed for longer periods—at times up to a decade. Judging by the current nearshoring renaissance in Mexico, properties with an industrial application are likely going to be in demand for many years to come.

Admittedly, construction has become costlier after the pandemic and the onset of the current wave of global inflation. “New industrial developments are experiencing construction costs around 25% higher than pre-pandemic cost levels,” according to Fitch Ratings. Nevertheless, rental rates are growing quickly enough to make investment in industrial developments reasonably profitable.

The sector is keen to attract international investment. Selective investment in different segments of the Mexican real estate sector

is led by trusts known as fideicomiso de inversión de bienes raíces, often simply known as FIBRA. Simón Galante, president of the Mexican Association of Real Estate FIBRAs (AMEFIBRA), recently told TBY that, “We need to reengage the international community in FIBRA investments in Mexico. When we went out to market, there was great participation from institutional international investors, and now we need to return.”

All that said, finding the right venue is not always an easy task.

Manufacturing operations in on par with standards expected by international investors require the right amnesties, adequate square meterage, and—as always with real estate—the right location. Lands near railways and the US border are particularly in demand, though Mexico enjoys over 130,000km of world-class highways which ensures the transportation of cargo from any part of the country to the US in under 24 hours.

Indeed, Mexico’s nearshoring framework offers a whole host of incentives to foreign manufacturers. Nearshoring projects executed under a “shelter operation” with the right license, including the IMMEX program, are exempted from the country’s 16% value-added tax (VAT) for the import of their equipment and materials. Such exemptions are contributing to the industrial real estate boom in the country.

Other factors desired by investors and foreign nearshoring clients include the availability of the needed skilled and semi-skilled labor force in the area as well as proximity to the local vendors, service providers, and suppliers whose presence adds synergy to nearshoring operations. As such, the country’s human capital is also playing a role in the industrial real estate sector.

With the internationalization of the country’s industrial real estate sector, we have seen some attempts by the authorities to give the market better transparency and regulatory practices. The so-called back-door relationships that are common in certain parts of the Latam region have become increasingly useless in Mexico to secure a good deal.

Industrial real estate is also an investment opportunity for foreign nationals, as they can legally own property in the country, though there are certain restricted zones, including 100km from international borders. Local lawyers and consultants, meanwhile, continue to come up with innovative ideas such as company registration or forming partnerships to let foreign nationals benefit from the sector and its good prospects. ✖

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Mexico 2023

INTERVIEW

Eug e n e T o w le MANAGING DIRECTOR, SOFTEC

What reasons are behind Softec’s focus on residential projects?

BUILDING better To better meet the immense demand for residential spaces, Softec is keen to become more customer centric and design spaces that truly meet their needs.

BIO

Eugene Towle has been Managing Partner of Softec since 1987 and is the founder of several companies in the real estate and high-tech sectors, including Hipotecaria Su Casita, Sand Inmuebles, and Mac Zone de México. He is an independent director of public and private companies in the real estate, hospitality, and financial sectors. He was marketing director of Apple de Mexico (1984-1987).

He participated in the course Birth of Giants for the development of highgrowth companies at the Massachusetts Institute of Technology. He has taught real estate marketing courses at ITAM, Universidad Iberoamericana, UNAM, and Universidad Anahuac since 1992 and has been a guest lecturer at Harvard and USC. Towle is a mechanical engineer with master’s degrees in mechanical engineering and business administration, all from Cornell University in Ithaca, New York.

The reason that we focus so much on residential is that in a given year between 5,000 and 6,000 new housing projects are evaluated for initiation or development.

About 200 retail centers of different types, about 50 or 60 hotels 20 to 50 office buildings and five to 10 industrial parks are evaluated. So, the reason that we undertake mostly residential is that that is where the bulk of the development activity occurs, and if you look at the value of the Mexican industry in 2021, it was estimated at almost USD25 billion half of which was residential construction and the rest commercial real estate.

Why has Softec started to see a contraction in new housing projects?

One of the things that we have seen in the last four years is a contraction in the start of new housing projects. Real estate development is a capital-intensive business, and the capital to invest in buying land and to do the titling of projects has been limited, with investors wary about investing in this market. Yet, at the same time curiously, we have had the highest demand for new homes. The origination of new mortgages is at an all-time high, especially for homes in the middle and upper market. When the markets are expanding, developers tend to ignore their consumers and start building according to what is permitted, what the municipality allows in terms of density, type of product, and what is financeable by investors. The client seems to get sidelined. Many developers start to build a large volume of high-end project that are not focused on a specific client, which created the perception that the entire housing industry is over-supplied, which is not true. There is a tremendous scarcity of inventory, and new homes are becoming scarce. Mexico is a country with a relatively youthful population which translates into demand for a million

new homes every year. And of 1 million homes, in the peak year of real estate development in 2006/2007, we built almost 600,000 of them. And in 2021, we did about 230,000, which amounts to 20% penetration of a million-unit market.

This means we are not reading the market properly; so where then is the opportunity? The opportunity is precisely in reading the market properly and in finding the products that people need and want to buy, which means going back and doing your homework.

What are the main trends in the real estate market currently?

Our mantra is that you have to focus on your client and users’ needs. One very interesting thing is that we are re-centering to that idea to being more consumer centric. In housing, and residential, consumers are asking for high-speed internet, places where they or their children can study or work, and better balconies in apartments. The other thing they are asking for is adaptable spaces that can be used for different purposes at different times of the day. In the offices space, what we are finding is that offices are transforming. We will see a redefinition of spaces to have more meeting rooms, training rooms, places to meet with clients, and so forth, and there will be remote offices for different projects and so forth. Companies have to be careful about maintaining the esprit de corps, making sure that people know they are part of a team that will support them. Meanwhile, for hotels, we expect demand over the next 15 years to be between 260,000 to 300,000 new hotel rooms. Currently, we are at about 300,000 hotel rooms, and so the stock will probably double over the coming 15 years. In fact, what we have seen is that developers who began projects over the past two years of 2020-2021 are selling twice as fast, as those with older inventory. ✖

Construction & Real Estate

205

B2B

Simon Dalgle ish

R o d r i g o S án ch ez -R í o s

CEO, M2CROWD

FOUNDER, LA HAUS

What kind of projects are you working on in the real estate market?

PROPTECH Providing efficient and effective solutions to challenges in the market, these proptech companies have established a niche for their innovative models.

What is the most innovative aspect of your business model?

SIMON DALGLEISH For a long time, small

groups of wealth individuals have pooled their money together to invest in real estate development. We analyze different construction projects, identify the products that we think are the best, and agree on terms with the developer as to how much M2CROWD will invest in the project, what returns it should generate, and how long it will be before those returns are realized. Once we have that agreement, we show this to our community of investors and seek their participation.

Every single project is separate, and they can invest, for example, MXN5,000 in one project, MXN100,000 in another, or not at all. Every single project that we offer is personalized. Each individual makes their own decisions about how much they want to invest in any project.

Once we fund the project, we deliver it to the developer. And then, once it has been built and the sales start to materialize, we start to receive those cash flows in return, and distribute them back to the investors. We typically group together funds from about 500 different investors to invest MXN10 million for a developer to complete project or begin a

while, we have built relationships with over 1,000 developers; we help them to sell their inventory faster, and they use our data and consultancy to make decisions to build the houses that market needs and make their offer fit better to the reality. We have the data that banks lack and can underwrite and provide financing to the developer and buyer to compensate for a broken system. We produce a virtual cycle of more affordable supply that meets demand and ensures that the resources—the time, the construction materials, the capital the developers spend—go to meet demand and address the deficit.

new project. Essentially, we perform the due diligence of the project to be developed. And then when it comes time for payment, we manage all the follow up to make sure that we get paid, and then distribute the money back to the investors.

What is the main differentiator between La Haus and other real estate technology apps?

RODRIGO SÁNCHEZ-RÍOS We, the founding team, developed residential, commercial, and industrial projects in Colombia and experienced firsthand the challenges and growing pains that developers in Latin America encounter. We saw a fundamental lack of actionable data on which to plan construction results in uncertainty. La Haus is a solution for all of those problems that developers face in bringing housing units to market efficiently. Our focus is a marketplace that provides the world-class breakthrough consumer experience of buying a new home. We embed our software into developers whereby they launch new projects exclusively through La Haus, and with that, we give the buyer real-time information of what is available. They can do everything online, from the signing of documents to payments. We have sold 20,000 units through La Haus. Mean-

SD We remain largely focused on residential buildings in Mexico City, but we have begun to realize projects, for example, in the nearby states of Querétaro and Puebla. M2Crowd differentiates itself by working closely with its investors to manage expectations as to when a project will deliver returns. Around onethird of our projects return principal and interest before the projected completion date, another third pay on time, and the final third after the projected date. This is why it is important that we be clear with investors. We prefer projects where the sale price of the units are no higher than a maximum of MXN5 million in the luxury market because projects at higher price points are often slow to sell.

What notable trends do you foresee?

RSR It is not so much about large spac-

es anymore; it is about wanting to live in the urban center with a distinctive cultural experience. If it is Mexico City, they want to live close to the museums, parks or bars in La Roma. Through La Haus, we want to make a world that resembles New York and Singapore: a vibrant city of high density where you can walk everywhere so you don’t need to invest in a car, or in commuting. We give developers that information, ensuring that when they bring that to market itself, commercial goals are achieved swiftly. That is our core business model. And on top of that, we have the provision of financial solutions to developers and buyers. Our actual target market is middle-class units of about USD100,000, which is where we see the greatest demand. ✖

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Mexico 2023

INTERVIEW

M a ur ic i o S u árez MANAGING DIRECTOR, FICADE

What projects are most in demand in the residential sector and why?

A NEW era In line with changes in housing purchases and its institutional structure, FICADE is undergoing a transformation process to become more resilient and structured as an organization.

We have been through complex times, though today we are seeing a recovery.

The most dynamic sectors continue to be those with lower budgets, generally under MXN 2.5 million per tenement. In Mexico City, due to the price of land, it is difficult to have such prices, and people generally have to look at the outskirts or in nearby towns to find anything under MXN2 million. That is the most dynamic sector, however, and the others are not at their best levels yet, even if partially recuperated. People’s home purchase decisions were postponed during these uncertain times. These needs are still present in society, but there is a high level of uncertainty in people’s lives. Some have decided to rent, which is a niche that will develop in more profound ways in the coming years.

It is currently a niche and business model that is worth viewing for solutions and has different financial considerations for household purchases. In more developed countries, the rental market has a much higher market share, while in Mexico, it is a new market to explore and develop different business models and niches to serve incoming demand. Housing demand will explode somewhere in the near future, and we need to be ready for when that happens.

What is your strategy at FICADE, and how are you preparing for evolving market activity?

BIO

Mauricio Suárez founded FICADE in 2013 and has served as CEO since its foundation. Between 2006 and 2013 he worked at SARE Mexican developer, performing various activities in different areas of the company. He is an industrial engineer graduated from Universidad Iberoamericana and holds a degree in corporate finance from ITAM, international business from Harvard, and a master’s in promotion of real estate projects from Universidad Anahuac del Norte.

Right now, we are in a restructuring process. We are designing FICADE’s future mainly for two reasons: the changes in housing purchases and our founding partner and main shareholder is no longer part of our group. There has been a huge change in our structure and decision-making processes. This year will be about reformulating our strategy and business models. We are putting together a board of directors for a much more institutional mission. I would like to build FICADE into an institutional company, and the housing sector is not accustomed to such a vision

since they are generally family businesses.

We are setting our goals toward utility and profitability. The healthiest vision is to always orient toward profitability instead of growth and keep the whole organization’s focus on efficiency and improving processes. I am not that interested in size; my focus is more on efficiency. With regards to high-quality products, it is not only about the niche of luxury but also high quality under MXN3 million.

How have your new constructions focused on ESG and sustainability?

FICADE counts on three different types of certifications. One is called Edge and is endorsed by the World Bank. It is directly related to everything LEED. We were the first company to be granted this certification in Mexico City with our Revolution project.

We currently have the two projects of Skypark—Amores and San Lorenzo. This certification helps us save on resources such as water, electricity, and construction materials, and everything related to the construction process has to be sustainable.

Also, the end customer will enjoy benefits in their apartment’s operation costs. Skypark also counts on parks on their rooftops. We are constantly looking for sustainable schemes and mechanisms that will allow us to remain at the forefront. We are the first company with the Edge certificate in Mexico City, and we will remain active in this search for sustainability, which is an extremely important standard in today’s companies.

What are your predictions for the Mexican real estate market?

We are extremely excited, even if today’s environment has not positioned Mexico as the most attractive market for investors. We trust in Mexico and want to keep on contributing in everything related to investments. I support the idea of finding new opportunities. As an entrepreneur, the ability to adapt to any challenge that may arise is of extreme importance and always bears fruit. ✖

Construction & Real Estate

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INTERVIEW

building IT HIGHER With the population boom in larger secondary cities as well as a greater demand for mid-range vertical housing, Venit is poised for more projects in the coming years.

L u ca P i cco lo CEO, VENIT

What is your perspective on the current state of the real estate industry in Mexico?

We will still have perhaps another two years of adapting, changes, and even trying to understand the end result of not just the pandemic, but also inflation and high cost of materials and steel.

With all the changes in construction and elsewhere, we will see many changes in consumer habits. The capacity and quality of spending will be a challenge in the coming years. At the same time, there will also be some interesting opportunities.

Industrial logistics in real estate is having a boom as a result of the new trade agreement with the US and Canada, the pandemic, the nearshoring, and everything else. Industrial growth is currently at a peak, and I expect it to remain this way for a long time. The interesting question here is how it will change the landscape of other real estate areas such as offices, retail, and especially housing. The biggest change we will see in the coming years will be housing.

some secondary cities. The main example is Querétaro, though there are other cities, like Tijuana, Mérida, and San Luis Potosí. As well, tourism is also a driving factor in Mexico, especially in areas like the Caribbean and the Pacific. It will be interesting to see how Riviera Maya continues to grow and shape itself.

What pricing are you targeting in your housing project?

We sought to have many options. We are now on the mid-high to upper for different projects. We are even working on going slightly lower to the middle-class, below MXN2 million. We always work on vertical housing. It will be an interesting challenge because of the high increase in costs, inflation, and higher interest rates, which also put more pressure on credits, mortgages, and all that. We are unsure how the market will adapt to that, though mid-range homes continue to be one of the fastest-growing segments with great opportunities because of the lack of products.

some mixed signals because we do see a great deal of foreign investment into industrial real estate.

What are the next steps for Venit?

We see an interesting shift in some places and in housing. We see great potential in multi-family developments, and we like that niche and expect to grow there. We are currently working on a few projects that involve a multi-family investment.

There are many operators of multi-family that have started to focus on Mexico City because of the volume and demand.

However, there is also great potential for smaller groups to have a solid business in other places like Querétaro. It has the perfect demographic for a boom in demand for housing. Furthermore, this is not only true of Querétaro, but Mexico as a country. The country is seeing a large amount of mobility within Mexico itself. ✖

What kind of projects are you developing?

As a result of the pandemic, we decided to focus our strategy from mainly on housing and especially on vertical housing areas. We still have retail and office projects in mind; however, there are currently not our top priority. We are looking at the changing retail experience. There are also many question marks about office space and the nature of the office. We are currently seeing interesting trends in both areas. The first thing is the growth in

How much demand do you see from housing projects?

Raising capital has been a challenge. For now, we do not have any liquidity problems, though things are more challenging today. We need four times the meetings to get the same amount of capital as compared to pre-pandemic times. I do not expect this to change significantly in the coming years, at least until the next federal election. On the other hand, there are

BIO

Luca Piccolo holds an MBA from Universidad San Pablo CEU in Madrid, Spain (2004). He has worked from 1998 until 2007 at various businesses, including Dbrains Web Studio and Grupo Integer. Since 2007 he has been working at Venit Investments, first as a COO and since 2009 as CEO.

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Mexico 2023

INTERVIEW

Jua n Pa b l o R am í rez C as t ellan o s F O U N D I N G PA R T N E R , BANTIMEX

What projects are you currently working on?

ARTISTIC vision Art plays a major role in Bantimex’s philosophy, and the developer has several groundbreaking projects that can both contribute to the environment and also uplift artists at the same time.

BIO

Juan Pablo Ramírez Castellanos is an expert in raising capital and private investment, fundraising for third-sector organizations and business projects with high social impact, and management of government funds and international funds. He has a master’s in senior management and project management and is a mentor of the National Entrepreneur Institute. Currently, he is part of the youth business coordinating council, the social union of Mexican businessmen. Previously he worked as CEO of CIEM and FIDESOL. He has a Master in Business Management at Universidad Anahuac.

Looking at the real estate sector from a group perspective, after doing a great deal of research, we have determined that there is currently a greater capacity to move units built in Riviera Maya, and that is where we are 100% focused. The second place where I see extraordinary potential is Los Cabos, followed by the usual cities like Mexico City, Guadalajara, Monterrey, and Querétaro. We have investments in Puebla, Querétaro, and San Miguel de Allende, and the newest area we have entered is Riviera Maya.

Markets in the interior of the country, with the exception of some cities, are contracted, and, for builders like us, that makes it difficult to develop projects. Tulum has a special focus because it operates differently. What we are doing are two specific things. The first is respecting the percentages that it marks for construction; for example, Tulum requires us to leave 40% of free land in green area. On the other hand, there are no public services there, and the water is taken from the subsoil. Every time there is a development, you have to build a well and extract water from it. On the issue of waste, it is the same. What we are looking for is putting forth the best available technology to make it sustainable.

Another important part is the vehicular issue; the number of vehicles in Tulum will undoubtedly grow exponentially in a few years, and many of the developments there currently do not have adequate parking. We are already taking all this into calculation. Another thing we are doing is promoting the use of electric vehicles. We will bring a brand of electric motorcycles to the region and set up an agency to sell them. We will also set up chargers in different places around Tulum. We are taking a long-term perspective on specific situations, namely water, waste management, energy, and transportation.

What is the role of art in the philosophy of Bantimex?

Regarding our projects, we want to extract the world of art from museums and bring it to the people. Generally, museums are always a space where a small number of people who have a taste for the museum go to; in reality, art is locked in a box and does not come out. Talking to artists nationwide, we all agreed that we wanted to create something that we could take abroad. So, the first part of the group’s philosophy comes from the statement of making Mexico the largest urban art gallery in the world. That is the group’s main mission. We spoke to artists and asked them to create a work for a specific project to be built, and based on that project, the architectural studio develops the concept of the entire construction. We did it the other way around rather than just developing a project and then placing a statue or some paintings there. Here, we gave priority to the artwork and build based on the art. For example, in Tulum we have a project inspired in the Garden of Earthly Delights

by Bosch, a complex of 120 units completely inspired by and is a direct textual extraction of a painting from the part of Eden. Then, we have another complex in Tulum where an artist painted the complex, and that painting was transferred by the architect to reality. This is also from a top artist who appeared in Forbes. We are setting an example with our own actions of how it can be developed contributing to the environment from an artistic point of view, first, by placing the artist’s work in the public part of complexes, buildings, or houses so that everyone can see it, and by having an inscription with a QR code that provides more information and brings users to the artist website that can better contextualize the work. That becomes a hotspot in the city, develops into an attraction, and promotes tourism development. ✖

Construction & Real Estate

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Image: Ingus Kruklitis

An aerial view of a hotel complex in Tulum

210

Mexico 2023

INTERVIEW

MARKET needs

With a leading development department from which new products are invented or developed in response to project requirements, Imperquimia stands out in Mexico for its specialized products for the construction industry.

R am ó n R ey es Med i n a MANAGING DIRECTOR, IMPERQUIMIA

Internal development department creates specialized products for the construction industry

BIO

Ramón Reyes Medina graduated from National Polytechnic Institute and the University of the Americas. He has a track record of almost four decades in financial and administrative positions in national and international companies such as Bechtel, Honeywell, and Schneider Electric. In the last three years, he has led the general management of Grupo Imperquimia with double-digit growth results and has marked a clear path in the company’s strategy, having quality, the environment and profitability as the main axes.

What are the main opportunities for growth in the construction industry?

We believe that there are many opportunities in the sector. We came from a growth position where Imperquimia could not expand beyond a certain level of sales, and over the past three years we have almost doubled our sales levels as well as our cash flows, which are always usually a big issue. I think we have an advantage as a Mexican company because we have a development department from which new products arise in response to specific project requirements. Those are the opportunities we are always looking for. Actually, we also reach our final consumers through our 21 stores throughout the region. We view those 21 stores as warehouses, from which we supply various distributors to meet needs as they arise. Right now, we are trying to include an operation in Los Cabos, Baja California, and other specific locations. Finally, we are working with a number of construction companies that are building hotels to create products to meet their exclusive requirements faster and at a lower cost.

How have you dealt with the challenge of timely product delivery?

This is, again, down to our development department. We have total management of all our materials, based on knowledge of availability, stock, and price. Right now, we have a product called Urelastic 450 not found anywhere else. It is an advantage that Imperquimia is present in Mexico attending to local demand and reacting to situations as they arise.

What are you planning for next year?

We are working on products that we call grouts.

For example, we use Grout 1,200, a unique product created for use in the Felipe Ángeles International Airport project. No product in the market in Mexico has the resistance that this grout has, which also makes it relevant for large-scale projects. We are looking to develop such differentiated products so that in 2023 we have valuable products that the competition lacks. Our founder, engineer Héctor Mario Gómez Galvarriato, has created many products, and sometimes they are not immediately brought to the market until a clear application is identified, if any. We are working on products that stand to benefit the environment. Currently, 70% of our buckets are made of recycled material, and we believe we can do even more.

You have stated that 90% of your portfolio is in Mexico.

What plans do you have to continue growing internationally?

We are entering Latin America and have a partner in Guatemala, although we are also collaborating with a client keen to distribute our product in Latin America. It has plans to expand internationally in 2023, and so we are assessing the specific need of those areas. If we lack a suitable product, we will develop it. The company already collaborates with us in Puerto Rico, has and has been working with Imperquimia for 25 years, although currently we are operating more often and with a greater volume. ✖

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VOICES FROM THE SECTOR

A lan R ah m an e FOUNDER & CEO, CRAFT ARQUITECTOS

A le j andr o C ar doso GLOBAL CEO & M A N A G I N G PA R T N E R L AT I N A M E R I C A , M A S S I VA R T MASSIVart speaks a great deal about the importance of incorporating art into business. Why is this important?

What is the advantage of handling both the architect and developer side of construction projects?

What differentiates us from other architectural firms is that because we are also developers we understand the language from A to Z. We may get involved in any type of project, such as the New Medical Plaza. That we have not been involved in real estate development doesn’t mean that we are not involved in all processes. Our diversity comes from our love of challenges, and we are certainly motivated by them. We are extremely flexible depending on our client and are always looking for new trends.

There is a direct relationship between art and culture with business, and its first positive signal is the ability to generate impactful content, meaningful conversations about the brand that engages better and much more efficiently with the public and clients. This is unique and it opens different channels of communication. When a brand strategically uses art and culture as marketing vehicles, it becomes a differentiator in the marketplace. For the real estate and hospitality sectors, it helps any architectural space— whether public or private—to become an experience for those visiting it.

What cities besides Mexico City have you identified as investment opportunities?

How can art help real estate projects comply with ESG standards?

What kinds of projects are you focused on?

MASSIVart has played a key role in conceptualizing in advance a city master plan (a new neighborhood for example) or development with the objective of attracting people who want to live, work, or invest in businesses there. In the past, it used to come in at the end, though today it is an extremely important task. Creative placemaking becomes a creative and highly strategic tool for developers to incorporate in their planning process that involves architects, landscapers, and designers.

We have three projects in Guadalajara, a city we love, two mixed residential and a mixed corporative building. Our interest lies in opening new paths in different scenarios, so we started our projects in Guadalajara, in the entire Baja California area from Cabos to Tijuana. There are also projects in the State of Mexico, and soon, in Querétaro. Guadalajara has a bold governor and people are aware of that, and understand that the moment is right to purchase before prices rise.

J o rge Margai n MANAGING DIRECTOR, I VA N H O E C A M B R I D G E

We have been active in Mexico since 2014, having invested in a company called Mira. This company is focused on urban, vertical, mixed-use communities, and we have three main projects with it.

One, called Neuchatel, is located in the area of NoVo Polanco in Mexico City. It is a large tract of land measuring 30,000 sqm, and the idea there is to ultimately build 1,400 residential units, approximately 100k sqm of office GLA in three towers, and around 5,000 sqm of retail. It’s a very large project, and we have completed the first phase, which comprises two buildings of four-cell residential properties. These number 572 units in two towers. We completed those in the second and third quarters of 2021, and people are already living there. Then we completed the first phase of the office component for which we have a partnership with Heinz. Heinz is an important partner for Ivanhoe Cambridge being one of the largest real estate companies in the world. We are based out of Texas, and currently have projects in Chicago, Dallas, Houston, Toronto, and Paris. We are considering additional investments in Brazil as well.

I gn aci o R am í rez CEO & FOUNDER, INVERTI What are the main challenges real estate developers face in Guadalajara?

At Inverti, our core business is the management of permissions. After 30 years of experience, we work closely with governments and developers.

We can help our clients develop their project in the required time and aspects involved. This can be a challenge for developers all around Mexico. In Guadalajara, we have seen tendencies to build vertically, which has had a boom over the past three years. We were one of the first groups to see the vertical aspect 13 years ago.

What opportunities for investment have you identified in Jalisco?

We conducted a study 13 years ago that revealed that 80% of respondents wanted to live in a house and only 20% in an apartment. We repeated the survey during the pandemic and the results had changed completely; 80% would accept living in an apartment, while 20% wanted to live in a house.

With this change, the metropolitan area of Guadalajara tended to build vertically. Jalisco is the number-one state in the agro-industrial business.

Of the food consumed in Mexico, 28% is produced in Jalisco, which brings the region considerable revenue. These are the sectors investing in real estate.

A coffee farm pictured in Mexico

AGRICULTURE SECTOR SNAPSHOT SOURCE: OECD

Support

8.1%

Crop production

5.58 T/HA

Fish landings

1.6M TONS

Nutrient balance

30.5 KG/HA

ARABLE LAND (% OF LAND AREA) SOURCE: WORLD BANK 10.4 10.3 10.2 10.1 10 '17

'18

'19

'20

TOP AGRICULTURAL EXPORTS (IN USD BN, 1H2020) Avocados

1.8

Tomatoes

1.4

Tequila & mezcal

1

Sugar and sweeteners

0.95

Peppers & chilies

0.87

Image: Guillermo Ossa

SOURCE: FREIGHT WAVES

Agriculture & Agrofood

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CHAPTER SUMMARY

Agriculture & Agrofood

IN THE NEIGHBORHOOD nflation was an important topic in 2022 as the prices of commodities including food skyrocketed with disruptions in the supply chain and the conflict between Ukraine and Russia. However, in Mexico, contrary to what happened around the world, the USMCA agreement was an important lifesaver and exports of agrofood registered positive numbers according to data from the government. The agrofood sector has grown 24% since the inception of the treaty two years ago thanks to the access it provides to Canada and the US. Avocadoes, tomatoes, berries, and chilis were among the top exported products to the US and avocados berries, mangoes, and cacao products for Canada.

The Business Year dove deep into the market and conversed with top brands and suppliers in the market to further investigate how players are adapting to the context and taking advantage of the benefits USMCA provides. On this matter, Rising Farms told us of the importance of strengthening the country’s capacity to create scalable operations in agriculture. “Our vision from the outset is to bring in real estate dynamics that exist in other sectors such as the retail, production, and hospitality industries that combine incentives from

I

different types of investors and bring them into agriculture,” said Co-Founder Mauricio Ricaud.

When it comes to the sauce and spices category, Mexico is an important segment in Latam. “It is a market that is worth around USD4 billion, said Guilherme Secamilli, President of The Kraft Heinz Company. “It is a market that grows every year, meaning Mexico is definitely a priority for us. It is highly connected to our product categories, and it is the second-largest market in Latin America.”

Consumers are also starting to watch what they eat more in Latin America, making health foods an interesting opportunity in the region.

"We noticed that there was an excellent opportunity to commercialize high-quality, natural, and healthy products in Latin America. “We saw that in supermarkets located in New York and Miami, there was a growing trend for natural and healthy products, whereas in a Mexican or Ecuadorian Walmart there wasn't any product of this kind, or if there was any, it was an imported and expensive brand,” said Raúl Bermeo, Co-Founder & CEO of Nature’s Heart. “Nowadays, if you are a mass consumption food company, you must be addressing some healthy attributes, otherwise you'd be outside of a major trend,” he concluded. ✖

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Mexico 2023

INTERVIEW

Guil h e r me S ecam i lli CEO MEXICO, T H E K R A F T H E I N Z C O M PA N Y

What is the importance of the Mexican market for this global brand?

STRONGER together A major market for Kraft Heinz regionally and globally, Mexico has grown to become a leading country not only in terms of sales, but also in the development of new products and exports.

BIO

Guilherme Secamilli was appointed CEO of The Kraft Heinz Company Mexico in 2019. He has led it to double-digit growth during his leadership. He has more than 20 years of experience in the FMCG industry with a focus on the food and beverage sector. He has been a key player in the success of the companies in which he has collaborated, leading teams mainly in the commercial area, both in his native Brazil and in Mexico.

Kraft Heinz is one of the leading food and beverage companies in the world.

We started production in Mexico in 2005 through a company we acquired here.

Since then, we have only continued to accelerate. Mexico is one of our global priorities, not just within Latin America, but internationally as well. It is a market that is worth around USD4 billion just within the sauce and spices category. Therefore, it is closely connected to our priorities, categories, and products. It is a market that grows every year, meaning Mexico is definitely a priority for us. It is highly connected to our product categories, and it is the second-largest market in Latin America.

Kraft is currently investing heavily in innovation and distribution in Mexico. Can you elaborate more on that?

In 2020, we drafted a five-year plan in which we set a goal to double the size of the company by 2025. However, the team had more ambitious plans and is currently on track to deliver the results originally set for 2025 two years ahead of time. In just three years, we will have doubled the size of the company, and now the plan for 2025 will be to triple it. The question is: How are we being able to deliver it? There is no magic formula, though if I had to list the ingredients, the first one would be people. We invest largely in our people and in furthering their growth, but we also bring in great talent in the market. Bringing in talent, investing in our people, and defining the team will deliver results, because one person cannot deliver anything on their own. You need a strong team, which is what we have, along with a strong work culture.

What strategies does the company use to continue innovating in the local market?

We listen to our consumers and get our marketing team in sync with them. In addition, we want to keep increasing our investment in marketing until 2025, because we understand the importance of listening

“About 92% of our total sales globally is produced in our plant in Mexico.” to consumers and understanding not only what they tell you but their actual needs.

We adapt our formulas to the local market and deliver products that tap into Mexican cuisine. Another cornerstone is the digital transformation we are going through.

We still have a long way to go, and there is still valuable experiences to gather from the pandemic. We have invested heavily in tools to automate everything, which in turn, makes us agile. We have a presence in more than 160 countries and are constantly looking at how to adapt our portfolio to the needs of each country. We have to take a closer look at why a product that was successful in Brazil is not in Mexico and vice versa, for example. We also consider the importance of working jointly with local suppliers. About 92% of our total sales globally is produced in our plant in Mexico. Furthermore, we have increased purchases from local suppliers. We produce high-quality products as a standard, global strong brands that are loved by consumers and that tie into nutrition and healthier eating habits.

How does the company plan to increase its distribution capacity in the country?

We are still in the process of reaching all four corners of Mexico. Today, we are heavily focused on having a presence in the big population centers though there are still opportunities out there to establish a presence in every home in Mexico. In the last few years, our operations have increased to 55,000 points of sale in Mexico.

We are the food company that has accomplished the biggest growth in the country over the past few years; however, there is still much more to be done. The main challenge is how to keep growing and retain those levels. ✖

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Image: Grigorev Mikhail

A market stall pictured in Mexico City

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Mexico 2023

FORUM

AGROFOOD Mexico continues to consolidate its position as a relevant country in Latin America in agriculture and food and beverages given the size of the country and the growing number of consumers.

P u b lio Migue l Adr ian za Sa l a ve r r ia

Lo ur d e s Trev i ñ o

F ern an d o C és ar

P R E S I D E N T, TA J Í N , M E X I C O

MANAGING DIRECTOR, METCO

BUSINESS EXECUTIVE OFFICER, COFFEE & BEVERAGES, NESTLÉ

TAJÍN STARTED IN 1985 as a seasoning product to enhance the flavors of fruit and vegetables. It was formulated to be the perfect blend of chili peppers, lemon lime, and sea salt. We have been growing by double digits over the past 37 years, and given the trend of our growth five years ago, we decided to start investing in a new plant. We started its construction three and a half years ago along with the Center for Research and Field Experimentation (CICE), which is our in-house research laboratory. We concluded construction in April with the inauguration.

We invested about MXN1 million in the construction of this production center and employed about 1,000 people directly and 4,000 indirectly during its construction phase. After the construction, and once we started operating the plant, we had 400 direct employees and 2,000 indirect employees. The plant is located in Tala, and 70% of our workforce comes from this valley. We have been extremely disciplined from a marketing and commercial standpoint and have been successful, especially in the US, where we introduced our product in 1993. The Mexican population in the US is about 30 million people, and that gave us an extraordinary platform to launch our product and start constructing our business base into the general market.

METCO PLANNED to expand into the in-

A LARGE PART OF OUR PORTFOLIO is Nes-

ternational market because we knew we have a competitive and innovative product—a low-calorie sugar that was a blend between sugar and Stevia. It was an innovation, because at that time we had the first patent in the whole world for a blend between cane sugar and Stevia.

We had to initiate many processes that were needed in order to export to other countries because we did not have certifications for food safety and so on. The first stage was to get all the necessary certifications and also explore the different markets that were our goal. The US was our first target and we also explored the Middle East, Japan, Europe, and Central and South America. Our biggest consumer right now is the US and Central America. We are in the south of the US and have solid distribution channels with solid, double-digit growth, which has allowed us to position our product in the market. We still have a weak brand in terms of recognition but the product is excellent. We have a loyal customer base that has been growing YoY because of our quality, taste, and competitive prices. We also work with many industrial clients. One new business segment is low-calorie applications or developments.

café Taster’s Choice, which appeals to coffee lovers who want a specific coffee origin and a superior experience. We launched Nescafé Reserva a few years ago aimed at those who are interested in knowing the specific region in Mexico where their coffee comes from. We have also innovated heavily in the direction of white cups. They have had strong growth, and we have done this through Nescafé Cappuccino and our capsule systems. In numerical terms, today we have a per capita consumption of around 290 cups per annum, and our goal is to reach 365, or at least one per capita rate per day. This is equivalent to a little more than half of what is consumed in the US and a little more than half of what is consumed in Brazil. The potential is there.

The priority is to continue growing coffee consumption in Mexico. We have a solid market positioning in almost every segment in which we compete and we certainly want to continue strengthening our market share both in-home and outof-home, where the market is still very fragmented, with many players tackling different consumption occasions. We have a strong expansion plan in order to achieve a stronger presence and support the continued growth of consumer demand.

Agriculture & Agrofood

J avie r Rodr ígue z

R a úl Be rm eo

MANAGING DIRECTOR, MCCORMICK TRACTORS

CO-FOUNDER & CEO, N AT U R E ’ S H E A R T

WE HAVE an aggressive growth strategy. Over the next five years, we hope to multiply our sales fivefold. The goal is to rank among the top four in Mexico. That means that over the next five years we would have to sell about 1,500 tractors a year, which would rank us about fourth place in Mexico. In 2021, we were in seventh place but proudly came in fifth place at the end of the year. Our brand is a very powerful one and has good solid technology, but it is not just about selling the product. We have to accompany the buyer on his journey after the sale, which can last a minimum of 10 years. There are tractors out there that are still working strong after 30 years. In Mexico, corn is the biggest product, but has the lowest value. Right now, we are more focused on the high-value products which are avocado, berries, fruits, and citrus fruits.

This is where the farmers have much greater returns in a shorter timeframe.

A farmer with two acres of avocado can buy two tractors, whereas a farmer with two acres of corn will not even be able to afford one. That is why it is important to focus our energy and attention on where there is more value.

NATURE’S HEART is the story of three

brothers and two cousins. We were able to study abroad and noticed an excellent opportunity to commercialize high-quality, natural, and healthy products in Latin America. We saw that in supermarkets located in New York and Miami, there was a growing trend for natural and healthy products whereas in a Mexican or Ecuadorian Walmart there wasn’t any product of this kind, or if there was any, it was an imported and expensive brand. Nature’s Heart was born in Mexico in 2010, with a great passion for plant-based foods and the heart to make a difference. What began as a brotherly mission is now a global reality; in 2018, Nestlé acquired a majority stake in the brand and currently we work as a hybrid integration model: we can work as an independent company but at the same time, we take advantage of all the capabilities of Nestlé to take the brand to places we never thought before. Working like this, allows both of us to generate immediate value without losing autonomy, agility in innovation and our operation itself. In 2023, we will continue working on brand consolidation. For the past two years, we have been working to take the brand to points of sale that we now can reach after this merger with Nestlé.

217

218

Mexico 2023

INTERVIEW

UNTAPPED potential Employing a REIT to manage its assets that is separate from its agricultural operations, Rising Farms has become a major disruptor in the local agricultural sector, with almost unlimited opportunities for growth.

In what ways is Rising Farms disrupting the Mexican agriculture industry?

P a b lo Ricaud CO-FOUNDER, R I S I N G FA R M S BIO

Pablo Ricaud is Co-Founder & President of Rising Farms, a high-tech indoor farming company based in Mexico.

Previously, he was vice president for Latin America for the San Franciscobased private debt fund Arc Labs. He has also held senior management positions at the fintech companies PayJoy and Yave

M a u r icio Ricaud CO-FOUNDER, R I S I N G FA R M S

BIO

Mauricio Ricaud Arriola studied industrial engineering at Universidad Anáhuac. He has a master of science in sustainability and social innovation from HEC Paris and one in economics and strategy from the Norwegian School of Economics. His professional experience began at Mabe, in the household appliances industry.

Later, he worked for LVMH in Switzerland and for OECD in Paris. In 2020, he cofounded Rising Farms, where he is the director of operations.

MAURICIO RICAUD Our vision from the

outset is to bring in real estate dynamics that exist in other sectors that combine incentives from different types of investors.

In the case of Rising Farms Group, it has operations separate from real estate—a REIT that attracts real estate investors with real estate risks, returns, and incentives— capable of taking care of its facilities and land. The operations area is not that deeply concerned with the management of assets and that only deals with the leasing of such facilities. With a REIT that can be scaled up publicly and even internationally, all that is required is the land, facilities, and lease contracts, and the business can then be scaled up infinitely. When they are kept separate like this, the REIT keeps adding square meters to the operations portfolio, without the conflict of having an eventually capped financial balance. This is something that no one else in this industry is doing besides ourselves.

PABLO RICAUD The issue is that agriculture has a reputation in Mexico for being sporadic, risky, or unsophisticated and predominantly comprised of small farms.

The pandemic changed the game, and real estate portfolios are in serious trouble. We offer an alternative green real estate asset that focuses on a sector that does not go into decline, is essential, and is the future of food provision and sustainability because it produces so much more with less. We are introducing a highly attractive dollar-converted asset to the real estate industry, which no one has in their portfolio.

What are main gaps in the agriculture industry that Rising Farms is working to close?

MR Above all, our vision is to have a completely vertical corporation that owns the different companies that service one other—the real estate part, with its incentives, servicing the operations part. Then, the operations part will scale up to the point of outsourcing operations to allow for the participation of entrepreneurs and busi-

nessmen to partner with us. That ecosystem offers numerous possibilities, and people do not require funding or extensive know-how or connection to the industry to get started in this industry. Our ultimate vision is to be able to fully offer this REIT with which any entrepreneur may partner to run facilities with all services being provided by Rising Farms, be it installation, know-how, loans, or distribution.

PR We would buy their production and dis-

tribute it, because we have also observed a wide gap in agriculture in which for the past 20 years in Mexico. Technology in this sector has stagnated. Also, the way agricultural products are sold, for instance, involves a middleman. We are wholesalers, and we cannot manage without intermediation, we cannot compete with those huge distributors from the US. However, we could perhaps access other niche markets that cater to a different industry such as food service. Perhaps the future lies in processing tomato, fruit or vegetables to bring added value to the product.

In what ways can your technology help reduce CO2 emissions?

MR Indoor agriculture is essentially already sustainable because it employs drip irrigation, for example, which enable huge rates of accurate through the use of a computerized central control system. One recent Oxford study revealed that the average CO2 emissions of tomato operations worldwide equals 3.6kg of CO2 per kilo of tomato produced. At Rising Farms, we are at the 0.4kg level. That goes to show the opportunities that Mexico and Latin America have to produce in a more sustainable way by taking advantage of the right amount of technology. With relatively small measures, we can make a difference.

PR We should be aware of predatory prac-

tices, done at the expense of employees, the environment, and so on. Beyond the commercial imperative both the environmental and human aspects are crucial. We have to work toward a balance that considers all aspects of the business. ✖

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FOCUS F o rm ali z i n g t h e agri cu lt u re i ndu st r y

THE SEEDS OF SMART THINKING Obsolete agricultural practices feed a poverty trap while slowly strangling the natural environment. Digital solutions and the initiatives they can steer are gradually making sure that the sector reaches its true potential.

ACCORDING TO WORLD BANK DATA for 2021, agriculture accounts for 3.84% of GDP (5% for Latam and Caribbean [LAC]), with arable land at 12.3% of the total. LAC countries could become the world's food basket, and the region is the world’s preeminent exporter of agricultural products. Yet the potential is curbed by perennial issues of scalability in a largely informal sector, one where smallholdings with obsolete practices are actually damaging soil quality. The stakes are high as confirmed by the UN’s major 2022 Global Land Outlook 2 report. Its findings reveal that soil health and biodiversity underpin the security of societies and economies, where around USD44 trillion of economic output — over half of global GDP — is somewhat or particularly reliant on natural capital. Improved soil health can boost land productivity and biodiversity, as well as the total amount of carbon sequestered. In LAC countries family businesses account for 80% of agricultural producers, 40% of production, and two-thirds of related employment. Tellingly, however, 14 million small producers remain in poverty, mostly without access to financing. This is Mexico’s story.

ENTER AGRICULTURE 4.0

The OECD notes that a 10% rise in the Digital Ecosystem Development Index represents a 1.4% increase in GDP. Digitalization has the potential to maximize productivity, slash costs, and mitigate supply chain risks, all on the shoulders of big data. Where the poor of Mexico are concerned, cash remains less king than joker, its use perpetuating the informal economy and poverty trap. Digital solutions like micro-loans delivered over the humble mobile phone have pulled countless Mexicans into financial inclusion with access to commercial opportunities. The neologism ‘AgTech’ means adding precision and sustainability to farming practices by funding projects promising sustainable profitability. Agriculture 4.0 marks a paradigm shift where, aside from credit sourcing, data-driven digital solutions include automation, remote sensing, and precision agriculture. In a TBY interview, Javier Rodríguez, Managing Director of McCormick Tractors notes in this vein how, “Farming costs can be reduced more by new technology with the use of GPS.” All this with an app on the farmer’s phone.

A MICROCOSM

Vision 2030 is Mexico’s roadmap for a nature-positive food system.

Yet in the southeastern state of Chiapas—to take an example—less than 500 acres of corn are grown under regenerative agriculture with 1.7 million acres under conventional production. This is compound-

ed by the cost of fertilizer and disruption to supply chains by war in Ukraine. Note here that regenerative corn fields generate nearly twice the profit of conventional ones. This is because legume-based cover crops curb fertilizer use, which by sector reckoning accounts for 32% of gross income for conventional fields versus 12% in regenerative fields. … AND A SOLUTION

Because of its weight in the produce basket, corn production has in past years seen state complicity in the destruction of natural resources. Yet farmers, ranchers and officialdom are best viewed as partners in a sustainable endeavor. International environmental agency The Nature Conservancy is perhaps best known for its global “Plant a Billion Trees” initiative. In Chiapas it supports Mexico’s Vision 2030 that foresees incorporating 6.2 million acres of land into sustainable agriculture and cattle-ranching schemes by that year. Another goal is to reforest 3.5 million acres of land. Chiapas is Mexico’s second most biodiverse state, and lateral thinking has brought together farmers, environmentalists, and ranchers for sustainable management projects attuned to soil health. Reforestation and restored soil health means greater carbon storage. Initiatives in Chiapas will also look beyond corn to beans and coffee production. Project funding comes in part from the Mexican environment ministry’s climate change fund, Mexico's National Institute for Forestry, Agriculture and Livestock Research (INIFAP), and TNC as part of its “Plant a Billion Trees” campaign.

THE CYCLE OF LIFE

Absolutely everything has its price, and even agriculture is a vast producer of waste. Ministry of Agriculture and Rural Development data reveals that annually the sector produces over 300,000 tons of agricultural plastic waste. A new solution is afoot. Israeli firm Netafim is poised to open a recycling facility in Culiacan Municipality in the state of Sinaloa. Initial capacity will enable the annual recycling of over 3,000 tons of plastic in a catchment area benefitting farmers in Baja California, Sonora, Sinaloa, and Chihuahua, who will sell used drip hoses.

The digitalization of the farming sector promises to provide actionable data resources and systematic planning and execution.

Moreover, the small producer can obtain the credit needed for CAPEX, reducing harmful obsolescence, boosting competitiveness, and formalizing the fragmented sector in the process. ✖

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M a r í a T e r e s a G arcí a P lat a GENERAL DIRECTOR, MEXICAN FOOD BANKING NETWORK (BAMX)

What are the economic benefits of business models that reduce food waste?

COMBINED efforts BAMX aims to help companies reduce the cost of food storage so that they may save money and reduce waste.

BIO

María Teresa García Plata holds a master in marketing from ITESM. She has seven years of experience in the tertiary sector, as director of the Mazatlán Food Bank, national director of procurement in the National Service Offices of the BAMX Network, and, currently, General Director of the BAMX Network.

There is an important benefit of working with us and being our partners, which is why we want to be part of the supply chain. We can help companies reduce the cost of food storage and products that are not going to be sold in time. In addition to reducing the cost of inventory, we also minimize the cost of destruction, given that food that will not be sold must be destroyed. We rescue the food that is still edible and integrate them into food packages that we deliver to communities for free. Meanwhile, the company receives a tax-deductible receipt from us, which is an extra benefit of working with BAMX. BAMX has signed significant partnerships with the Business Coordination Council (CCE) and other alliances. What have been the main achievements of these partnerships?

We are making important advances in our relationships with CCE and COPARMEX, among other allies. The members of these associations actively participate in our zero-hunger working group, which is an initiative of CCE and the UN Global Compact Mexico chapter, as well as the Mexican government’s commitments to Agenda 23. Currently, we are working on specific actions regarding the five topics of the working group. For us, it has been a major challenge to define specific actions, but we now share a common crusade. We are collaborating with Pacto por La Comida as part of the zero-hunger working group. In addition, with the participation of CCE we are about to embark upon a new means of collaboration by identifying internal initiatives.

What are the main advances of your Pacto por la Comida (Pact for Food) campaign?

This is a particularly interesting and challenging initiative, with 20 signatories to date. One of our major projects, it was launched in March 2021, and the signatories encourage numerous companies and businesses to review their food donation

policies and initiatives so as to increase the volume of food being donated and dedicate adequate time and logistics to realize these initiatives. We already see the realization of the projects in terms of the tonnage of food donated. When companies hear of Bimbo, Danone, Unilever, and the other signatories’ efforts, they are keen to join the process. We now intend to strike establish special projects with Walmart and Unilever in the context of Pacto por la Comida. We are keen to extend the participation of retail business and the hospitality sector to get restaurants and hotels involved in the initiative as well.

Why are people donating less food in Mexico?

We aim to have around 20,000 tons of what we call the top categories of food.

I'm talking about groceries, animal protein and cereals. But right now, our allies in those sectors are dealing with challenging conditions. As a result, food donation has fallen by around 30-40% year on year. Our challenge now is to find different ways for companies to continue seeing BAMX and Pacto por La Comida as the best route to sustainability or fulfillment of their ESG strategy. There are no partners as such in this, because we are helping with a twin problem: hunger and food loss and waste.

Currently, we are working on a new strategic plan of four strategic objectives. First, we want to increase our impact to expand the scope of our network. Second, we must enhance our positioning so everyone has a clear understanding of what BAMX does and what a food bank in Mexico actually is.

Third, we have established a more professional board. Locally speaking we have 54 food banks, each being independent with their own boards, and we would like to see stronger boards with effective member rotation and a greater participation from local business leaders. The fourth and final objective in our strategic plan concerns collaborations with other NGOs for more effective community intervention within our sector. Everyone should be part of the solution to this problem. ✖

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INTERVIEW

working SMARTER SNAC’s vision is to strategically create better working conditions together with member companies that will result in higher productivity and profit increases, benefiting everyone.

A lej an d ro Mart í n ez G E N E R A L S E C R E TA R Y, N AT I O N A L U N I O N O F F O O D A N D C O M M E R C E ( S N A C )

What challenges are companies in the food and commerce industry facing in terms of their workforce?

We are facing a talent and leadership crisis that goes far beyond the food and commerce industry. This is something that every workplace is trying to deal with and solve, especially when it comes to hiring, retaining, and engaging leaders and employee. The risks associated with generational changes, combined with a new post-pandemic reality, are great.

New generations of employees need to be trained quickly and must be encouraged to embrace company values and mode of operation, while helping them identify with and develop a sense of belonging and purpose within a community. Avoiding conflict and dissatisfaction, and trying to make everyone happy in the workplace, is not an effective, let alone realistic, strategy. As a union, we also strive for excellence and are aware of our role as advocates; however, our role must also be understood as that of educators of our affiliates and even of their families. Based on observable trends, it is safe to assume that 30 years from now, at least half of the current unionized jobs will be gone. We need to be ready for a new automation revolution that will lead to robots and AI taking over many current jobs. We must develop the right set of skills amongst our members so that they may face future challenges and be ready for the type of jobs that will be available to them in the future.

Why is SNAC promoting the idea of a smart union?

A smart union is not about brain-related intelligence, it is about leadership style and the drive to innovate by using new technologies to serve people and not the other way around. Our goal is to develop leaders with a clearly defined methodology, overcoming the type of confrontational attitude that union leaders are typically associated with, and promote in its stead collective consciousness and intelligence, and develop the skill sets that will allow workers to maximize their potential and transform companies from within. Smart leadership is about establishing strategic alliances between the unionized workers and the companies, because, directly or indirectly, we are also stakeholders. By developing professional union leaders, it is possible to plan strategically and create together with the companies better working conditions, which lead to productivity and profit increases that can only be accomplished through this type of strategic partnering model that takes advantage of all knowledge and contributions from the bottom up. Our union has become an MVP for the companies we work with, as well as for our affiliates. I am a firm believer that strategic planning can be done with both union and business thinking. The most mature model within the SNAC methodology is that of Grupo Bimbo, and it is no coincidence that Bimbo is the world’s number-one company in its realm, while its work culture is regarded as a role model for other companies, as evidenced by the awards and acknowledgements it receives on an annual basis. In Mexico, the unions within Grupo Bimbo

are strong and constitute an integral part of the company’s success; we have built this work culture and its achievements together for more than 80 years.

What are your goals for the union?

Our goal is to develop leaders from within the workforce, from the bottom up, and ensure they will not require the services of a union forever. We want to capture the bottom of the social pyramid, help them grow and develop, prepare them and propel them into management, a better life, and personal and professional growth in or outside the company. We want to help them become better persons and citizens. Empowering the working class with the model of a smart union is my personal goal and legacy. It is the way to recalibrate the balance of power and help the world be a better place for everyone. ✖

BIO

Alejandro Martínez is General Secretary of SNAC and Director of Section XI of the Federation of Workers of Mexico City in the CTM. In 2012, he joined Barcel as a salesperson and started his trajectory in SNAC. In 2019, he was elected national secretary general of the executive committee. Martínez has a master’s degree in senior business management from IPADE and another in government and public management in Latin America from Pompeu Fabra University in Barcelona.

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CHAP OPENER AD HOLDER MEDICA SUR

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CHAPTER SUMMARY

Health & Education

HEALTHY STARTS reating a health system with the capaci-

for 130 million in a country the size of C tyMexico is no easy feat for both the public and private sector. To further investigate the challenges of the healthcare industry, The Business Year spoke with the Mexican Consortium for Hospitals (CMH), which highlighted that there is a considerable rise in what patients are spending on health. “The main problem we currently face is directly related to access to health services. We are going through a moment of two paradoxes, while we have a health system based mainly on public service, there have been a series of decisions and reforms that, in my opinion, have weakened the public system,” said Javier Potes, Managing Director of CMH, in an interview. “Over the past two years, there has been a 40% rise in what people spend on health, which is substantial,” he added.

To combat the scenario, Potes proposes pushing a bigger social agenda within the private sector to find a balance between business and accessible services.

In this edition, we also spoke to the best-ranked hospitals in the country to discuss the investments these institutions are making in innovation, including Medica Sur, which recorded his-

toric results in 2021. Juan Carlos Griera, Managing Director of Médica Sur, has a vision to increase its digital capacity. “First, we are modifying all the management systems of the hospital. Meanwhile, we are also innovating in the digital area, in terms of the appointment app, toward spending less time in the hospital for a smoother experience,” he told us, adding; “We saw that the moment was good, that the sector had been active due to the pandemic, and moved to capitalize on an interesting sale at a dynamic moment for the sector.”

Another key component in the industry is ensuring medicine supply and distribution, which is quickly becoming an important area of opportunity for investment. “Many of the large medical distribution companies in Mexico left the market for several reasons. We therefore see a great opportunity for the market to be filled,” shared Patrick Troop, Managing Director of Pharma Tycsa.

“Pharmaceutical companies are experts in promotions and manufacturing, but they are not experts on logistics, so this is where we come in,” he continued. The company has identified that the country is being on medication and is focusing on bringing international standards to the to attract more international pharmaceutical companies. ✖

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NUMBER OF ELEMENTARY SCHOOLS (’000) SOURCE: STATISTA

98

2015/16

97.55

2016/17

96.92

2017/18

2018/19

96.51

2019/20

96

2020/21

95.85

NUMBER OF HOSPITALS SOURCE: STATISTA

2018

2019

2020

2021

4,538 4,629 4,707 4,909 4,995

Image: FERNANDO MACIAS ROMO

2017

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INTERVIEW

in HARMONY

ANHP plays an important role in the private healthcare sector, providing a united front when advocating with decision makers and, at the same time, keeping all hospitals informed of developments in the government Could you tell us about ANHP and the role it seeks within the local healthcare sector?

ANHP is 22 years old and has more than 137 hospitals, the most important hospitals in the country.

To date, we have 85% of the most important hospitals in the country, including the chains Ángeles, Puerta de Hierro, Español, ABC, and others, as well as smaller hospitals that are important. All of them need some form of representation with the authorities. We were established due to the need to provide a common front for the private hospital sector, which was growing significantly. We now have a voice in the Security Council and the Ministry of Health, and we keep all the hospitals informed of developments in the government.

And at the same time, we have formed collaborative ties with the Mexican Institute of Social Security. All the work we have been doing is well defined and is the result of 20 years of work. We have shown the general public that ANHP can work in harmony with the public sector. Previous efforts had already been made, but with the pandemic, it became abundantly clear that this was essential for the well-being of the population.

What is the next stage for the association?

The main thing is not to lose this synergy as well as unity that has been formed. The Health Council has been working closely with us on new certification models. These models emerge from the General Health Council, which certifies hospitals in terms of quality and patient safety throughout the hospital environment. This certification is important because the more hospitals that have it, the better the sector will be overall. We are in charge of representing that large part of the private sector.

All our hospitals are certified, and they all meet national standards. As part of this certification process, we undergo ongoing improvement processes. All this is reflected in our patients, who are better cared for, have better quality of care, and

Mi gu el Á n gel H ern án d ez EXECUTIVE DIRECTOR, N AT I O N A L A S S O C I AT I O N O F P R I VAT E H O S P I TA L S ( A N H P )

fewer typical hospital problems. We work hard to develop a completely safe hospital environment where patients feel confident that they are receiving the best care possible, the equipment is available and in perfect condition, our nursing staff is well trained and that there are no problems with medication. These are extremely complex things that require excellent logistics and organization.

The certification process ensures that everything works properly and has helped the industry improve significantly. Insurers are confident and also heavily promote this process because it ensures that their clients are well cared for. We can also guarantee quality access to healthcare.

Over

137

hospitals as members

Represents

85%

of most important hospitals in Mexico

How does ANHP plan to further improve the quality of the Mexican health system in the coming years?

The main focus will be to improve the quality of the system through certification processes. We will focus on having indicators that allow us to measure the efficiency and effectiveness of all the processes and systems of a hospital. This will require technology and support from all hospitals, and the private system will be strengthened. The private system is growing, and significant growth in the number of hospitals will begin. Large hospital chains are coming to Mexico. Transparency is another issue that we are concerned about because the general public must see us as being transparent. We have a digital communication program, but it is just starting. There are also small awareness campaigns about what a hospital involves. It is not just a building. It implies a strong investment behind it. The hospital sector has one of the largest investments in the market; services must be available 24 hours a day. Social security also has its costs, and we all pay it out of pocket.

It is necessary for the public and private sectors to work together, and ANHP will advocate for the private sector and for health to continue to improve its quality and access to services. ✖

BIO

Miguel Ángel Hernández is Executive Director of the National Association of Private Hospitals (ANHP). He is a notary and lawyer, specializing in the insurance market with responsibilities in the technical, reinsurance, subscription, and compensation areas of life, personal accidents, and major medical expenses. Previously, he worked as CBDO in BBVA Bancomer and as CPO in Seguros Monterrey New York Life.

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STRENGTH in numbers

CMH has made great strides in providing more health insurance options for patients and getting all the players in the sector to work together to make progress and improve health outcomes in the country.

H u m b ert o J av i er P o t es G o n z ález GENERAL DIRECTOR, M E X I C A N H O S P I TA L C O N S O R T I U M (CMH)

Biggest consortium of private hospitals in the country Prioritizing collaboration and data management

BIO

Humberto Javier Potes González is the founder and General Director of the Mexican Hospital Consortium and Alianza de Prestadores Privados de Servicios de Salud, an organization that represents private health care providers in Mexico. He also founded Liga Ibero Latinoamericana de Atención a la Salud in collaboration with the hospital associations of Argentina, Brazil, and Colombia, as well as LATAM Salud, which represents the business associations of the health sector in Panama, Dominican Republic, Guatemala, Colombia, and Costa Rica. He has a degree in business administration with 34 years of experience in the private health sector and is a member of the Health Commission of the Business Coordinating Council (CCE).

What are the main challenges faced by the Mexican health system?

The main problem we currently face is directly related to access to health services. We are going through a moment of two paradoxes, while we have a health system based mainly on public service, there have been a series of decisions and reforms that, in my opinion, have weakened the public system. As a result, there has been a patient migration to the private sector. Over the past two years, there has been a 40% rise in what people spend on health, which is substantial.

This increase is mostly because people are not getting the desired response in terms of opportunity and accessibility to services, medications, materials, or procedures, and have started relying more on the private sector. The first paradox is the privatization of public health. The second is that the private sector needs to start having a more social approach. As we are witnessing this patient migration, we need to decide what to do in the private sector.

We need to change the way we work and approach the business, becoming much more accessible.

What do we need to start thinking about? Not only how to provide a service, but also how to make it more financial accessible. Therefore, the financial aspect must become an important element for us.

We need to start thinking of ways of putting money in our patients’ pockets. We need to start working on financial solutions so that patients migrating from the public sector, from the middle to lower-middle class, can have access to private health.

How are you looking to increase collaboration with the financial sector?

We have had many talks with insurance companies and want them to change their insurance model.

Insurance coverage in Mexico is expensive, being directed toward a certain type of hospital, namely highly specialized institutions with high-end hospitality facilities. It is not easy for an average Mexican to have access to an insurance policy. In-

deed, only 7% of the population has coverage for medical expenses. We need new insurance models with different level of healthcare providers and new risk-sharing schemes in order to reduce insurance premiums. For instance, we have alliances with Sura and General de Seguros, through which we made progress in terms of developing medical insurance with coverage of up to MXN1 million, with an average premium of around USD300 per year and deductibles of USD35. This makes health services at our hospitals much more accessible.

With MXN1 million, we can practically cover 95% of medical procedures that a patient could needs.

This does not include the larger health problems, such as cardiovascular or neurological problems, as the premium would increase dramatically. Further down the line, we will find ways to address that which is currently left out, but in the meantime, we have already solved that 95%.

In what ways is CMH incentivizing innovation?

This is our third focus. We approach the social issue through accessibility. We then have the business model, achieved through strategic alliances. The third stage is technology and how we can articulate the strategic alliances using digital models. For example, we have signed an alliance with Amazon Web Services Mexico (AWS). Our aim is to advance by leveraging the technologies of AWS adapted to the health sector. We have a particularly special project aimed at redesigning the healthcare system with technology at its base. Implementation of technology in the sector is lower than 5%, and then there is the issue with doctors. Strategic alliances are a change in our business model. At our hospitals, we receive 3% of the population, while general practitioners are seeing 97% of the population. We therefore need to create alliances with pharmacies, as in Mexico they have a general doctor’s office.

Through these alliances, we can tell those pharmacy doctors that we can treat their patients in need of specialized physicians in our medical directory. ✖

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INTERVIEW

meeting THE DEMAND

By investing in the best resources, Médica Sur strives to ensure the best medical and administrative team and deliver results.

Why did Medica Sur finalize the sale of Laboratorio Médico Polanco?

In November 2021, we finalized and materialized the sale of our medical laboratory subsidiary. It was a company that we acquired in 2016 that had 120 branches and a processing center, although the hospital’s strategy has been redefined. We will be more focused on the hospital component, on the expansion of hospital services, and the decision is made to withdraw from diagnostic services to centralize the strategy. Ultimately, the hospital component has always been at the heart of Médica Sur. We were working very actively at the end of 2020 and throughout 2021, and finally we sold the business to SYNLAB, a leading group in the global diagnostic arena, a prestigious German group. And as of November they are operating the company.

So we wish you the best of luck, and for us those resources, which represent a significant amount of money, will be used to expand hospital services, from improving the current infrastructure we have on campus, to building a tower of specialties generated by demand for the campus, which is news.

And we are also exploring options to build a new hospital in Mexico City. This, in addition to plans to set up telemedicine clinics. We have these three projects in mind to capitalize on and, effectively, this will be achieved with the resources derived from the sale of the laboratory.

And are you looking to develop Medica Sur’s telemedicine project internally, and when do you plan to launch it?

Yes, internally. We intend to open the first clinic in the 4Q22. These will be physical units where patients receive a telemedicine consultation with hospital specialists, but without having to go there.

Once a need for you to make a face-to-face visit is determined you have a reason to do so. If the project proves successful in Mexico City, and we identify significant demand for the service, we could expand it. This is something new in the world: a way

J u an C arlo s G ri era MANAGING DIRECTOR, MÉDICA SUR

of growing and bringing services closer to the population without having to generate an investment as large as setting up a clinic or hospital.

Médica Sur was once again named the number one hospital by Newsweek. Can you tell us about what strategies led to this status?

Our strategy is the same keeping our patient at the center of everything. It’s about good clinical practices about, strict adherence to patient safety, procedures, the quality of the physicians we work with, and the support group for nursing physicians. All this is a given, as it always has been. It's not like we did anything different to get first place.

We deliver the best service possible, at a fair price.

We highly value having a greater reach across the population, bringing services closer to a fair price in the knowledge that highly specialized medicine very expensive. The news broke in the first week of March. Newsweek has only has included Mexico in its analysis of public and private hospitals since last year. And for the first two we have ranked in first place, and will continue to keep things that way.

Modifying the management system of the hospital Investing in telemedicine consultation clinics

Can you tell us about other investments towards your digital transformation?

The digital part is essential to growth. First, we are modifying all the management systems of the hospital. We are installing a new version of SAP, which will help significantly in the administrative and management components. Meanwhile, we are also innovating in the digital area, in terms of the appointment app, toward spending less time in the hospital for a smoother experience. We are working on these applications that generate customer satisfaction and better interaction. We are also focused on the fact that we have returned to practically full capacity for traditional procedures. This year we face the challenge of formalizing the SAP project.

Also, we plan to start expansion in the specialty tower and telemedicine units. ✖

BIO

Juan Carlos Griera has directed Médica Sur since 2015. He holds an MBA from ITESM and has vast experience in the financial sector. Griera is also member of the audit committee and the company’s Corporate Practices Committee. He was previously Sub Director of Banco Inbursa and has worked for Banco Invex.

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FOCUS M od e r nizing t h e h e al th c a r e s y s te m

MODERN PROCEDURES Mexico’s long march toward truly universal healthcare has reached the landscape of Industry 4.0, where today digitalization is as necessary as political commitment.

THE YEAR 1943 was a landmark for Mexicans as the pioneering

Social Security Law rendered the state legally responsible for the collective wellbeing of all. This was closely filled by the launch of the Mexican Social Security Institute (IMSS), an integrated system of pensions and healthcare provision theoretically accessible to all citizens. Yet, the system has failed to reach the immense informal society due to economic headwinds that curbed political commitment. Market-driven, neo-liberal politics, in short, rendered healthcare a hot potato. The 1994 signing of the NAFTA accord only strengthened the hand of the private sector, and, as intended, prompting a move toward private treatment. According to Javier Potes, Managing Director of Consorcio Mexicano de Hospitales, which fosters synergy among private health institutions, “Over the past two years, there has been a 40% rise in what people spend on health.”

(SPS), a package of core health services for the—at the time—53 million uninsured citizens. This model encompassed 2,000 diagnoses, 65 catastrophic conditions, and 100% coverage for children under five. Yet it, too, failed to enroll 20 million Mexicans.

Mexico’s 2018 presidential election brought victory for Andrés Manuel López Obrador, notably on a health-for-all ticket. He labeled the health sector “a disaster” greater even than its education counterpart. The pledge was to provide medical care and pharmaceuticals free for the entire population, yet this will take more than a single political term. Obrador introduced MAIS (the IMSS-Bienestar Model of Integrated Health Care), comprising just two components of medical care and community participation, operated by IMSS through agreements with respective states. MAIS has proven itself with the rural poor but has not adequately addressed the health and social problems of Mexico’s cities.

CHALLENGES TO WELLNESS…

A (PRIVATE) CASE STUDY

The dynamic of healthcare is changing, with the aging population witnessing a shift from infectious to chronic diseases. And in recent years COVID-19 has drained the public health insurance system, while procurement has remained an opaque and sometimes inefficient process of tenders.

“Private” is by no means synonymous with “pernicious,” and Potes observes how, in Mexico, despite the public-private healthcare duopoly, the “bottom line is that the public sector through tax collection pays the private sector to provide the services.” In truth, the private sector has revealed moments of true initiative to the benefit of its public sibling. To prevent the state seizure of private hospitals during the pandemic, Consorcio Mexicano de Hospitales inked a deal with the government to treat non-COVID-19 patients—over 20,000 in total. The result? Freed-up public sector beds for nonCOVID-19 treatment and the ability to “cover part of the fixed expenses of those facilities, [resulting in] a win-win-win.”

…AND RETHINKING THE SECTOR

Zooming into the present, Mexico’s healthcare sector is becoming attuned to environmental, social, and corporate governance (ESG) as a litmus test of sustainability, social contribution, and efficacy.

And so the drive for patient-centricity means that the concept of ESG’s triple bottom line is increasingly relevant.

A DIGITAL PANACEA? A VOTE FOR HEALTH

In a remedial move to boost public sector coverage, the administration of President Fox in 2003 established Seguro Popular de Salud

Digital disruption is today the reality in healthcare it was in the financial sector, where it also targets wider participation. The efficiencies to be reaped from practices such as telemedicine are le-

Health & Education

gion, and promise to rationalize Mexico’s healthcare system over time, despite gradual take-up. According to Potes, “Implementation of technology in the sector is lower than 5%.” And even where adopted, technology often outpaces operational models at many hospitals. His organization champions technology adoption in the healthcare universe. Cutting waiting times dramatically streamlines available healthcare resources. And an alliance with AWS Mexico (Amazon Web Services) aims to “redesign the healthcare system with technology at its base [to] reduce waiting times and […] even redirect you if necessary for travel convenience.” This data-driven technology is proven by Uber and Airbnb, which leverage data to offer optimum service.

ABC Medical Center is another sector player leaning on zeroes

MOS IS A AESTHETICS CLINIC THAT COMBINES CUTTING-EDGE TECHNOLOGY WITH TREATMENT FOCUSED ON EMPATHY AND HUMAN CONNECTION. CDMX - MÉRIDA YUC.

www.clinicamos.com.mx

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and ones to reshape its clinical management system The center has put in place clinical work guidelines setting standards for treatments. The resulting system, according to Managing Director José María Zubiría Maqueo, “provides feedback for the patient, the doctor, and the hospital itself, [meaning] greater certainty for the patient, more information for the doctor, […] a better diagnosis, and assurance for the hospital that all these protocols and guidelines are being followed.”

Mexico’s public healthcare sector, then, has reflected the dominant political climate and imperatives of the free market. Yet, while patient-centricity is advancing in the private sector disproportionately, there is evidence that cross-fertilization is upping the overall game. ✖

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Jos é M a r ía Z u b i rí a Maq u eo MANAGING DIRECTOR, ABC MEDICAL CENTER

How do you plan to use your financial background to support the growth of Hospital ABC?

ALL systems go ABC Medical Center has invested in a high-end clinical management system to digitally transform its operations by 2024.

BIO

José María Zubiria Maqueo started his professional career in technology and then worked in the financial and telecommunications sectors in some of the most important companies worldwide such as Banamex in Mexico and Avantel and Embratel in Brazil.

He was appointed by former Mexican President Vicente Fox and later ratified

by President Felipe Calderón to serve as Head of the Tax Administration Service Office. In 2009, he returned to the financial sector. He was appointed

by Banamex and Citi Bank to lead their strategy, corporate development, operations, and technology departments for Latin America and was later chief administrative officer in Mexico. His most recent work experience was with Grupo Martí, where he served as board member and then as CEO. Zubiría is a member of the board of Fundación Universidad Nacional Autonoma de Mexico (FUNAM).

He served as member of the UNAM Board of Trustees. He was a professor at Instituto Technologico Autonomo de Mexico (ITAM).

ABC Medical Center has the best levels of clinical and patient safety performance, two of the most complex issues in the medical business. The fact that it reached those levels of prestige and standards lead it to be the first medical institution in Mexico to be certified by the Joint Commission, a certification mechanic reserved for the best hospitals in the US. This was the first international certification that the center received, and since then it has received and maintained others. Our center is renowned for its results, its low infection rates, and other strong clinical characteristics. We want the solutions that we offer to satisfy and even exceed our patients’ expectations. That is the reason why an engineer is helping with the management of a hospital, keeping in mind its faults and flaws. We leave the healthcare to our medical team, which comprises the best doctors in the country. We expect this combination to help sustain the leading position of our center.

What investments is the hospital making in technology and data management?

Our center focused its investments for many years on clinical technology and the progress of acute treatment. This resulted in the best radiotherapy and imaging teams, the best laboratories, and so on.

All this was an investment that we worked on for many years. Now, on data management, we made some investments, though they are more toward accounting. Today, we are conceptualizing a new way of management, one where the patient is at the center, and we focus on covering what the people who work around them need.

Then, we go to the diagnosis process. Before they get to the hospital, we need the patient’s complete medical history. Right now, there are electronic clinical files, but we are aiming for a clinical management system that can help with the diagnosis and, once that part is done and treatment has been decided, can aid with the analysis of the data from other past cases. In addition, we have developed clinical work guidelines that determine standards for

“We want the solutions that we offer to satisfy and even exceed our patients’ expectations.” specific treatments. The moment you put all these in a system that provides feedback for the patient, the doctor, and the hospital itself, it results in greater certainty for the patient, more information for the doctor to provide a better diagnosis, and assurance for the hospital that all these protocols and guidelines are being followed and that the treatment it is providing is the most effective, timeliest, and efficient. This is something we are actively working on. It is a large investment from the hospital, but it will be immensely useful for future diagnoses and treatment.

How is ABC Medical Center adapting to the reopening of the market?

We count on nine strategic initiatives, of which there are two closely associated with the services we offer. Our medical center is divided along lines of service, like the ones in the US, and each one has a different aim for 2026. We want to continue advancing toward these objectives, like the creation of high-specialty centers. In 2022 we will have two centers that follow these guidelines: the High Specialty Pediatrics Cardiopathy Center and the High Specialty Pediatric Oncology Center. The second initiative is inclusive health. We expect to reach a goal of 2,500 patients from different programs. For example, we have one such program aimed at women before, during, and after pregnancy, and it benefits about 300 women and babies who mostly live near our location. We are in a constant process of continuous improvement. Every organization make mistakes, and we all have the opportunity to learn from them and understand where they come from, as well as have the opportunity to correct them and elevate our standards.

We have a comprehensive list of what we expect to achieve for every year from now until 2026. ✖

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A nurse administering a COVID-19 vaccine in Mexico City

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MORE to achieve

With a full range of logistics services for pharmaceutical companies in Mexico, Pharma Tycsa is ready to play a key role in developing the sector further in light of emerging growth opportunities in the region.

P at ri ck Tro o p MANAGING DIRECTOR, PHARMA TYCSA

Evolution of medicine will require new logistics infrastructure Pharma Tycsa invested MXN30M in a distribution center

What trends are you seeing in Mexico, specifically in the health industry?

Specifically in public healthcare, there is a great deal of uncertainty regarding the next two years and even after 2024, because Mexico will have presidential elections. Since there have been many changes to the regulations and the players, things are murky. This give us room to truly evaluate where we are going and which markets will we attend to, namely federal, state, or others. We were searching for different niches of business in the pharmaceutical industry to serve our public customers. Today, we have four different lines of businesses: the distribution and compounding of oncology products; distribution compounding; third-party logistics services for the pharmaceutical industry specifically for multinational companies; and state logistics operations for the last mile, a segment of logistics services for public customers. Here, we operate state contracts to do the entire logistics for government customers within their regions.

How do you help international players enter the public health industry?

Within third-party logistics services, we have different models that depend on our customers. We have a portfolio of services to help pharmaceutical companies enter and serve the public market. We have a department of experts on all the regulations and steps needed to submit their products, and we can go all the way to storing their products in our warehouses and delivering them. Pharmaceutical companies are experts in promotions and manufacturing, but they are not experts on logistics, so this is where we come in. That is our core business and is where we add value to our customers.

Why did Pharma Tycsa decide to invest MXN30 million into a distribution center?

Many of the large companies in Mexico left the market for several reasons. We therefore see a great opportunity for the market to be filled. The strate-

gy of Pharma Tycsa from the beginning has been to work with multinational companies rather than local generic manufacturers. The biggest player in that segment was Farmacos Especializados, which closed down. We are ready to capture many of those customers, and given that the only option that they were working with disappeared, we are trying to capture that market now.

What main opportunities for growth have you identified within the logistics industry for pharmaceutical companies?

On the one hand, the logistics practice, which is our core business, will never disappear because manufacturers and pharmaceutical companies will not focus on that activity. Someone will always have to do logistics for either the government or pharmaceutical companies. The only thing we need to do is to be flexible, to understand the dynamics of the industry, and to be prepared to capture and offer our infrastructure in order that the market can respond to these needs. On the other hand, medication and pharmaceuticals are evolving in line with more technology, becoming much more complex, and involving many more biological sources. This will make them more precise and target individual patients more rather than generic symptoms, which will be a major change in the future. Therefore, new infrastructure will be required to handle those products, mainly cold chain, and we have to be ready to adapt to all those needs from the industry and be the first ones to offer such options. All these new biological products will require different traceability options and they can potentially have different side effects for patients. The healthcare and pharmaceutical industry will certainly see new challenges. The coming few years will be extremely interesting. We do not have time to recreate things; we just have to look overseas for the best practices to be implemented in Mexico. Additionally, Mexico will get new products on the market that might be of high quality and low cost. Therefore, there are several opportunities in the market. ✖

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HEALTH With the healthcare system and health needs in the country evolving to require more advanced treatments and medication, companies in the sector are investing more to develop their local capacities.

L u is F e lipe Alva

Sa n d r a Sá nch ez

L u i s V ald és

MANAGING DIRECTOR, MOTION CORP

CEO, PHARMADVICE

GENERAL MANAGER, SARSTEDT

MOTION CORP started 30 years ago with a pneumatic transport system. The primary sector is hospitals in Mexico, and we work in 450 hospitals operating on blood and medication management. 15 years ago, we analyzed the best uses of pneumatic practices in the world to understand the processes in places like the US and Europe. That is when I noticed the opportunity in Mexico regarding pharmacies. We analyzed the best suppliers and processes in other countries and compared them to the ones in Mexico.

We started this in 2008, and the first important installations happened in 2011.

For us, the most important opportunity exists in medication control. We are in charge of traceability from the moment the medication is bought until it reaches the patient’s mouth. We ensure the proper use of medication, that there are no mistakes, that the treatment is complete, and that the patient receives the medication on time. It is important to think about the right patient, the right medication, the right time, and the right dose in order to prevent mistakes. The US, Canada, and Germany all have different models, but they all have the same goal: medication control, its use, and patients receiving their treatments in an easier and faster way.

IN 2020, I saw three important things

MEXICO IS AMONG OF the main markets in Latin America along with Brazil. It is, therefore, essential for Sarstedt, which has been present for 20 years now. Our main business involves diagnostics and the laboratory. These essential needs make for a market for our products of over 120 million people. Everybody needs a blood sample at some point and our system is two things in one, whereby you can do the blood collection either with an aspiration or a vacuum system.

We are focusing on diagnostics, so all PCR testing for our consumer base. We collaborate directly with laboratories and hospitals for PCR tests. Our six target customers are hospitals, laboratories or clinical laboratories, blood banks, industry, research, and veterinary. Our blood collecting device has the advantage of being able to reduce frequent blood sample taking to just 1ml each time, rather than the standard 5 or 6ml.

In light of supply issues and other geopolitical eventualities we are seriously looking to increase our in-house operations to meet demand. We also have strong green credential and we produce in Germany at environmentally-sound facilities with a focus on CO2 reduction.

Currently, we have production in Mexico, but I am keenly looking into changing this over time.

that became extremely attractive and inspired my entrepreneurial endeavor.

Mexico is the second-largest pharmaceutical market in Latin America after Brazil and the 11th worldwide, with retail drug sales of around USD8.5 billion in 2021 and growing. The country has a growing aging population and is moving from infectious to chronic diseases. It has multiple, fragmented, underfunded state-run health insurance systems and a smaller but rapidly developing private healthcare insurance system. Moreover, COVID-19 had a heavy toll on the public health insurance system. I knew I could help close some of those gaps by working in unison with industry players and key stakeholders including the government, physicians, academia, NGOs, patient organizations, and so on. PharmAdvice shepherds its clients in developing a targeted strategy by fully understanding market needle movers and brand levers. Meanwhile, new players in the market from different sectors are already searching for overlooked gaps in the value chain and creating innovative solutions to bridge those “holes.” They bring a data-driven approach, connectivity, and customer-centricity that the life sciences industry needs to stay relevant in the market. Collaboration and partnering allows for leveraging strengths and resources from both sides, and PharmAdvice becomes the best connector and liaison for such an endeavor.

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investing IN THE FUTURE Working closely with a growing team to increase its digital presence and invest in data management, CRM, and more, L’Oréal Mexico is not content to rest on its laurels and is planning to soar further.

K en n et h C am p b ell PRESIDENT & CEO, L’ O R É A L M E X I C O

What is L’Oréal’s perspective on the Mexican beauty market and how much activity are you seeing in this sector?

pliers to secure our ingredients and raw materials.

First, Mexico is the second-largest beauty market in Latin America after Brazil, and ranks among the top 15 markets globally. As emerging markets become more relevant, we are looking forward to Mexico becoming part of the top 10 countries within the next three years for L’Oréal. In 2022, Mexico has grown by 30%. Two-thirds of our business stems from the consumer products division of mass market products. The role of Mexico and of the consumer products division is to democratize beauty. Our biggest brand so far is Garnier, followed

by L’Oréal Paris and the other makeup brands. We observed the largest growth since the pandemic in everything aspect of derma cosmetics. We have a division catering to the needs of people looking for medicated brands with dermatologist approval, such as Vichy and CeraVe, and this market has doubled over the past three years. It used to account for 5% of Mexico’s total beauty market, but today is at 10% and enjoying growth rates of 30-35% in this market. This is a large country so reaching every store has not been easy. The two main strategies have been, first, to source more within Mexico. We have two factories in Mexico, and have been looking to localize as much of the production as possible, particularly the consumer products division, and now have almost 85% coverage in Mexico. We have become increasingly relevant in terms of manufacturing. The second strategy is to anticipate demand and work in close partnership with sup-

Why does L’Oréal believe that, in Mexico, people will continue investing in beauty products despite economic downturn?

I am optimistic about the future of the company in Mexico. Penetration is high but can still be higher, if developed with innovation through new products and applications. Mexico is not only a large market in terms of consumption, but also a country with 130 million consumers and a young population that is still growing. Women in Mexico are particularly interested in beauty and care about their appearance. I think it is very much in our hand to stimulate demand by through innovation, and there are still many people to recruit through new channels. One of the major changes we have experienced over the past three years is that back in 2019 less than one percent of the beauty market was online, while today it is 10% and for L’Oréal 15%.

It has grown so much in under three years, and the rate will reach one-third or one-quarter within three to five years.

Today, one-third of our sales worldwide are done through e-commerce.

Why is L’Oréal working toward becoming the world’s first beauty tech company?

The company’s vision is to transform ourselves into the first beauty tech company in the world through the benefits of innovation and on the strength of our labs, as we have done over the past 100 years. Data, as they say, is the new oil, and companies that realize it and act on this will win. This is where we have been

investing notably. E-commerce is one example; it is growing twice as fast as the rest of the company. We are among the top advertising spenders in the country, and among the top 10 in print and TV. But over the past three years we have shifted our focus to digital. Now twothirds of our spend is digital advertising.

Two years ago, we had a team of 19 digital experts but next year we will have over 100. We are investing in people who are experts in data management, CRM, data mining, and data analysis, and who can help us advance towards our beauty tech vision. We want to enhance the beauty experience online, such as by adding the ability to test products virtually. ✖

BIO

Kenneth Campbell has been part of the L’Oréal Groupe for 23 years, in May 2020, he assumed the role of President and CEO of L’Oréal México. He began his career in L’Oréal Deutschland in 1997 as Group Product Manager L’Oréal Paris Skincare & Haircare. Since then, he has had an international successful career, with responsibilities in Spain, France, Austria—where he was appointed President & CEO in 2010—and the UK, before moving to Asia Pacific. There, he was the first CEO of L’Oréal Taiwan and later the regional director of professional product division.

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SPECIALIZED services M a r Ca mp o s CEO & CO-FOUNDER, CLINICA MOS

What opportunities in the beauty market did you identify that inspired you to open Clinica MOS?

To set itself apart from the competition, Clinica MOS focuses on the experience of caring, pampering, and creating a connection with its patients while providing high-end technical procedures.

The beauty treatments market is growing by double digits YoY, with Botox being the most requested treatment; however, today, patients are looking for simple solutions, and we realized that Mexico does not have a beauty company with a strong national presence. For example, in Mérida, no clinic offers state-of-the-art services, and we are the only place nationwide that offers a subscription model that includes state-of-the-art technology, dermatological services, aesthetic services, and medical spa services. Our innovation and subscription model allowed us to enter the entire country. The membership includes a monthly facial, though we also offer much deeper, more specific treatments using special technology that will have additional costs. However, members receive a special price for these treatments. We are focused on increasing the value of our subscription model and want our patients to receive the best technology available on the market.

How do you set yourself apart from other beauty clinics on the market?

BIO

Mar Campos studied medicine at the Anahuac University and did her internship at the University of Miami Miller School of Medicine. She later did a master’s degree in pharmaceutical dermocosmetics at the University of Barcelona and various courses in aesthetic and anti-aging medicine in Europe focused on injectables and facial rejuvenation. In 2016, she founded MOS with the vision of providing a novel experience in facial rejuvenation treatments and skincare.

There are many medical clinics, but none function as a medical spa, where we truly focus on the experience of caring, pampering, and creating a connection with our patients while they are receiving technical procedure. That truly differentiates us.

Some of the treatments or procedures require needles and might be painful, but we want to change that perception. We want members to come to our clinic and leave their cares behind. We integrate the aspects of dermatology, aesthetic medicine, medical facials, and also pampering. Our clinic in Mérida also has the advantage of not being limited those living in Mérida, but to everyone from elsewhere looking for such treatments. Our main model is to provide consistent skin solutions; it is not just about providing a one-time Botox treatment and that’s it. It is more about a comprehensive solution for their skin’s

needs. For example, one of our solutions targets skin pigmentation through monthly visits. We focus on luminosity, reducing wrinkles, adding hydration, and so on; it is not only focused on dark spots, which is our main differentiator.

What are your expansion plans in the near future?

We want to consolidate the number of patients in our subscription model, and by 2023 our goal was to open two new branches specifically in Mexico City. We want to open in Mérida City as well, because the city is growing significantly, and we want to cover that market to the north.

We are located in the center of the city, and we want to cover everything north of the city. Later in 2023 or early 2024, we might consider other locations or in other states.

What investments are you making in technology?

We are focused on laser technology from Israel because it is the best in terms of the development and creation of laser technology. We have machines with laser technology for the treatment of blemishes, rosacea, and acne with incredible results.

We also see a trend toward gene-based skin diagnosis for 2023. The idea is to incorporate this treatment in our clinics.

Currently, we develop a diagnosis through an image that analyzes a patient’s skin and detects pigmentation, wrinkles, hydration, and so on; however, we may be able to eliminate this with a study that tells us, according to one’s genes, what they are susceptible to, for example acne or rosacea, and then we can design a treatment that is much more targeted and personalized. We also see a strong trend toward functional dermatology, which is focused not only on treating a patient, but also looking into their lifestyle that might be causing their condition. We look at their glucose levels, diet, and so on. Today, everyone is more aware of the importance of a healthy lifestyle. This is crucial and will be one of our pillars for 2023. ✖

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a clear FOCUS

Prioritizing R&D for products specifically targeted at women and their unmet needs within the market, Organon Mexico has a clear focus on improving the health of women that is unique in the world.

Why did Organon decide to become the first pharmaceutical corporation dedicated to women’s health?

Organon is a new start-up that has only been around for a year. It was actually born over a year ago. With a project within the company from which we separated, we became listed on the stock market, and the reins were handed to me. Organon is a spin-off from MSD/ Merck, and today we are a distinct company, although the project has been ongoing for three years. Work on separating a product category from the portfolio began two years ago. After that, the decision was made to establish a company dedicated to women’s health.

No other corporation in the world has such a clear and deliberate focus on improving the health of women on the scale that we do. We are actually fighting against all the odds, because generally, in the past, women’s health companies or those that entered that segment, were absorbed through mergers. At the current time, we are focusing and prioritizing R&D of products specifically for unmet needs within the market. As half of the population, we believe that it is the exact moment to be able to generate this change, since women are changing their position in the world of work and achieving a level of equality that did not exist before. What was decided was to migrate to another company and start giving priority to areas such as, osteoporosis, hormone replacement therapy, and especially contraception. Within the company, we came from were established products that were also prioritized. And because those products had seen the expiry of their patents in most of the world’s markets, they ceased to be a priority; it was no longer invested in as is the case in the pharma space. But there are many markets in the world, including the Mexican market, where these products still have growth opportunities. So that group of products was migrated to Organon.

Within those products, we find important ones for cardiology, cholesterol reducers, and products to treat high blood pressure. Within the group of

F ern an d o F o gari n MANAGING DIRECTOR, ORGANON MEXICO

pain products, we have injectable corticosteroids, analgesics and anti-inflammatories. Then we have products within respiratory therapy, especially to treat allergic rhinitis and asthma; different therapies within the respiratory area; and dermatology products, such as creams that combine antibiotics, antifungals. Regarding the future, there is a third group of products present in other countries but not in Mexico, which is biosimilar products, together with a category within the group of women’s health products, namely fertility products. These products are not in available Mexico, but the Mexico Organon team is working hard with the government and regulatory entities to reverse this situation as soon as possible. There are many barriers related to regulatory issues and government policy that require addressing.

How is Organon trying to improve the welfare of women in Mexico?

Our main goal is to ensure that we have a successful portfolio and to promote ourselves among relevant government institutions, as well as non-governmental organizations. Furthermore, what is extremely important for a pharmaceutical company of our scale with the products that we market, is to supply predictability as the state does not buy in small volumes. It is essential to work with government closely to have clear knowledge of how to allocate resources to ensure timely delivery. Indeed, I would say that that is the most significant challenge that we have encountered, particularly in Mexico. The Mexican pharmaceutical market is the eighth-largest worldwide and values and prioritizes recognized product brands.

This presents a growth opportunity in terms of products whose patents have expired. In truth, the Mexican market is a world of opportunity.

We have a manufacturing plant and a growing economy, to which we may add macroeconomic stability and a skilled workforce with tremendous drive. ✖

Organon is working to bring biosimilar products to Mexico Regulatory approvals required to bring innovative products and biosimilars to the country

BIO

Fernando Fogarin holds a bachelor’s degree in business administration from the Buenos Aires University with a postgraduate degree in marketing from San Andrés University and an MBA from Argentina’s Austral University.

He has over 27 years of pharma experience and over 11 years in leadership positions.

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R e n zo Ca sap í a H E A D O F L ATA M , COURSERA ENTERPRISE

How did Mexico become one of the biggest markets for Coursera?

EVOLVING with the times Coursera works with customers, institutions, and companies of all types on the career journeys of employees in light of evolving requirements and a transformation of the workforce.

BIO

Renzo Casapía has been leading Coursera in Latin America since January 2022. His passion and career have been entrenched at the intersection of technology and education for the past 20 years, in which he has held leadership positions in North America, Latin America and the Caribbean at global companies such as Citigroup, IBM, National Geographic Learning and Cenpage. Casapía is a professor of digital transformation and data analytics at Hult Business School in Boston and EADA in Barcelona. He holds an industrial engineering degree from Universidad San Agustín in Peru and an MBA from HEC University of Montreal, Canada.

The best way to define what we do is to imagine a triangle, where today we are close to 100 million learners globally. Some 20 million of those are in Latin America, and close to 4.3 million are in Mexico. Mexico is the third-largest market for consumers. That does not include what we do for the government or in schools and universities. That is the first piece, the consumer part. This is for people who are keen to upskill, reskill, change careers, look for courses on our platform, or earn certifications. Then, we have the other piece, the providers of that content.

Therefore, how does that content get to the platform? We have big-name universities—Stanford, Yale, and University of California, as well as industry partners working with us. Then, we have Google, Meta, IBM, and SAP, which provide us their content, which we then organize for academies, courses, and certifications. On top of this, there is the enterprise part, which we pursue with governments to assemble our offerings for the public sector, organizations, large and small corporations, and universities. Companies all over the globe are undergoing transformation. There is considerable work that needs to be done before you can start thinking about innovating, machine learning, or AI in order to develop the talent required to apply to them. Our vision with them, and with governments, is that we do not necessarily need the talent, as we have the capacity to develop it. Therefore, we can get this person, or people, from different areas, which allows you to develop this talent within your team. And then they can pursue courses, along a predetermined learning path. The key here is that there is a winwin, and a personal stake for employees, because they want to gain a certification, which in turn is good for the company.

What type of companies do you generally work with?

Normally, it is a matter of working with larger companies. Technology is one of the

fastest transforming sectors, along with retail. The key here is development based upon the application of actionable data.

We have developed considerable business with fintechs, as big banks and corporations require a steady stream of talent. Our business model is a licensing one. Normally, we have different models. Today, there is a tendency for companies to say, “I want to do this or that company-wide and ensure everybody gets onboard.” Our consulting team curates the content best suited to their skills requirements.

What are the key skills being demanded in Latam?

Interestingly enough, this changes when you compare courses in progress and those that are completed. Consumers enter our platform seeking new skills. You will see things such as basic finance for people who, not working in the financial system, lack financial education. Learning how to learn and how to study is a key skill to have, too. You will see some basics of digital marketing and data as well as a general introduction to data, and IT support, digital marketing, and user experience studies. In terms of a list of actual certifications of people who completed courses, there is a clear tendency toward digital skills. Data analytics, programming, user experience, digital marketing, and analytics are very clearly the trend for us. Leadership is significant, too, as are negotiation and agility.

What is your main focus for the coming year in Latin America and Mexico?

We are working hard to remain relevant for large corporations first and foremost.

This is despite our relevance for the full spectrum of businesses. We are a small team, so we cannot go after thousands of companies, whereby partnerships may well be formed where required. With the larger corporations, the thing is to create as many flexible models as possible. With universities, we are keen to continue working the private institutions, such as largest universities in Peru and UVM in Mexico. ✖

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Image: javarman

The iconic Central Library of the National Autonomous University of Mexico (UNAM)

NUMBER OF JOBS RELATED TO TRAVEL AND TOURISM IN LATIN AMERICA IN 2021 (MNS) SOURCE: STATISTA

An aerial view of Playa del Carmen, south of Cancún

BRAZIL

6.4 MEXICO

6.03 ARGENTINA

1.33 VENEZUELA

0.97 PERU

0.96 COLOMBIA

0.93 CHILE

0.78 DOMINICAN REPUBLIC

0.76 CUBA

0.51

NUMBER OF WORLD HERITAGE PROPERTIES IN LATIN AMERICA IN 2021, BY COUNTRY SOURCE: STATISTA

MEXICO

35 BRAZIL

23 PERU

13 ARGENTINA

11 COLOMBIA

9 CUBA

9 7 CHILE

7 PANAMA

5

Image: Sire Nothingtodo

BOLIVIA

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CHAPTER SUMMARY

Tourism & Sports

RISING JUGGERNAUT exico is moving beyond the days of be-

known as a cheap beach destination M ing for international tourists and is reaping the fruits of the sector’s efforts to highlight the diversity that the country has to offer from vineyards to a cosmopolitan capital and international sporting events. Its growth is not without challenges, though, as the industry took a toll during the pandemic, but recovery is well underway. According to the tourism secretary, from January to November 2022 the country registered a total of almost 19 million international tourists, a 51.7% rise from the same period in 2021 and an 8% rise from 2019. The industry represents about 7.5% of national GDP. An important factor behind these results are the steps players are taking to apply international standards in the country and offer added value.

One example can be found in the success of the Mexican Open, an annual tennis event that has become one of the most prestigious in Latin Amer-

ica. “The vision was always to be the best, first, at a national level and then at a global level,” said Raúl Zurutuza, Managing Director of Abierto Mexicano Tenis (Mexican Open). “Over time, we have gained recognition from players as well. We were voted ATP 500 Tournament of the Year in 2016, 2017, and 2019,” he went on. Another example can be found behind the story of Síclo, one of the first boutique fitness studios in Mexico. “We were the pioneers in Mexico of this new boutique fitness industry and decided on the pay-per-class model in which members only pay for what they use,” said Alejandro Ramos, Co-Founder & CEO of Síclo.

“We sought to create a fitness experience that was cool and fun so people would really look forward to that hour of class,” he added. Their model has received a great response and is expanding toward additional Spanish-speaking cities.

In this chapter you may find additional stories of entrepreneurs working to highlight and cultivate the richness of the country. ✖

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MAKING a mark

The Mexican Open, celebrating 30 years in 2023, has not only boosted local economies, but also helped to develop local players and increased interest in the sport in Mexico.

R aú l Z u ru t u z a MANAGING DIRECTOR, ABIERTO MEXICANO TENIS (MEXICAN OPEN)

Celebrating 30 years in Mexico in 2023 Most emblematic tennis tournament in Latam

How did Abierto become one of the most prestigious tennis events in Latin America?

point of view to the sponsors and the city.

The first edition of the tournament was in 1993, and it involved a long-term vision. A project of this type, especially in sports, does not produce results immediately. Some 29 years ago, Alejandro Burillo Azcárraga, one of the founders of the tournament, saw it as a great product that could be developed for the country. The vision was always to be the best, first at a national level and then at a global level. Over time, we have gained recognition from players as well. We were voted ATP 500 Tournament of the Year in 2016, 2017, and 2019.

And another important element of the event is its support for Mexican talent. How do you help develop Mexican tennis players?

What are you doing differently in Mexico compared to other tournaments?

BIO

Raúl Zurutuza has been the director of the Abierto Mexicano Tenis Tournament since 2003.

He previously worked at the International Tennis Federation for 16 years in the commercial and its marketing department overseeing the television and commercial operations of the Davis Cup in Latin America.

He is also member of the ATP Tour Tournament Council and Chairman of the ATP Tour 500 Tournaments Group.

A great deal of it has to do with hospitality. The tournament is also by the sea and done in collaboration with a five-star hotel. The treatment that we provide is fundamental. Another issue has always been relations. We have extremely long-term business relationships, for example working with the hotel since 2001. Another factor is the media; we have been gradually gaining significant media coverage in an important way.

We do a great job with them in terms of attention, press conferences, how we treat them, and everything to do with the media. The fourth aspect, which is the most important of all, is the public.

The public makes a great difference and helped the tournament to grow over the years. In addition, the commitment of the government of the State of Guerrero, regardless of the administration in power, has helped significantly. All these factors combined have made the tournament a winner for everyone. We have a great reputation as a sporting event. There is no global ranking of tournaments, because everyone is making a great effort, but we like to think that we are among the best. One important thing to highlight about the tournament is its importance from an economic

Our philosophy has always been to have a Mexican player in the tournament, even if it is only one. The truth is that no Mexican player can enter the tournament directly. We support them by giving them an invitation to the Singles Main Draw and a Singles Qualifying invite. In 2022, we gave it to Rodrigo Pacheco, a 16-year-old player who played the first qualifying round. He played extremely well, though he later lost. This is all part of our commitment to helping to develop Mexican tennis players.

Can you elaborate on the next stage for the event?

After 30 years, we like to think about what will happen in the next 30. Without a doubt, the goal has always been to become a 1000 Masters: the super elite of tournaments in the world. In terms of infrastructure, we are ready; our new court is spectacular, with everything required. The only thing missing is three courts, which we already know where we would build them. We are at a solid level, and that is the ultimate goal. We are ready for an event of this type. But you have to be patient. In the meantime, we have to continue to consolidate our position. We want to continue to be one of the favorites of players.

What are the advantages of participating with the Mexican Open for sponsors?

Our commercial offer has been improving; we no longer just sell a logo on the court. There is a return on investment for broadcast television. We have been growing, and we still have a long way to go. However, the loyalty that we have shown our clients and their own loyalty is reciprocal. It is not something that was developed overnight. It has taken many years of work. ✖

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extensive GROWTH A pioneer of the boutique fitness industry in Mexico, Síclo has created a community of over 200,000 people in Mexico, Spain, and Peru.

A lej an d ro R am o s CO-FOUNDER & CEO, SÍCLO

What differentiates Síclo from other fitness and wellness options in the market?

Síclo is an omnichannel boutique fitness platform that has studios as well as an online app so users can take classes from wherever they are. We also have an at-home bike from where customers can take their Síclo classes whenever they want. Users can choose their preferred instructor and how long they want to take each class. We started Siclo in 2014 and launched our digital project in 2017.

We have travelled a long journey since we had to create our own bike. We also produce content and created a production team as well as a studio tailored to the style of our fitness classes. All that took time, and when the pandemic hit, we decided to bring forward the launch to March 2020. We were extremely fortunate because everyone was stuck at home and looking for ways to exercise and to do fitness. We were the pioneers in Mexico of this new boutique fitness industry and decided on the pay-perclass model in which members only pay for what they use. We also wanted to market fitness classes as the best part of one’s day rather than a homework that people have to do. We sought to create a fitness experience that was cool and fun so people would really look forward to that hour of classes. Also, we paid close attention to the locations of our studios.

We work hard on the brand, and we want members to post about it on social media to let other people know they are there. We were fortunate to find a great location in Santa Fe Park Plaza with 9-m high ceilings and glass walls, so everyone can see what is going on inside. The

architecture of this flagship studio also made the statement that we are not a traditional boutique studio. We created a cool and vibrant experience, and the response has been positive.

What other markets is Síclo targeting?

After seeing great responses from Mexico, Spain, and Peru, we decided to continue going after major Spanish-speaking cities, which is why we are looking closely at Colombia, Chile, and other cities in Latam. Our biggest challenge right now is making the right choices.

Resources are limited, so we have to carefully plan our roadmap and develop a solid expansion strategy in these countries. We are continuing with our plans with our current investing team and investors. We often look for capable, ambitious, and compatible partners in the cities we want to expand in.

any discipline that they are looking for, and our plan is to continue to reinforce this. A central part of our strategy and plans is to not only start digital classes of all these disciplines but also have inspace physical classes for them as well.

In addition, the future of fitness, similar to many other industries, is hybrid, and people will definitely continue to go to physical studios. Taking a class with 50 other members creates amazing energy, and these studios will continue to be a central part of what we do; however, we know people often workout at home.

That is also an important thing to consider, and that is how we envision our product evolving in the coming years. ✖

What steps is the company taking to digitally transform itself?

In previous years, we started with other fitness concepts. We started Bala, a box bootcamp model that had amazing classes and excellent results for its members.

We also joined Kentro, an amazing discipline that combines yoga, strength, and cardio. We did not create it, though it invited us to be part of it, and we invested in the company and formed an amazing partnership. When the pandemic hit, we incorporated many other disciplines and have nine currently: boxing, yoga, Kentro, barré, running, strength, meditation, stretching, and Síclo. For many of them, we have physical studios. People want specialized classes, the best classes of

BIO

Alejandro Ramos co-founded Síclo in 2014, the leading boutique fitness brand in Mexico and Spanish-speaking markets. In 2015, he launched the first studio. Since then, he has led a team with over 400 people to open 25 studios in Mexico, Spain, and Peru; launched biSí, the leading at-home bike in Mexico; and Síclo’s super app, where users can both watch Síclo´s live streaming and on-demand classes and reserve for in studio classes. Prior to Síclo, Ramos held associate roles in finance and entrepreneurship such as ALLVP and Citigroup. He is also co-founder and board member of Crecer México. He holds a BA in business engineering from ITAM.

Land’s End, the southern tip of Mexico’s Baja California peninsula, pictured from the air

Image: Frederick Millett

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Mexico 2023

FOCUS Dig ital nomads

WORK IN THE SUN Mexico is the next rising haven for digital nomads thanks to its vibrant culture and natural splendor, as well as its telecoms infrastructure and visa regime.

A NEW LIFESTYLE has emerged over the last decade or so: young Westerners, often with university education, are not all eager to begin traditional careers these days. They instead choose to travel far and wide, while making a living from a series of remote jobs or freelance projects. Many cities around Mexico, for example, have seen a rise in the number of young American, Canadian, and even European residents.

If you drop by co-working spaces such NEST in Carmen or WeWork in Mexico City, you will come across people with different nationalities who are gathered in shared workplaces to work on freelance projects, from coding apps to ghostwriting, to pay for their temporary stay in Mexico. The country’s lively nightlife, culinary wonders, and political stability is a big draw for this community of non-traditional professionals.

Though the digital nomad lifestyle has been around since the 2010s and even 2000s, we have has seen a definite surge in the number of people who self-identify as digital nomads after 2020.

“By 2025, some studies estimate that a whopping 35.7 million Americans or 22% of the workforce, will be remote workers,” according to Forbes.

The rise of distance-working after the COVID-19 pandemic has certainly helped to establish this new way of life. Many businesses were forced to embrace distance-working during the lockdowns.

And some were surprised to see that remote working did not affect the productivity of certain professionals, including programmers, graphic designers, or even team managers.

Once the pandemic was over, some of those who had enjoyed distance-working choose to continue their way of life, and many employers did not see a reason to object. In any case, the freelanc-

ing culture and the uberization of work had began even before the pandemic, which meant that many members of the workforce in Western economies were not restricted by traditional job contracts.

The incentives are manifold: these wanderers of the world are on the lookout for some adventure as well as lower cost of life in countries such as Mexico. Nevertheless, they prefer to remain part of the US economy, getting paid in the American dollar. Most American digital nomads who have remote jobs are working for US-based— and rarely European—corporations while living in the developing world.

Though calling themselves “nomads,” digital nomads cannot live anywhere on the planet. They can only flourish in parts of the developing world that enjoy strong IT infrastructure. After all, the distance-working culture became possible with the explosive growth of the internet. It is thanks to continuous advancements in connectivity throughout the 2010s, brought about by the telecoms industry, that we could join HD virtual conferences or share large files on cloud platforms during COVID-19 lockdowns Mexico is an excellent destination for digital nomads. While offering much in the way of cultural splendor and unique experiences that digital nomads are drawn to, Mexico also has a robust IT ecosystem. With well over 80 million internet users, affordable internet is available almost everywhere. With the continuously expanding coverage of 4G and 5G, there is little concern among digital nomads about the feasibility of working remotely from almost anywhere in the country.

Nevertheless, although Mexico is among the world’s top-10 countries in terms of the ease of access to the internet, both fixed broadband and mobile connections leave a great deal to be desired

Tourism & Sports

as far as the speed is concerned. Raising the average megabits per second (mbps) rate will make Mexico a more attractive destination for digital nomads.

Visas are yet another concern for digital nomads, as this new way of life is not always fully recognized within the visa regimes of different countries. Digital nomads often decide to stay for durations longer than what is secured with tourist visas but, having a remote job, do not see a reason to apply for working rights in the host country. Sometimes there are no non-working long-term visas. Some countries are rolling out a new category of visas exclusively for digital nomads, who are neither immigrants nor holidaymakers.

As it happens, Mexico has a visa type that perfectly suits the needs of a digital nomad. The country’s Temporary Resident Visa

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is often used by digital nomads, though the country may introduce a specific type of visa for the nomad community in the future. Mexico’s other attractions, especially for North Americans, include the multitude of agreements between the three major North American nations, making life easier for a American and Canadian citizens in Mexico.

The flocking of digital nomads to Mexico is not free of downsides.

Although the nomad community is contributing to GDP due to its relatively high spending power, it is exactly their high spending power in foreign currencies that can raise the rents in the country for the locals. This problem, however, is being addressed by the clustering of the digital nomad community in certain parts of cities such as Mexico City, Oaxaca, and Carmen. ✖

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Mexico 2023

INTERVIEW

D e me tr io Al b e r to He rn án d ez C o ri a CEO & FOUNDER, M E Z C A L A L P H A C E N TA U R I What main trends in the market are helping mezcal become an increasingly popular spirit?

BIO

Demetrio Alberto Hernández Coria’s passion for mezcal began in 2008, at the beginning of the beverage’s boom in Mexico City. In 2015, he moved to the city of Oaxaca and eventually founded Mezcal Alpha Centauri. Hernández Coria has participated in many commercial missions around the world to promote the mezcal culture, including New York City, Scandinavian countries, the UK, Germany, Belarus, Russia, Japan, Italy, and Spain. He has a degree in business administration from the Autonomous Metropolitan University.

Sometime around 2007, interest in this magical drink started to grow in Mexico City. Young people were starting to be more careful with their diets and eating habits. But, when it came to what they could drink, consumers were only offered industrially produced spirits. This provided a big opportunity for mezcal to shine, as people started to realize it offered many benefits and had several advantages over other spirits. Its manufacturing process is artisanal and does not use chemicals or additives. Mezcal is the only distillate in the world that requires the plant, which is the raw material, to be alive for at least 2,000 days, with some requiring more than 10,000 days. This means it combines solar, moon, stars, and cosmic energy, something that no other spirit does. This, combined with the unique flavors of the different agaves, the differences of the land where they are grown, and the different hands and techniques of the people that make it, mean mezcal fits more in the world of wines than spirits. In Miahuatlan, Oaxaca, I met master

Cutberto Aquino, with whom I have been working since 2017. He and his family make Alpha Centauri Mezcal. Alpha Centauri is the closest star system to our star, the sun, and allows us to take our customers on a personal trip through the universe of mezcal, final destination: Mezcal Alpha Centauri.

What kind of investors are you looking for, and how do you plan to continue with the capital you are going to collect?

At Mezcal Alpha Centauri, our top priority is to offer the respect that mezcal masters deserve and value the traditions. Then, we plan to build a distillery where different masters from all over Mexico can come to work to produce special batches under more controlled costs. This will allow us to offer an entry-level mezcal for beginners though one still made by the hands of geniuses, maintaining quality and authenticity.

We are looking for investors with humanitarian values and, above all, cultural respect. We also understand that any form of investment must be profitable. With this mind, we are also looking for investors who not only have the strengths and abilities needed to work in global markets, with business vision, but also love for tradition and respect for the mezcal culture. ✖

Image: Plan B Viajero

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Mexico 2023

INTERVIEW

A REAL impact

One of the biggest and most renowned art studios in the country, Menchaca Studio has been seeing great success in promoting Mexican art and artists throughout the world and even in smaller communities.

C és ar Men ch aca C R E AT I V E M A N A G I N G D I R E C T O R , MENCHACA STUDIO

Seeks to combine magic and nature, bringing pre-Hispanic values back Mexican art brings many opportunities to collaborate with international brands as its value is growing

BIO

César Menchaca is the Creative Managing Director of Menchaca Studio. His main goal is to globalize Mexican traditions by collaborating in different exhibitions and international events, such as the World Golf Championships or the Festival Day of the Dead in Rockefeller Center. He also seeks to support fairtrade for small Mexican communities by collaborating with them in his studio.

What is the international value of Mexican art?

We have amazing artists that have created amazing work. We are in museums and hotels, and because we believe art needs to be much closer to people, we also exhibit in commercial centers and public places. There is much more work to do, and there are opportunities with international brands.

It has favored them to work with Mexican art, and they have seen the benefits, so we hope to continue growing that way. Mexico has a rich and magical art scene that should be more well-known.

What are your relations with the private sector?

I have sought to create relations and energies with the private sector with brands and international events that can reach outside of Mexico, like our work with Formula One to help design helmets and cars. We have collaborated with Johnny Walker and Piaggio, and we have a campaign with Brugal Rum from the Dominican Republic to bring together the culture of Mexican art and rum. We have also collaborated with the Global Championship of horses. We are looking to form relations with global brands to bring part of our work to the world. We have a project with Google for an important global event in Mexico, and we were put in charge of creating artwork for the CEO. People like Tom Cruise have artwork of ours and also in Rosa Tous in Barcelona. Maluma also has an art piece.

This is a major factor for large brands to support our work and share the essence of Mexico.

How are ESG policies helping WWyour business?

In social terms, one of the key objectives of the studio has been to bring art to where it should be and look at how we should do this in a fair way in terms of work. In the studio, there are over 500 artists who are self-taught because they did not be-

lieve in their work before; however, they now know that their work has value. This, or seeing a child or a family have hope in their work, is the most incredible thing that can happen to us as a studio.

They have understood that they can be paid fairly for their work, that they can live well from their art, and that they can develop a whole community through an artistic project. Millions of pesos have gone toward communities to change their lives. We work with projects that allow us to look at everything going on in the world with things like pollution and the use of plastic. We have a project that involves creating recycled sculptures with plastic gathered from landfills. We have a gorilla at the moment made from recycled plastic, and the intention is to create a whole exposition and talk about everything that is happening with this situation and pollution, not only in Mexico but globally as well.

In relation to the future, how do you see Menchaca art within the art world?

I see myself in the best museums and places in the world. All of the passion and work will be displayed; at the same time, we want to create a reflection on what is going on in the world. We have a project called Jaguar’s Soul Through my Dreams, which is about giving voice to an animal that is endangered and that has such a large influence in the Hispanic and Latin culture. At the same time, we want to give a voice to the communities of the world that are disappearing. We also want to give voice to the elements of fire, earth, air, and water that come to life through mythical warriors and represent life and the Hispanic culture. We give all of this sense through an interactive exposition with not only large sculptures but also an interactive factor that will leave an impact on the spectator. ✖

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INTERVIEW

Lui s Lópe z M o r to n FOUNDER, M O R T O N S U B A S TA S How did the company begin?

BIO

Luis C. López Morton Zavala founded Galerías Louis C. Morton Galleries, the foundation of what today is Morton Subastas. He is also the founder and main promoter of Pluma y Martillo, where in 2008 he published the first edition of a Manual on Inheritance as well as its second edition, De Herencias y Herederos. He established Morton Loans and created Morton Porcelain, and manages its Flea Market. Morton holds a degree in business administration from Universidad Anáhuac and has studies in Senior Management at the Instituto Panamericano de Alta Dirección de Empresas (IPADE). He is a graduate of the Harvard Business School’s Senior Business Administration program.

I wanted to create an auction house, due to the complete lack of them at the time in Mexico. We started with an antique shop and the first auction, which was a flop, despite having a catalogue full of interesting items. We continued holding them, however, and came to understand the Mexican market. We came to be the reference point for modern and contemporary art, pricing according to the market. We established a market, but antique dealers resisted. At the same time, though, the business started to become organized. People didn’t understand how an auction worked so there was a serious process of education. We learned the business by trial and error. We also work closely with the public sector to clear the grey legal aspects of auctions. There are many situations where items cannot be sold due to their classification as sacred or colonial art.

Details of our work are openly available online for and we want to become the auction house of Latin America. Pieces that come to the auction house are naturally enough directed to specific categories, be it modern art, antiques,

graphics, or else our Saturday opportunity auctions. We charge a commission to both seller and buyer, which is standard practice at every auction house. If a piece doesn’t sell, we either return it or decrease the price for the next auction.

What investments has the company made to become more digital?

In 2019, we had plans to become more digitalized, but given the situation, our meetings and strategy were advancing very slowly. Yet in 2020, we had to make the instant decision to implement these ideas. By the end of the first year of the pandemic, many more people were buying online, which boosted business. At the same time, this platform gave us the starting point to co-manage the pandemic. We knew our mode of operation had to change, though we did not have to lay anyone off, nor did we reduce salaries. 2021 was a little more complicated, coming as it did from 2019’s supply shortages. Everything is acquired through the three Ds: death, divorce, and division. Here in Mexico, we can add dinero (money) as well.

In 2019 we started holding auctions. We are the company that transforms art and antiques into money. And our objective is to do so with complete transparency. ✖

Image: Alexandra Lande

Teotihuacan is an ancient Mesoamerican city located just north of Mexico City. Its largest structure is the Pyramid of the Sun, which is the third-largest pyramid in the world.