Kick-off for the Mexican economy?

Last week, en route to Brazil, I stopped off in Mexico, a little too early for the World Cup, but still a good opportunity to get a feel for the atmosphere. Opinions on the chances of Mexican national football team were unanimous: they’re going home after the first round. The joy of having won the play-off against New Zealand to secure the very last place in the World Cup turned to doubt the moment the Mexicans were drawn in the same pool as Brazil, Cameroon and Croatia.

 

Thankfully, the Mexican clients I visited in Monterrey, in the north, and in Mexico City were more optimistic about the energy reforms in their country. Last year, president Enrique Peña Nieto announced that sweeping changes were required to get the Mexican economy, which grew by only 1% last year, back on track again. He announced changes to regulations to attract foreign investment and a number of projects in the electricity sector are already beginning to take shape.

 

Last week, en route to Brazil, Jeroen Plag, head of Client Coverage Asia, Americas & UK at ING CB, stopped off in Mexico, ‘a little too early for the World Cup, but still a good opportunity to get a feel for the atmosphere’. He observes that the Mexicans are much more positive about their economy than on their football team scoring high at the World Cup.

Foreign investors

Earlier this year, additional domestic investment in infrastructure, roads, ports and railways amounting to USD 60 billion was announced. This immediately caught the attention of foreign investors, especially from Brazil, Spain and Portugal. Improved infrastructure means a better market for cars, among other things, so we’re seeing more investment from international manufacturers in the automotive sector. Setting up a car factory costs a few hundred million, but a gas or oil plant of a certain size will quickly generate a couple of billion in additional investment. When combined with the fact that the gas in the neighbouring US is getting cheaper and is once again being transported to Mexico, the picture is pretty clear: Mexico has some big plans and the government, which has a mandate through 2018, has plenty of time to implement them.

 

Monterrey

One other major issue in Mexico is safety. Although an important drug baron, El Tigre, was caught this week, the fight against organised crime is far from over. The last time I was in Monterrey, I received an email with the details and a photo of the driver that would be collecting us from the airport. At least that way we knew we had the right driver! Monterrey is about 200 km from the border with Texas and in many ways it looks like the US. You’ll find exactly the same restaurant chains there on the same straight streets with businesses and shops on either side. Given its location, Monterrey is the perfect place for foreign investors. Labour is cheaper than in the US and there’s enough room for new investors.

 

Mexico City

A little more densely populated – or should I say a lot more densely populated – is Mexico City. An aerial view of the airport reveals just how close together the houses are in the approach to the airport from air. Like the old Hong Kong airport, where you could see the laundry hanging on the lines, in Mexico City just before you land you can look right into the houses. The city and its satellite towns are officially home to 21 million people, but that could easily be a couple of million more. As the city is situated between hills, there is very little room for expansion. Traffic is constantly backed up and the associated air pollution does not make it a pleasant city to live in.

 

Tortillas with ant larvae

One of the advantages of travelling a lot is getting to try the local food, so also in Mexico. A business lunch only starts at 2 p.m., and the tortillas and guacamole taste very different to those from the Albert Heijn supermarket in Amsterdam! Something else that tastes ‘different’ are the fried worms, grasshoppers and escamoles, or ant larvae – a delicacy that is eaten with the aforementioned tortillas and guacamole. Incidentally, you no longer have to go to Mexico for these, now that we have grasshopper muffins in the Netherlands! Also check out the video that I tweeted before.

 

After lunch, it’s off to the airport for the overnight flight to Sao Paulo, Brazil, to weigh up the chances of the Mexican and Dutch football teams.

 

Follow Jeroen on Twitter: @JeroenPlag

 

Initially published by Dutch daily 'Het Financieele Dagblad', with permission re-published by ING.