Time to tune in

Latin American companies turn up the volume on global growth

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Country Insights: Mexico highlights

EY - Francisco Álvarez

Francisco Álvarez
Regional Managing Partner, Mexico and Central American
EY

Talk to non-Hispanic Americans about Mexico and most will tend to know two things: first, their car was manufactured there, and second, the country suffers from significant drug-related violence. This impression is not inaccurate. Manufacturing is an important part of the Mexican story, and drug violence has cost thousands of lives in the past six years.

However, the perception dramatically understates the reality of Mexico, which, despite its challenges as a developing country, has created one of the world’s strongest, most vibrant economies. The International Monetary Fund ranks Mexico as the 14th-largest economy in the world, on the doorstep of the world’s largest market. The North American Free Trade Agreement (NAFTA) links Mexico not only with the US but with Canada as well.

This is only the beginning of an exuberant growth trajectory. We see it every day when we meet our clients here in Mexico City and advise them on their next bold moves. We have observed it on the world stage too – for example, in the summer of 2012 when Mexico became the first Latin American country to chair the G20 summit.

Jim O’Neill, the Goldman Sachs economist who coined the acronym “BRIC” in 2001, said at a London investment conference in 2012 that he now expects Mexico to become the world’s seventh largest economy by 2020.

As was the case in China, Mexico’s economy got its jump-start through manufacturing for the American market. Lured first by the tax advantages, North American companies stayed once they saw the valuable role of Mexican factories in their supply chain.

Also like China, the hardworking and increasingly efficient workers of Mexico are rapidly transforming Mexican-owned companies into world-class competitors with global ambitions.
In the past few years, these national champions have been looking abroad, both to the rest of Latin America and to the US.

This report focuses on these new champions: the rising cohort of strong and sophisticated Mexican companies. It explores their increasing engagement with external markets, including their goals in growing their business abroad, the strategies they are using to expand and the challenges they face.

Fast facts: Mexico

  • Mexico is one of the world’s most open economies. Its imports and exports represent nearly 60% of total GDP. The US, by contrast, is just 21% open, by that measure, and Brazil just 18.5%. (“Open economy brings rewards,” Financial Times, 16 April 2012)
  • On EY’s 2012 Globalization Index, which rates the extent of globalization of the world’s top 60 countries by GDP, Mexico ranks 37th, well above Brazil, which places 45th. (Looking beyond the obvious: globalization and new opportunities for growth, EY, 2013)
  • The Central Bank of Mexico now holds cash reserves of US$166.3 billion as of early April 2013. (Banco de México weekly report, 16 April 2013)
  • Mexico now maintains a fiscal deficit of 2%, making it one of the most fiscally restrained members of the Organisation for Economic Co-operation and Development (OECD). (“The Rise of Mexico’s Middle Class,” Wall Street Journal, 12 March 2012)
  • Between 2011 and 2021, exports from Mexico will rise more than anywhere else in Latin America, both as a percentage (7.6% annually) and in absolute numbers, generating a cumulative total of US$3.8 trillion. (Oxford Economics)

For more information

EY - Mexico Download the Mexico highlights report here.