The upcoming year is one of great anticipation for UK-Mexico relations. The Dual Year, ‘The year of Mexico in the UK, the UK in Mexico’, is aimed to increase relations across economic, cultural and social lines. KITE Invest had the opportunity of meeting with the UK Ambassador to Mexico, H.E. Duncan Taylor, to discuss the current landscape of UK-Mexico relations, the viability of the Mexican economy, and investment opportunities for the UK.
KITE Invest: Mexico has exhibited that it has great growth potential and high expectations from investors around the world, especially, as a result of the openings attributed to the sector reforms. What is your opinion of the reforms that have passed during President Peña Nieto’s time in office?
H.E. Ambassador Duncan Taylor: President Peña Nieto has been in office for two years, and during this time, the result that he has been able to achieve with the reform package is quite spectacular, and required a great deal of skill and consensus building. Mexico needs to find ways of raising productivity in particular, and I think this is a big driving force behind the reforms.
In the UK we have a particularly strong focus on the energy reform, because the UK is one of the leading countries in the world in terms of the energy sector and oil & gas exploration. As one of the leading countries in the world in this field, it is understandable why there are expectations of significant investment by British companies in Mexico.
The telecom reform is also quite interesting for the UK. For instance, Sir Richard Branson has begun investing here and has a presence in Mexican telecom with Virgin Mobile.
Overall the reforms are not only opening up the sectors, but on the other side, allowing British companies to see the business possibilities in Mexico.
At the turn of the 20th century the UK was a major trading partner with Mexico and now the UK is down to less than 1% in market share. Although trade between Britain and Mexico is growing healthfully, it is coming from a very low base and is a very modest amount. For instance, the UK accounts for around 4% of world trade and in Mexico we have less than 1%. Mexico is the 14th biggest economy in the world and for the UK as an export market it is around the 40th. For me this does not make any sense, it should be much more.
KITE: When do you expect the Mexican community will begin to see tangible results from the reforms?
H.E. Taylor: It could take some time before the Mexican community sees benefits from the reforms. While investments are starting to enter into the sectors, this does not have a direct effect on the Mexican people. One of the challenges is to show and prove that these reforms will have benefits down the road will be good for the Mexican people.
These reforms are said to bring a 1-2% GDP growth, and this would be an amazing achievement; however, this will come over the next few years, not immediately.
KITE: With respect to the tax reform, and in particular the increase of taxes of foreign companies, do you think this could damage the inflow of foreign companies?
H.E. Taylor: The key point there is that Mexico has to consider its position as a location for investment. As an investment location you have to have the business opportunities, which clearly Mexico has, but then there has to also be competitive rates of tax or the business will go somewhere else.
It’s a complex issue and one needs to look at the whole package. For instance, what are the incentives for investing in Mexico, what is the overall tax burden to the company, and what is the level of profit to be made?
KITE: Comparing markets in the region, Brazil has been more favoured in terms of investment. In this regard, do you think Mexico still presents a more attractive option for British investors?
H.E. Taylor: Brazil is a very large market; it has 220 million people and is one of the largest economies in the world. If British companies are looking to do business in Latin America, it is natural that one of the first places they will look to is Brazil.
Yet, Mexico’s market size is not too far behind with 120 million people. Looking back to the 1990’s Mexico’s economy was the ninth largest economy in the world, and now it is the 14th. Mexico’s economy has gone down, because it has not grown as fast as it competitors, like Brazil, who grew extremely fast in the 2000’s. If Mexico wants to live up to its potential, it has to match its competitors in growth.
KITE: This past year saw the development of the British Business Centre in Mexico. What was the purpose of the Centre’s creation?
H.E. Taylor: The British Business Centre is the result of an initiative by Lord Green, the former Minister of State for Trade and Investment, to develop a network of Business Centres, which will provide additional support to British companies who are looking to do business in a respective country.
The British Business Centre was formed to assist companies by providing them assistance, information, and services until the company gets more well established. The Centres will complement and supplement what the Embassy’s Trade & Investment team already provides. I think we will see the Business Centre becoming a significant additional player in the adding of British companies doing business in Mexico.
KITE: In terms of education, what opportunities do you see arising between the UK and Mexico?
H.E. Taylor: The UK does very well in the education sector, it is one of the most successful countries of selling education, and we are very keen on retaining our high-ranking position. We see many Mexicans going to study abroad in the UK, ranking second after the USA, with around 2000 students at any given time.
The UK and Mexico also have great collaboration between universities, programs, and innovation funders that will promote academic funding at the advanced levels. As a result, we expect to see a big increase in the senior level, advanced joint research studies between the two countries.
In terms of Mexico and education, there are a variety of things that arise.
Due to the reforms, and particularly the energy sector, there is going to be an enormous demand for skilled workers. Initially, skilled workers will most likely come from abroad, but it will be imperative for Mexican to increase the level of skilled workers, especially for the energy sector.
Another area that is very important is English language. The Mexican Government is really keen to make an effort to promote the learning of English, as they understand quite clearly its importance due to NAFTA. If Mexico wants to become a competitive player in world trade, a greater spoken English will be required as around most of the world English is the lingua franca. To this end, the British Council has been working with the Mexican Government to help train and raise the standard of English language teachers.
KITE: Lastly, in your recent appointment as the Ambassador to Mexico a year ago, what would you say has been the biggest challenge?
H.E. Taylor: By way of challenges, it would be how to find the key to get British businesses to see the opportunities in Mexico. My top priority is getting more British businesses to Mexico. It is happening and it is growing, and the reforms will continue to help the British presence grow.