The Mexican Agency for International Development Cooperation (AMEXCID) is a decentralized body of the Mexican Ministry of Foreign Affairs (SRE). The agency was created on September 28, 2011, and was provided with specific powers to deal with matters related to international development cooperation. KITE Invest met with the Managing Director of AMEXCID, Juan Manuel Valle Pereña, to discuss Mexico’s stance and growing influence within the international arena and the country’s relations with the United Kingdom.
KITE Invest: After three decades of struggling to raise growth rates, what are your views on the scope of the reforms taken by Peña Nieto’s Administration and their ability to drive growth, competitiveness, and social welfare?
Juan Manuel Valle Pereña: Over the last three decades, the Mexican economy had important achievements such as macroeconomic and financial stability, however important challenges remained, being these exacerbated by the fact that since 1994 there had not been a majority in Congress by the President’s party, making efforts to change even more complicated (for Constitutional reforms there needs to be two-thirds approval by Congress).
In such a context, the structural reforms passed by Congress in the last two years of this Administration must be considered a success.
If we look deeper into the reforms, we do not only see that they are targeting what the investors say is important and are willing to invest in, but also and more importantly,is that they intend to make real and long lasting changes in the economy.
In terms of sectors, our manufacturing sector has been an important driver of our economy for a while now, particularly since NAFTA was signed. Nonetheless, the reforms were orientated to generate better conditions in the manufacturing sector, in order to consolidate Mexico as a hub for manufacturing. For instance, if we look at other countries that have similar integration of their external sector, we will only find Germany and South Korea, as countries above Mexico in terms of the size of their high-value added exports in GDP.
In order for the manufacturing sector to succeedwe need to have skilled labor, which relies on better education and more flexibility. Then in terms of addressing the many needs in infrastructure and social programs, Mexico needed more revenue, to which the fiscal reform was crucial. Finally, the energy reform will allow to have more efficient firms and attract foreign investment, but overall, the energy reform will bring a more certain and cheaper source of energy for large corporations, firms, as well as, families.
The combination of the reforms allows us to firmly believe that the expectation of an increase in growth rates is feasible, but also there is the possibility of having a real impact on the economy. The reforms were not just about economic growth but alleviating poverty and inequality as well.
KITE: In your estimation is Mexico a modern or traditional economy?
JMVP: There is a very good report by McKinsey that suggests that we have a tale of two Mexicos. The modern Mexico is the one that was closely related to NAFTA, and to foreign and Mexican multinationals, where there has been productivity growth rates of over 6% for 20 years. The traditional Mexico, on the other hand, is linked to services and trade and small and medium-sized enterprises; there is more informality, tax evasion, and there has been a decrease in productivity.
The abovementioned reforms aim to achieve only one tale of Mexico, a tale of development, progress and success for all.
KITE: Turning to AMEXCID, what are your views of the Agency’s track record in creating value for its stakeholders and evaluation of its recent results?
JMVP: Certainly the idea of having an entity responsible for coordinating cooperation efforts in and outside of Mexico was an important step. There are many things that through cooperation projects can be learned from other countries and shared by Mexico with them. It is crucial to have an entity that brings those items into the domestic agenda and finding the partners for undertaking projects. Even more important for one of the largest 20 economies, and expected to be one of the largest ten, is having a coordinated strategy towards approaching others and sharing what we have done well in Mexico.
It is crucial that countries like Mexico, Brazil and Chile that are in the transition from being developing to be developed countries, have an institutionalized framework for sharing their experiences as they grow in importance regionally and globally. In order to do this we need to measure how successful Mexico is; therefore, AMEXCID has set up a technological platform to identify, measure, and estimate cooperation efforts (in terms of financial resources as well as knowledge sharing and technological transfer).
We have also developed a program for our International Development Cooperation that is perfectly in line with our National Development Plan and has allowed us to establish five key areas where we should be concentrating: health, education, science & technology, environment, and infrastructure.
This allows us to look at the future with a dual strategy. On the one hand we can share the expertise that we have, and on the other, we are able to develop more projects in these five areas. This notion is crucial to the future development of Mexico in the international arena and at home.
KITE: What are AMEXCID’s priorities and objective’s for 2015 and new areas where AMEXCID plans to expand its influence?
JVMP: The priority is to finalize a platform that will contain our areas of expertise and to share the platform with the ministries of health, education, science & technology, environment and infrastructure, in order to identify where and what we can do at the larger scale in other countries.
The goal is to have this platform completed by the end of this year in order for us to be able to commence with some of these larger scale projects next year.
An additional element of this year’s priorities refers tothe discussion on the Post-2015 Development Agenda and the Financing for Development Conference that will take place in Addis Ababa. Last year it was agreed that Mexico would hold the first High-level Meeting of Global Partnership for Effective Development Corporation, and Mexico became co-chair with the Netherlands and Malawi. We are fully committed with this agenda, because of its focus on global partnership, ownership, transparency, and relationships with the public, private and academic sectors.
KITE: With this year being the Dual Year between Mexico and the UK, what are your views on the strategic opportunities that Mexico can offer British investors, particularly in light of the recently passed reforms?
JMVP: Being a manufacturing hub and with the energy sector reform currently in the process of being implemented, many of the opportunities are associated with manufacturing and with energy, clearly very attractive for UK investors.
There are numerous opportunities and many that have not been taken advantage of. Clearly the energy sector is the most important in terms of investment and it is natural to expect that the largest companies around the world and the UK will be investing directly and partnering with Mexico.
In terms of trade, the UKTI and ProMexico have to work more closely together and set a clear strategy in the areas where there is most potential: aerospace, biotechnology, agribusiness and others.
KITE: The UK aims to double its trade with Mexico by the end of 2015, do you this as a feasible goal and what measures will have to be taken?
JMVP: If trade with the UK doubled between 2000 and 2012, the goal of doubling trade between 2013 and 2015, even with the 30% reduction due to the global recession, does not seem very feasible.
In order for this to come close to being achieved, the business communities and not just the governments have to come together. While international cooperation can be doubled by governments’ will, the same is not true for trade.A government’s role is to set up an adequate legal framework for the development of the private sector, and to adapt it to new realities and needs that the business community might help to identify.
It is in this regard that the Mexico – UK Dual Year aims to bring together and target very specific sectors, giving the needed push in business exchange and flows, and ultimately an increase in trade.