Mexico’s future is bright due to significant structural reforms taken by President Peña Nieto’s administration; the country is destined to become one of the world’s largest economies in the not too distant future. Mexico is looking outward and has aligned itself with the United Kingdom in the upcoming 2015 Dual Year, which aims to strengthen relations across cultural, social and economic lines.
KITE Invest: Thank you very much for receiving KITE Invest this afternoon. I would like to start by talking about Mexico’s growth, not only in relation to structural reforms, but also other reasons that have positioned Mexico as one of the fastest growing countries in the Americas. In this regard, what would you consider to be the main factors driving Mexico’s growth?
H.E. Diego Gómez Pickering: Mexico without a doubt, because of its geographical position as a bridge between North and South America, and as a link between the Americas, Europe and Asia, has always been well positioned to receive foreign investment. In fact, it is a fundamental factor that explains why Mexico can grow, especially, as seen during the last two decades where our growth rates have been around 2.6 per year, which is still well below Mexico’s real growth potential.
Mexico is a country of almost 120 million people and has a diaspora of over 30 million in the United States. The Mexican economy is also linked to over 40 countries worldwide due to a series of trade agreements, establishing a perfect framework for Mexico’s growth.
Growth has not been higher due to a series of circumstances that are currently changing or are set to change thanks to the deep structural reforms initiated by the Mexican Government over the last 19 months. The expectation from these reforms, which range from the legal stage to an environmental aspect, is that the country will be able to grow at rates of 6%. This will have two major consequences: it will improve productivity and will level the distribution of wealth.
KITE: PricewaterhouseCoopers and HSBC have both stated that Mexico’s economy will eventually be bigger than that of economies such as Spain, France, and Canada. Focusing on the reforms mentioned, what are the specific factors about these reforms that contribute to such growth – a growth that places Mexico as the seventh largest economy by 2050.
DGP: Mexico began opening to the world twenty years ago with the signing of the North American Free Trade Agreement, followed by the signing of other trade agreements with more than 40 economies around the world. With these agreements, Mexico began to change its production methods, which over time crystalized a series of impediments that prevented Mexico from opening farther. The induction of the structural reforms has begun to unlock areas that had not been open before.
For instance, the education system, which had not witnessed reforms in over three decades, the current reform is paving the way for a better system of education and in turn, a wider scope at the basic and higher levels. Other major reforms are taking place in the energy and telecommunications sectors, which had been set aside, despite Mexico being the third most open economy in the world. In the energy sector reforms are changing legislation that had not permitted the entry of foreign capital for more than seven decades. Lastly, the reforms to telecommunications sector have greatly opened the sector, which was unable to benefit from trade liberalization due to constraints by the prevailing monopoly. These are three of the twelve reforms that have been approved and indicate well the reasons why the country is expected to experience economic growth.
KITE: Do you believe that these reforms will serve to reduce any fears that investors could have upon entering the Mexican market? Would you also shed some light on the judicial reform, as it addresses the issue of investors’ safety?
DGP: An investor who really knows Mexico is not afraid. At the international level, Mexico has one of the most transparent legal frameworks, and gives great security and certainty to foreign investors. It is for these reasons why Mexico over the last twenty years has received a level of foreign direct investment that would cause any other emerging country to blush.
The legal certainty in Mexico is not something that the reforms seek to change; legal certainty is there. The judicial reforms are further opening Mexico to investors whom had been unable to see the attractiveness of Mexico’s economy before. One of the great virtues of Mexico is the ease by which it allows investors to get a return on their investment, and that there is a legal framework in place to ensure this. The reforms will assure the existence of legal certainty and bring attention to new opportunities existing in Mexico.
KITE: The depth and reach of the reforms is clearly significant, in your opinion when will the efforts from the reforms be visible and be a reality? What measures is the Embassy taking to facilitate this?
DGP: The results of each reform entail a transition time and changes do not occur over night. The transition of the reforms permit for results in 15 years; however, what is clear and what is expected by next year is a percentage change in economic growth.The measures being taken by the Embassy are promotion and awareness. For instance, with the energy reform, the initial round ended and now we are in the process of developing round one of purchases for the beginning of next year and to begin having contracts with domestic and foreign companies. In terms of the education reform, measures have already been implemented for the 2014 school year.
KITE: What role do the reforms play in terms of the relationship between Mexico and the United Kingdom?
DGP: The reforms play an important role, particularly in the UK, because it is a reformed country itself. It is a country that has always been at the forefront in terms of economic and social growth, and in this sense, the reforms perfectly fit within the relationship between the two countries.
The UK was the first European country to recognize the Mexico’s Independence in 1825, and since then both countries have had a special relationship, a strategic relationship. In this context, it is not only that the reforms have been viewed favourably from here in the UK, but also they have encouraged that the dialogue between the two countries includes issues that may have been absent for a while, and thus enhancing the bilateral relationship.
KITE: While the relationship between the two countries is a lengthy one, the year 2015 has been coined “The Dual Year – The Year of Mexico in the UK, the UK in Mexico.” What are some of your expectations for the ‘Dual Year’? Why are the two countries avowing to strengthen relationships now?
DGP: The basic objective of the dual year is to build on existing relationships and to transform how the countries think of each other. For example, the finance sector in London knows that Mexico is a country of opportunity but this sentiment has not necessarily permeated into the mind-set of the British public.
What this year is trying to accomplish is that the UK will truly know Mexico as a country with great potential and as a country with a great future. Mexico will be seen and understood as a creative country, as a prepared country and as an educated country.
KITE: The Mexico UK 2015 idea was first identified as a way to strengthening cultural relations between the two countries. Has the Dual Year shifted course to include an economic focus?
DGP: The idea of the Dual Year commenced as one that would serve as a stage to showcase the rich cultures of both countries. Over time the focus of the Dual Year extended beyond a cultural exchange and to cover investment, tourism, as well as, education, science and technology.
KITE: What are the specific actions or strategies that both countries are doing to strengthen bilateral relations during this upcoming year?
DGP: Each government has established thorough programs. In the UK, the British Council and the Foreign and Commonwealth Office are developing a program of activities, which begin later this year with a visit to Mexico by the Prince of Wales. While in Mexico the Secretariat of Foreign Affairs in conjunction with the Council of Science and Technology and the National Council for Culture and the Arts are coordinating with ProMéxico to implement a program with over 100 activities, beginning with the Day of the Dead celebration.
KITE: Previously we spoke of Mexico’s legal certainty and safety, yet there is still the issue of perception. As you have stated in the past, there is an importance to communicate and establish the reality of Mexico. As Ambassador, what measures are you taking to enhance Mexico’s perception?
DGP: The fundamental function of the Embassy is to act as an advocate of Mexican interests and promote the opportunities in the Mexican market. The Embassy urges for greater awareness of Mexico through meetings with the global media in order to answer and clarify questions related to the reforms, the Dual Year and other issues relating to the economy and society of Mexico.
KITE: What is the biggest challenge in terms of the topics that are linked to Mexico’s perception such as violence and insecurity?
DGP: The biggest challenge is communication. Specifically, the ability to communicate with as many potential partners as possible in order to present the full reality of what is Mexico.