What is your outlook for the Mexican economy in 2021?
The speed of digital transformation in Mexico is extremely rapid; there is no country in the world that is accelerating that quickly. To some degree, the omni-channel was an option before, but today it is a necessity. In Mexico, the largest retailers and department stores were not adequately prepared for this change; however, this is the new reality of the Mexican economy. Second, regarding COVID-19, what differentiates Mexico from other regions is that there have not been programs to support these dramatic situations. There were no fiscal, labor, or financing programs to support this change. Certain industries have been resilient and have managed to withstand the effects of the pandemic. Some of these companies are somewhat connected to US and Canadian demand, and Canadian and US businesses have managed to withstand the impact of the pandemic more than Mexican companies. That is partly because there are support programs for firms in Canada and the US. Those companies that are closely connected to the FTA in North America have been extremely resilient. The healthcare industry has been resilient, as have logistics. The technology industry has not faced any problems. However, tourism and restaurants are some of the sectors that were more affected. Meanwhile, less people were able to meet the requirements to access credit due to the economic recession, impacting consumption.
Do you expect demand for offices and commercial real estate to pick up?
Working methods have changed. Many things can be done via Teams or Zoom, but some face-to-face interactions are still necessary, especially in Latin culture. As for commercial real estate, there is an oversupply of commercial real estate space. The Mexican economy declined in 2020 and is expected to record some growth in 2021. However, that growth in 2021 will still not lift us above the GDP of 2019. That means we still are in a recession. Second, and this is essential for me, a great deal of this activity requires liquidity. Many companies need access to financing, and Mexico is drying out in terms of financing. Businesses need liquidity to operate in a recession, but financing options in Mexico are limited. Mexican businesses are heavily dependent on the banking sector because there is not a well-developed stock market. That is why it is important to continue to promote this market, and particularly the new BIVA stock exchange, that has several programs for smaller issuers as well as advisory. The lack of financing options is one of the main handicaps that we face in Mexico.
Your track record is fairly unique in Latin America. What characteristics do you seek before adding a company in your funds?
Our main goal is to first maintain, and then increase the value of our investment. We are a growth-style fund, so we are also scouting opportunities in the market. We are extremely selective in terms of industries. Second, we seek to invest in companies that have the strengths to become stronger in their industries. We want companies that are unique in their sector. Third, we want them to have high growth potential; Genomma Lab is an example. It had certain products, so we provided Genomma with a business model financially sound, but focused on growth. In addition, a strong managerial team was, and is, extremely important for us. We are either majority or minority investors; what we seek is a strong business operator in their area.
Are you interested in any entering other Latin American countries?
Through the companies in which we are invested, we have a presence in eight countries. We do not invest in Brazil; it is a protectionist country. We are not looking at Argentina for the time being. Then, we have Colombia, Peru, and Central America. Central America has a great deal of potential. Chile has a similar situation to Brazil.