Aug. 29, 2016


Ildefonso Guajardo Villarreal

Saudi Arabia

Ildefonso Guajardo Villarreal

Secretary of Economy, Mexico

TBY talks to Ildefonso Guajardo Villarreal, Secretary of Economy of Mexico, on recent agreements made with Saudi Arabia and attracting Saudi FDI to Mexico.

BIO

Ildefonso Guajardo Villarreal was born in Monterrey in 1957. He obtained a degree in economics at the Autonomous University of Nuevo León, and later completed graduate studies in economics at Arizona State University and the University of Pennsylvania. He was Chief Economist of the Brazil Section, and Associate Economist in the Fiscal Affairs Department at the International Monetary Fund before becoming Director of the North American Free Trade Agreement Affairs Office based at the Embassy of Mexico in Washington, DC. He was appointed Secretary of Economy in 2012 after holding a number of government positions, including at the Foreign Affairs Ministry, the Minister of Tourist Development, and the Industrial Development Ministry.

During your visit to Riyadh, the two governments signed nine cooperation agreements. Which sectors promise higher potential for cooperation?

We were looking to find greater opportunities for rapprochement and economic relations in fields such as energy, infrastructure, and trade, fields in which both countries have great potential. There are several sectors in which, derived from our meetings with Saudi business and government sectors, we have identified potential business opportunities. By the nature of both countries and productive vocations, one of the first sectors where we believe we can collaborate is the energy sector. It is worth mentioning that the requirement for local content (it must begin at 25% in 2015 to advance to 35% by 2025) that we have established for the hydrocarbons industry is relatively low, compared with the level of local content established by other countries, such as Brazil, where it can be up to 80%. Other sectors that in recent years have seen significant growth are construction and infrastructure. Mexico and Saudi Arabia are generating a large number of infrastructure projects. The Saudi construction sector is considered the largest in the Middle East due to the expenditure that is done on infrastructure projects, which attracts foreign investors to establish new enterprises or joint ventures with local companies. Both countries are directing their efforts to develop projects that add technology, such as IT, telecoms, and multimedia, and add to the transfer of knowledge, such as education, life sciences, and healthcare. On the other hand, there are opportunities to supply the Saudi market with various consumer products, as they can be furniture home and office, lighting, textiles, and food. In this sense, Mexico is exporting agro industrial products and Saudi Arabia is one of the most important buyers of food in the world. Coffee, fruits, vegetables, and other foods are Mexican products that can participate in the Saudi market. We are considering the halal market as an important potential market. Mexican firms are certifying different products to serve this market, such as hamburger meat, sesame seeds, dehydrated products as egg yolk, tomato, and organic and inorganic chemicals used in small quantities for food and fishery products, among others.

What Mexican sectors offer the most investment opportunities to investors in Saudi Arabia?

We have opened some areas of our economy to private sector participation that were previously closed or were state monopolies. The energy reform undoubtedly enhances the opportunity to exploit our energy resources with private-sector participation and investment from fraternal countries, which also have experience in these fields. Our energy reform opens up the oil, electricity, petrochemicals, gasoline retail trade, and gas distribution sectors for both domestic and foreign investment for the first time in 75 years. Furthermore, the reform expands from 49-100% the participation of foreign investment on the construction of oil pipelines and on oil and gas well drilling. There is plenty of space and facilities to invest and do business in the Mexican energy sector upstream, downstream, and midstream. In telecommunications, up to 100% FDI will be permitted in telecommunications and communication via satellite together with up to 49% in broadcasting, so global IT companies are already investing in Mexico. Particularly, I would like to refer to the investments of the Saudi sovereign fund, which is a major business opportunity. This allows us to implement strategic partnerships to finance productive and infrastructure projects and it can be used in Mexico through the Fibra E, a financial vehicle to attract investment for any company, whether public or private, to develop infrastructure projects in several sectors. Also, it could be feasible to generate new operating companies in the energy sector through a joint venture scheme between Pemex and Aramco. Tourism, infrastructure and real estate development are areas with enormous investment opportunities. Mexico is already among the top-10 tourist destinations in the world; for example, in 2015 more than 5,000 Saudi visitors enjoyed Mexico's beaches and hospitality.

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