THE FRIENDLY HANDSHAKE
TBY talks to Nick Baird, CEO of UK Trade & Investment, on British-Mexican trade ties and the potential for SMEs to boost business relations.
Your appointment as CEO of UK Trade & Investment (UKTI) coincided with the organization's new five-year strategy to adopt a more entrepreneurial approach. What is the practical impact of this approach in countries such as Mexico?
The reason we decided to embark on a more entrepreneurial approach at UKTI—and in the government in general—relates to the measures that the authorities have taken to control our domestic debt. Internal demand is inevitably constrained, and we have to support our growth through exports and foreign investments. This approach is also being implemented at a time when traditional markets are weak. For example, we know the issues that the EU and the US are struggling with; there has to be a particularly big shift in terms of attention to the large emerging markets where there is evidence of growth potential in the medium term. At the moment, the UK has obtained a 3.4% share of the imports of Organization for Economic Cooperation and Development (OECD) countries. Meanwhile, we have only 1.2% of the share of imports from economies registering huge growth. The principal challenge for the UK is to close the gap and boost the share of our exports to emerging markets, and there is no reason why this should not be the case. As emerging markets develop, their consumption patterns align with those of the markets in which there are already successful exporters. Considering a country like Mexico, it becomes a clear priority in that sense. It has a large emerging economy, sound macroeconomic policies, terrific demographics, and excellent opportunities—not only as a market itself, but also as a springboard to the US and the rest of the region. We have less than a 1% share of Mexico's imports. Although we are starting from a low base, we believe that it is possible to build strong ties from there. We have seen an increase in our exports to Mexico over the last couple of years, and we set the target of doubling our export volumes by 2015.
In terms of FDI, which sectors of the Mexican economy do investments from the UK enhance the most?
The energy sector is very interesting at the moment. The oil and gas sector in Mexico, which has been fairly closed in the past, is now opening up. There are huge opportunities onshore and offshore as well, particularly in terms of deep-sea exploration and extraction. The UK-based company Petrofac was the recent winner of the first two private contracts for operational rights in a Mexican oil field in more than 70 years. When we move to deep-sea offshore opportunities, which we will be doing over the next year, we will clearly need the technology of major firms such as BP and Shell, and it will be very competitive. I also believe that there are big opportunities in infrastructure. Huge developments are happening in Mexico—new cities, roads, and energy developments. The UK is strong and competitive in these areas. A third sector is retail, where there are a variety of good prospects. We are starting from the beginning, but the large and growing middle class already consumes many of the goods we offer. For example, high-end fashion such as Burberry is already operating in Mexico. Accessorize opened its first store in Mexico City in 2010, and has opened three new stores since then, leading the way for many other companies. Education is the fourth area where there are real opportunities for partnership and collaboration in a broader sense. Of course, we can attract Mexican students to the UK, but cooperation and partnerships between universities and specific areas is another important aspect. For example, we are focused on the energy industry in terms of forming academic partnerships.
The Chancellor of the Exchequer has approved £45 million to support SME exports. How does Mexico fit into this strategy?
One of the messages that we are trying to get across to SMEs is that it is absolutely possible, with the proper preparation and proper engagement with experts such as ourselves and our trade team in Mexico, to engage in emerging markets like Mexico. There is an understandable fear of looking beyond the traditional markets of Europe and the US among many investors. However, the fact that we have witnessed many successful individual cases demonstrates the ease and opportunity of establishing an SME. Indeed, it is relatively simple to establish a business in Mexico, and tariffs and regulatory demands are relaxed. Therefore, Mexico has taken the center stage of our SME program.
© The Business Year - July 2012